Retire At 30

[darklord700]

I've seen a lot of retire at 30 or 40 kind of blog but I can never make the numbers work.

http://www.mrmoneymustache.com/

This guy worked from 21 - 30, 9 years in total and declare financial independence afterwards. Is it possible? It's not like he was earning CEO types of salary during those 9 years.

http://www.forbes.com/sites/laurashi...vel-the-world/

This couple retired when the hudsband was 40 so he might have worked for close to 20 years. But he started making 40K so it's not like he was pulling in huge salary too.

Blogs like these never gave us clear timeline of what happened and if that was replicable by the masses. I get the being frugal and live below your means part. But in these examples, even if you save every penny you make, I still couldn't make the math work in general.

Are these financial porn or what?

[blankall]

Don't know about retirement, but you can definitely get way ahead, but it also takes luck with real estate markets.

Have a buddy who instead of going to school went straight into construction. Had property by his early twenties. Then fixed up and flipped some properties on the side. He turned his construction work into a six figure job, by getting into buying and selling materials for the company.

He's 32 now. Not ready to retire, but his home is paid off, and he owns several investment properties. By his later forties, he'll be ready.

I'd say unless you manage to start a very successful business, forty is probably too young. Fifty is probably more realistic.

[RW99]

I'm closer to a Freedom 35 plan than this one.

[troutman]

My cousin had 4 condos in Edmonton. She did well enough with them to retire before age 50. She moved to the Sunshine Coast, then to Vernon. She skis all winter, and kayaks and golfs all summer. I don't get the sense she is ever bored. She sometimes takes the odd house cleaning job to earn extra spending money. Her children are adults now.

[Regorium]

I just briefly skimmed Mr. Moustache or whatever, and I think that what he did in the timeframe that he did it in is completely reasonable.

A couple things I did notice:
1) No student loans, no debt coming out of school - parents or someone funded him.
2) A great job making 42k in 1997. That's making 71k in 2015, AND remember that everything was ridiculously cheap back then.
3) Made 150k+ in year 5

Basically when you make that much money, you are able to invest in the greatest run up in the stock market of basically all time from 2001-2008.

Also, post-retirement he's still earning 50k+ a year working part time. That's a huge part of the math.

Sorry for rambling, but I think that for a lot of us in Calgary, it's very doable. As we've noted a lot of CP'ers make 100k+. Combine that with a second high earner, be frugal and never spend, no kids, and hope for the S&P going up 400% in 5 years, and you too can retire at 30.

The problem is selling this dream to people in Calgary making 40k a year and telling them to skimp on the latte. That will never work.

[bizaro86]

It's certainly possible, but takes a relatively unique set of circumstances. He was earning 100k 5 years out of school (4 year engineering degree with no student loans), which is certainly above average, although not unprecedented. He did post each years numbers starting from graduation here:

http://www.mrmoneymustache.com/2011/...-in-ten-years/

I went through it and thought the numbers worked, you may have a different opinion. It's impressive, but has the following requirements to retire by 30, imo:

1) Earn an above average income, preferably ~100k by mid to late twenties.
2) Live a lifestyle of someone with a much smaller income. This will probably require not going on expensive vacations, driving expensive (or multiple) cars or eating out a bunch. Your well off coworkers will do all of these things and talk about them at the office all the time.
3) Save the difference and invest it productively.
4) Be willing to live the same lifestyle in retirement.

I'm a big fan of his blog, but am much less extreme, and don't meet all the requirements above. (I especially like nice vacations). So I won't be retiring at 30, but think 40 should be pretty doable.

[OMG!WTF!]

I think the point of these sort of retire at 40 blogs/articles is to stay away from real estate. Lots of people in Calgary got rich buying and selling but only because the market was extraordinary. That is not reality any more. The expense of living in your own house and the risk involved is way too high to make it profitable. Even investment properties are pointless in most places. The idea with these blogs is to not buy anything, save a lot, live cheaply and make your money work for you. The idea should always be to trade the hot market.

I think these retire at 40 things are kind of lame. Do something you love so there's no need to retire.

[Calgary14]

One thing about Money Mustache that isn't mentioned anywhere is the income the site pulls in. I read somewhere it's estimated the site alone brings in 6 figures per year. So yes, retired, but with a solid business income to live off of as well

[fundmark19]

Originally Posted by OMG!WTF!

I think the point of these sort of retire at 40 blogs/articles is to stay away from real estate. Lots of people in Calgary got rich buying and selling but only because the market was extraordinary. That is not reality any more. The expense of living in your own house and the risk involved is way too high to make it profitable. Even investment properties are pointless in most places. The idea with these blogs is to not buy anything, save a lot, live cheaply and make your money work for you. The idea should always be to trade the hot market.

I think these retire at 40 things are kind of lame. Do something you love so there's no need to retire.

Not sure if I agree with you here. You could buy an investment property that has a suite and live in the basement and rent out the upstairs and pay for all of your housing costs while living rent free in the basement. You then are ahead since you don't have to pay rent which frees up 600-1500 (depending on your lifestyle) to help fund your retirement which is huge. Then if times are tough you still have an asset you can utilize to free up cash to fund your retirement. Worst case scenario you have to pay 600-1500 to live in your own house while still renting the other portion and maintaining your asset vs giving money away to a landlord.

[darklord700]

Year 1 Salary 58K Stash 5K
Year 2 Salary 58K Stash 18K (23K)
Year 3 Salary 67K Stash 44K (67K)
Year 4 Salary 127K Stash 83K (150K) – Girlfriend started working
Year 5 Salary 160K Stash 100K (250K)
Year 6 Salary 165K Stash 115K (365K)
Year 7 Salary 165K Stash 125K (490K)
Year 8 Salary 195K Stash 110K (600K) – Works 4 day week (20% paycut)
Year 9 Salary 110K Stash 120K (720K) – Quit Full Time Work

I organized Mr. Moushtash's timeline a bit above. The stash numbers I supposed are portfolio growth plus savings and the numbers in brackets are cumulative networth.

Say for year 3, salary was 67K before tax but savings and growth (based on a 23K portfolio) amounted to 44K. I find it these numbers hard to reconcile or duplicate.

I think milliondollarjourney a better guidline as the author detailes the savings and investment strategy every month.

[OMG!WTF!]

Originally Posted by fundmark19

Not sure if I agree with you here. You could buy an investment property that has a suite and live in the basement and rent out the upstairs and pay for all of your housing costs while living rent free in the basement. You then are ahead since you don't have to pay rent which frees up 600-1500 (depending on your lifestyle) to help fund your retirement which is huge. Then if times are tough you still have an asset you can utilize to free up cash to fund your retirement. Worst case scenario you have to pay 600-1500 to live in your own house while still renting the other portion and maintaining your asset vs giving money away to a landlord.

Those are good points for sure and I've done exactly that (live up/rent down) for lots of years. One major thing everybody forgets is the cost of maintenance over the long term. The vast majority of houses will need at least 100k every 20 years to accommodate basic repair and maintenance. That's the condo fee no one ever charges themselves.

The other thing is the market itself. Your home value is more than capable of going down in the coming decade making your monthly rental income totally pointless. It might go up, but the hot market now is not in here.

And finally, liquidity is always a concern. I have been renting the money I used to have invested in real estate, and it's far easier to generate profit in this market. There is also far less risk. Really really much less risk. And my terms are always one year so I can adjust every 12 months to market changes. That's a huge benefit. I still have on rental property and it sucks because I can not sell it right now...the market sucks, you can't just kick out the tenants. When I do sell, there will likely be three months of vacancy. That's something no one ever calculates either.

There are also the other costs of ownership, utilities, taxes. The other costs of selling including commissions, legal, title transfer. There is the cost of buying as well, usually cmhc fees, legal, etc. So you always need a 5-10% gain just to break even. I always found that the basement rent paid for utilities, taxes, and really not much more, maybe a couple hundred a month.

My rent payment for the last year has been a great pleasure.

[Regulator75]

Came for freedom 35 post, leaving satisfied.

[MoneyGuy]

Maybe this guy retired before his parents did.

I could retire now but choose to keep working because I like it (most days), the money is good and my work gives me travel opportunities that I wouldn't otherwise have.

Everyone is different. I knew a guy who retired before age 40. I think he's happy; I wouldn't be. Anyone who retires really early has to think of what they would do for potentially 60 years or more of full- or part-time retirement.

Interesting conversation.

[My2Cents]

I think My. Moustache also has a rental property that pays some of his bills. I wouldnt say he "retired", more he has moved his career from whatever he did before to now managing his estates/blogging.

That being said I do believe it doesnt matter how much you make, it matters how much you spend to retire. IE if you lived on 20% of your salary every year you work would allow you to spend 4 years not working. Also if you take that 80% you did not spend and make it work for you, you can likely stretch it longer. Mr Moustache doesnt have any "toys" and keeps his spending to as close to 0 as possible.

[shermanator]

I took a peek around the Money Mustache blog. There are some good points in there, most notably about being frugal and living within your means. I don't think retiring at 30 is realistic in Calgary, especially for someone starting in the current job market with the current cost of living in this city. However I do agree with others who say you can definitely get ahead in this climate if you do certain things right.

As an example, if you are purchasing your first condo, get one that you can afford to pay off yourself. Once you've established this, get a roommate and put all of the money they provide for rent towards the mortgage on top of your payments. It'll build up your equity much quicker than you would have otherwise. It will also shelter you a bit against an interest rate hike later as you'll be paying interest on a smaller amount.

Easier said than done, but I was able to afford my 2 bedroom condo on $42/K a year in 2010, so it can be done. That being said I was quite house poor.

[polak]

From those blogs, it looks like you have to be lucky both financially, investment-wise and timing wise (timing is huge. My parents paid 130,000 grand for their SFH in the late 90's. I can't even find a cardboard box for the cheap), a high salary pretty quickly out of school (also luck) and most importantly, you have to be the kind of person who has no problem doing nothing and revolving your life around saving money.

I'd rather make some poor financial decisions and enjoy the #### out of my youth over working and saving throughout my youth so I can be 45 and finally ready to enjoy life to the extent that I have in my 20's.

I guess you'll be able to take some awesome couples cruises with geriatrics and families and have plenty of time for Bingo and watching Ellen.

What will you remember on your deathbed? All that money you saved?

[HockeyIlliterate]

Originally Posted by darklord700

I've seen a lot of retire at 30 or 40 kind of blog but I can never make the numbers work.

http://www.mrmoneymustache.com/

This guy worked from 21 - 30, 9 years in total and declare financial independence afterwards. Is it possible?

It depends on whether you are looking for true "retirement" (as most people define that term) or simply "financial independence."

MMM has the latter. Despite his numerous assertions to the contrary, he hasn't done the former.

Originally Posted by darklord700

Year 1 Salary 58K Stash 5K
Year 2 Salary 58K Stash 18K (23K)
Year 3 Salary 67K Stash 44K (67K)
Year 4 Salary 127K Stash 83K (150K) – Girlfriend started working
Year 5 Salary 160K Stash 100K (250K)
Year 6 Salary 165K Stash 115K (365K)
Year 7 Salary 165K Stash 125K (490K)
Year 8 Salary 195K Stash 110K (600K) – Works 4 day week (20% paycut)
Year 9 Salary 110K Stash 120K (720K) – Quit Full Time Work

I organized Mr. Moushtash's timeline a bit above. The stash numbers I supposed are portfolio growth plus savings and the numbers in brackets are cumulative networth.

Say for year 3, salary was 67K before tax but savings and growth (based on a 23K portfolio) amounted to 44K. I find it these numbers hard to reconcile or duplicate.

MMM's numbers do have some problems.

If you take his timeline and his savings numbers, and then compare his yearly result with the S&P 500 index or Vanguard's Total Stock Market Index fund numbers for the same year (picked simply because they give you a very good picture of how the stock market as a whole did for that year), you'll probably see some discrepencies.

Taken at face value, I've never been able to get his math to work.

But, then again, you can't really take MMM (or any financial blogger, for that matter) entirely at face value.

Originally Posted by My2Cents

I think My. Moustache also has a rental property that pays some of his bills. I wouldnt say he "retired", more he has moved his career from whatever he did before to now managing his estates/blogging.

That being said I do believe it doesnt matter how much you make, it matters how much you spend to retire.

Agreed on both points.

MMM is notorious for enaging in "financial wordsmithing." He isn't "retired." He isn't living on $25K in income. Heck, he doesn't even fully account for some of his expenses.

But he's great at marketing a blog and a potential lifestyle.

[Weitz]

As stated above.. he "retired" from his day to day job.

But he isn't retired like I am going to retire. I.e. no work.

Edit: Also, who wants to retire and not have the money to do the great things in like like travel etc?

[CliffFletcher]

I have a friend who retired at 43. Started work as an engineer in the early 80s straight out of university, paid off his house within 5 years, lived like a pauper (still does), invested everything left over after his meager expenses, got a buyout after 20 years on the job, and retired. Owing to the stock market, he has twice as money on the bank now as when he retired 12 years ago.

Some things to keep in mind. The interior of his house looks exactly the way it did when he bought it in 1982 - same carpet, linoleum, etc. Never had kids. Married late in life to someone who is also dedicated to an incredibly frugal lifestyle.

It's not just a matter of discipline. You need a certain temperament, which is probably inborn.

[CaptainYooh]

This should be a pretty easy calculation. Think of a realistic amount you need to sustain your desired retirement lifestyle. For argument sake, let's use $10,000 per month, after tax or $14,000 before tax. Multiply it by 12 months = $168,000. This is what you need to receive annually for the rest of your life. Then, make some reasonable assumption about interest rate you can safely count on from a good income-producing security of some kind (REIT, bond, income properties etc.). Again, for this example, let's use 5% return. Capitalize your desired pre-tax income: $168,000/0.05 = $3,360,000. This is what you need to have invested as a nest egg to assure $14,000 income for the rest of your life assuming that your investment safely delivers 5% return. The moment you have that amount (or equivalent) in the bank – call it quits and go fishing.