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Retired by 50: What it really takes
It's possible to pinch pennies in your 30s so that you can give up the daily grind by 50. Just don't expect to spend the rest of your life on the golf course.
By Liz Pulliam Weston
Think it's impossible to retire in your 40s? I'd like you to meet some ordinary folks who have done it.
"Ordinary" may be a misnomer, because retiring after just 20 years or so in the workplace is an extraordinary act, and most took extraordinary measures to get where they are. But they're ordinary in the sense that they were working people with pretty regular jobs. They didn't strike it rich with stock options, inheritances or the lottery.
Most of them have kids. Most lived in high-cost areas -- Los Angeles, San Francisco, Washington, D.C., suburban New Jersey. Most didn't start really saving until their 30s (although the one who started at 28 wound up retiring at 35).
Their retirements look different from the retirements depicted on television. These folks don't live on the golf course or roam the country in 32-foot recreational vehicles. Most, in fact, are actually still working -- but usually part time and in their own businesses, doing things they feel strongly about. They've retired from the 9-to-5 world, but not from their passions.
In short, their retirements look a lot like the retirements many people have planned for themselves; about two-thirds of baby boomers plan to work in retirement, according to an AARP poll.
The folks I'm writing about are just two or three decades ahead of schedule.
People who retire so early often have several traits in common, said Jan Dahlin Geiger, a Certified Financial Planner and author of the book, "Get Your Assets in Gear! Smart Money Strategies."They're:
* Allergic to debt."Debt is the opposite of savings," Geiger said, "and you don't get to be rich if you don't save."
* Acutely aware of the power of time. Early retirees know that the sooner they put money to work for them, the more they'll eventually have. Even small amounts, if diligently saved and invested, can grow to whopping sums over time, thanks to the power of compound interest.
* More interested in their goal than what the neighbors think.You may realize that you can't keep up with the Joneses and have any hope of retiring early (or even of retiring at all, depending on how far you take your consumerism). But you may not understand how very different your life might have to be from those around you to retire young.
The first two couples I'll introduce you to illustrate that point vividly. Let's meet them now.
The Bolons
Janine and Brad Bolon were 30-something "DINKs" -- dual income, no kids -- when a pregnancy and two books completely changed their lives.
Janine, a biochemist, wanted to be a stay-at-home mom, a decision that would cause their nearly six-figure income to drop by about half.
Some baby boomers can expect to live comfortably on pensions and Social Security, but many still need to build their nest egg.
But the two books -- "Your Money or Your Life" by Joe Dominguez and Vicki Robin, and "The Complete Tightwad Gazette" by Amy Dacyczyn -- convinced her that she could not only stay at home, but also save enough doing so that Brad could retire in 14 years.
She wrote up a plan and showed it to her husband.
"He was skeptical," Bolon remembers. "(But) he said, 'Knock yourself out.'"
She did. Her savings strategy, coupled with a boost in Brad's income and a cooperative real-estate market, helped them reach their goal a few years early, even with the arrival of three more kids and while living in one of the country's most expensive areas.
Keeping costs low
Shortly after their eldest daughter was born, Brad accepted a job that more than doubled his pay to $110,000 but that required a move from their home in New Jersey to Southern California.
Although Brad's co-workers were living in McMansions and gated communities, the Bolons bought a 1,500-square-foot townhouse in a less-affluent area of Thousand Oaks. The townhouse was literally across the street from Brad's office, which meant he could stroll to work and the family could get by with one car -- "a beat-up old pickup," Janine called it.
The family was also within walking distance of three grocery stores and a public library, which further reduced their fuel consumption. Janine home-schooled the kids, now ages 11, 8, 5 and 4, and made saving money her priority.
"We saved $35 a month by hanging the laundry instead of using the dryer," Janine said. "We didn't use our air conditioner more than six or seven days of the year," an accomplishment in sunny Southern California.
"We went to 'U pick it' farms. I'd go with the kids and we'd pick fruit . . . and can them and make preserves," Janine said. "And I used a price book. That saved us $3,000 to $5,000 every year."
(A price book, for frugality newbies, is a notebook where you track the prices of commonly purchased items at local stores over time so you can spot the true bargains and stock up.)
As Brad's income rose, the family resisted the urge to ratchet up its spending and instead focused on building its net worth.
"We made a whole bunch of life decisions that put us in a good position," Janine said. "We lived on $33,000 to $36,000 a year. . . . The rest of our income we were stuffing into investments and Brad's 401(k)."
Their lifestyle was incomprehensible to many around them. Her middle-income neighbors would sometimes leave donations, such as clothes for the kids, on her porch.
"They were the nicest people," Janine said. "They assumed we must be pennies away from bankruptcy."
Snubbed but satisfied
The Bolons remember a distinctly chillier reception from some of Brad's co-workers who lived in vast homes, sent their kids to private schools and drove fancy cars. But Janine said she never let their snubs bother her.
"I would walk into (a work social event) in my $60 thrift-store gown and my $10 Payless shoes and I would feel like an actual millionaire, because I was and they weren't," Janine said. "I didn't have to drive a Mercedes to show people I'm wealthy."
In 2004, after eight years in California, the family pulled the plug. The Bolons sold their townhouse for a tidy profit and moved to a home in Cedar City, Utah, for which they paid cash.
The family could live solely on the income from investments, Janine said, but they prefer to leave the money alone to grow. Brad consults for a local community college. Janine is studying for a Ph.D. and has created a part-time business teaching others her money-saving techniques through books, a Web site and lectures.
Their passion now is philanthropy. The Bolons believe strongly that giving away at least 20% of the family's income is essential to their financial and spiritual success.
Fred Ecks and Ann Haebig
Work always seemed a bit overrated to Fred Ecks, 41.
Ecks got his first full-time job at 21 after graduating from California Polytechnic State University with a degree in computer science. Eight months later, he headed back to school to get a master's degree.
"I missed the freedom," Ecks said, "and the opportunity to learn something new every day."
He lasted about a year at his next full-time job before returning to school for a doctorate. At one point, he tried to figure out how much he would need to save to live on the interest of his investments, given the 8% or so that short-term government bonds could earn back then. The sum -- $121,000 -- seemed impossibly huge at the time.
Some baby boomers can expect to live comfortably on pensions and Social Security, but many still need to build their nest egg.
"It would take me 10 years to save that much. I'd be 34," he remembered thinking. That seemed impossibly old, "so I gave up."
Ecks eventually settled in to full-time work, got married and bought a house in Boulder, Colo. He had a mortgage, credit card debt "and lots of toys," Ecks remembered. And he was getting "tired of being tired all of the time."
He was at a coffee shop when he heard a radio program about the book, "Your Money or Your Life" (the same book that helped transform the Bolons' lives). He went next door to a bookstore and bought the tome, which he "devoured" over the next weekend. He became "a man with a mission" to save enough money so that he could say goodbye forever to paid work.
That was in 1994, when he was 28. Seven years later, at age 35, he achieved his goal, although he said it's only recently that he's felt comfortable saying he's retired.
Living in a van
There were some bumps along the way. His wife didn't share his sense of mission, and they parted ways. He accepted a job at Sun Microsystems and moved back to California, living in his van in the company's parking lot for six months while he continued making payments on the Colorado house.
Eventually the home sold, and Ecks moved into the first of a series of shared apartments and rented rooms. In the notoriously high-cost Silicon Valley, he never paid more than $600 a month for shelter. When a friend totaled his van, he paid cash for a used Geo Metro to replace it. He ate out infrequently, cooked cheap meals at home and shopped for clothes and household goods at thrift stores.
The Sun Microsystems job paid well and had benefits, although Ecks never cracked the $100,000 annual pay mark. Still, he saved 50% of his gross income while still pursuing his passions, including learning to sail and traveling. He visited Mexico and Guatemala on a Green Tortoise bus and drove to Alaska, among other destinations.
He wanted more meaning in his work, though, so in 1999 he took a computer job with Greenpeace at the environmental organization's world headquarters in Amsterdam, Netherlands. Although his pay was less than one-third of what he'd been making at Sun, his cost of living was lower as well, and he still managed to save 25% of his income.
After a year or so, he was ready to come home. He convinced Greenpeace to let him work half time in San Francisco. He then bought the "world's smallest condo" -- a 307-square-foot space, about the size of a decent hotel room -- in downtown San Francisco shortly after Sept. 11, 2001. He paid the $127,250 purchase price with a check.
By the end of that year, he was ready to say goodbye to paid work. He told Greenpeace to stop paying him even though he continued working four hours a day as a volunteer. He now had the ability to take off when he wanted, which he soon did by sailing to Mexico with a friend.
He'd also met a woman who shared his passion for simple living and financial independence. Ann Haebig, now 38, said she's "always been frugal"
"Even in college I had in mind the idea of saving 'enough' and eventually quitting," said Haebig, who works as a database architect. "I didn't know how to make that goal real in any concrete way until I found 'Your Money or Your Life' in 1999 or 2000. I started charting my progress in earnest then."
Setting sail
Eventually, Ecks sold the condo for $235,000, and the couple rented a house for a while before buying an old houseboat for $3,100. They had it towed to a marina in south San Francisco where Ecks could also moor his 30-year-old, 27-foot sailboat. Berth rent and a live-aboard fee set the couple back $600 a month.
Ecks figures his total monthly expenses run about $1,500, which is actually less than his investments earn. Ann works half time at CompuMentor and expects to be retired entirely within seven years.
Interestingly, Ann's passion for her goal of early retirement isn't as strong since she stepped down from full-time work to part-time employment a few years ago.
"I used to be a dot-commer working too many hours at a job I just didn't care about. Now I'm working half-time at a nonprofit and still saving money, while spending my freed-up time on projects I really care about," Ann said. "If I have to keep working longer because my salary's decreased, that's OK with me. The journey's pleasant enough now that I'm not racing to save that magic number of dollars like I once was."
Some baby boomers can expect to live comfortably on pensions and Social Security, but many still need to build their nest egg.
Ecks is concerned enough about the eroding power of inflation that he keeps half of his portfolio in stock-market investments (the other half is in Treasury bonds). But his experience, and that of many others who have embraced simple living, is that expenses actually go down over time as they get better at trimming costs.
In any case, Ecks said, the couple feels wealthy where it counts: in time and freedom.
"It's not what you have," he said. "It's how little you need."
In my next column, I'll introduce you to three more couples who have taken somewhat different paths to early retirement. In the meantime, here's what you can take away from these two stories:
* What matters more than what you make is what you save (although a bigger income and rising home equity can get you to your goal sooner).
* The decisions you make on the big expenses in your life -- where you live, what you drive, how much energy you burn -- have a profound impact on how much you can save.
* That said, no expense is too small to review if your goal is to get out of work early. Trimming expenses not only allows you to save more, but means you can live on less in retirement, thus speeding you to your goal.
It's possible to pinch pennies in your 30s so that you can give up the daily grind by 50. Just don't expect to spend the rest of your life on the golf course.
By Liz Pulliam Weston
Think it's impossible to retire in your 40s? I'd like you to meet some ordinary folks who have done it.
"Ordinary" may be a misnomer, because retiring after just 20 years or so in the workplace is an extraordinary act, and most took extraordinary measures to get where they are. But they're ordinary in the sense that they were working people with pretty regular jobs. They didn't strike it rich with stock options, inheritances or the lottery.
Most of them have kids. Most lived in high-cost areas -- Los Angeles, San Francisco, Washington, D.C., suburban New Jersey. Most didn't start really saving until their 30s (although the one who started at 28 wound up retiring at 35).
Their retirements look different from the retirements depicted on television. These folks don't live on the golf course or roam the country in 32-foot recreational vehicles. Most, in fact, are actually still working -- but usually part time and in their own businesses, doing things they feel strongly about. They've retired from the 9-to-5 world, but not from their passions.
In short, their retirements look a lot like the retirements many people have planned for themselves; about two-thirds of baby boomers plan to work in retirement, according to an AARP poll.
The folks I'm writing about are just two or three decades ahead of schedule.
People who retire so early often have several traits in common, said Jan Dahlin Geiger, a Certified Financial Planner and author of the book, "Get Your Assets in Gear! Smart Money Strategies."They're:
* Allergic to debt."Debt is the opposite of savings," Geiger said, "and you don't get to be rich if you don't save."
* Acutely aware of the power of time. Early retirees know that the sooner they put money to work for them, the more they'll eventually have. Even small amounts, if diligently saved and invested, can grow to whopping sums over time, thanks to the power of compound interest.
* More interested in their goal than what the neighbors think.You may realize that you can't keep up with the Joneses and have any hope of retiring early (or even of retiring at all, depending on how far you take your consumerism). But you may not understand how very different your life might have to be from those around you to retire young.
The first two couples I'll introduce you to illustrate that point vividly. Let's meet them now.
The Bolons
Janine and Brad Bolon were 30-something "DINKs" -- dual income, no kids -- when a pregnancy and two books completely changed their lives.
Janine, a biochemist, wanted to be a stay-at-home mom, a decision that would cause their nearly six-figure income to drop by about half.
Some baby boomers can expect to live comfortably on pensions and Social Security, but many still need to build their nest egg.
But the two books -- "Your Money or Your Life" by Joe Dominguez and Vicki Robin, and "The Complete Tightwad Gazette" by Amy Dacyczyn -- convinced her that she could not only stay at home, but also save enough doing so that Brad could retire in 14 years.
She wrote up a plan and showed it to her husband.
"He was skeptical," Bolon remembers. "(But) he said, 'Knock yourself out.'"
She did. Her savings strategy, coupled with a boost in Brad's income and a cooperative real-estate market, helped them reach their goal a few years early, even with the arrival of three more kids and while living in one of the country's most expensive areas.
Keeping costs low
Shortly after their eldest daughter was born, Brad accepted a job that more than doubled his pay to $110,000 but that required a move from their home in New Jersey to Southern California.
Although Brad's co-workers were living in McMansions and gated communities, the Bolons bought a 1,500-square-foot townhouse in a less-affluent area of Thousand Oaks. The townhouse was literally across the street from Brad's office, which meant he could stroll to work and the family could get by with one car -- "a beat-up old pickup," Janine called it.
The family was also within walking distance of three grocery stores and a public library, which further reduced their fuel consumption. Janine home-schooled the kids, now ages 11, 8, 5 and 4, and made saving money her priority.
"We saved $35 a month by hanging the laundry instead of using the dryer," Janine said. "We didn't use our air conditioner more than six or seven days of the year," an accomplishment in sunny Southern California.
"We went to 'U pick it' farms. I'd go with the kids and we'd pick fruit . . . and can them and make preserves," Janine said. "And I used a price book. That saved us $3,000 to $5,000 every year."
(A price book, for frugality newbies, is a notebook where you track the prices of commonly purchased items at local stores over time so you can spot the true bargains and stock up.)
As Brad's income rose, the family resisted the urge to ratchet up its spending and instead focused on building its net worth.
"We made a whole bunch of life decisions that put us in a good position," Janine said. "We lived on $33,000 to $36,000 a year. . . . The rest of our income we were stuffing into investments and Brad's 401(k)."
Their lifestyle was incomprehensible to many around them. Her middle-income neighbors would sometimes leave donations, such as clothes for the kids, on her porch.
"They were the nicest people," Janine said. "They assumed we must be pennies away from bankruptcy."
Snubbed but satisfied
The Bolons remember a distinctly chillier reception from some of Brad's co-workers who lived in vast homes, sent their kids to private schools and drove fancy cars. But Janine said she never let their snubs bother her.
"I would walk into (a work social event) in my $60 thrift-store gown and my $10 Payless shoes and I would feel like an actual millionaire, because I was and they weren't," Janine said. "I didn't have to drive a Mercedes to show people I'm wealthy."
In 2004, after eight years in California, the family pulled the plug. The Bolons sold their townhouse for a tidy profit and moved to a home in Cedar City, Utah, for which they paid cash.
The family could live solely on the income from investments, Janine said, but they prefer to leave the money alone to grow. Brad consults for a local community college. Janine is studying for a Ph.D. and has created a part-time business teaching others her money-saving techniques through books, a Web site and lectures.
Their passion now is philanthropy. The Bolons believe strongly that giving away at least 20% of the family's income is essential to their financial and spiritual success.
Fred Ecks and Ann Haebig
Work always seemed a bit overrated to Fred Ecks, 41.
Ecks got his first full-time job at 21 after graduating from California Polytechnic State University with a degree in computer science. Eight months later, he headed back to school to get a master's degree.
"I missed the freedom," Ecks said, "and the opportunity to learn something new every day."
He lasted about a year at his next full-time job before returning to school for a doctorate. At one point, he tried to figure out how much he would need to save to live on the interest of his investments, given the 8% or so that short-term government bonds could earn back then. The sum -- $121,000 -- seemed impossibly huge at the time.
Some baby boomers can expect to live comfortably on pensions and Social Security, but many still need to build their nest egg.
"It would take me 10 years to save that much. I'd be 34," he remembered thinking. That seemed impossibly old, "so I gave up."
Ecks eventually settled in to full-time work, got married and bought a house in Boulder, Colo. He had a mortgage, credit card debt "and lots of toys," Ecks remembered. And he was getting "tired of being tired all of the time."
He was at a coffee shop when he heard a radio program about the book, "Your Money or Your Life" (the same book that helped transform the Bolons' lives). He went next door to a bookstore and bought the tome, which he "devoured" over the next weekend. He became "a man with a mission" to save enough money so that he could say goodbye forever to paid work.
That was in 1994, when he was 28. Seven years later, at age 35, he achieved his goal, although he said it's only recently that he's felt comfortable saying he's retired.
Living in a van
There were some bumps along the way. His wife didn't share his sense of mission, and they parted ways. He accepted a job at Sun Microsystems and moved back to California, living in his van in the company's parking lot for six months while he continued making payments on the Colorado house.
Eventually the home sold, and Ecks moved into the first of a series of shared apartments and rented rooms. In the notoriously high-cost Silicon Valley, he never paid more than $600 a month for shelter. When a friend totaled his van, he paid cash for a used Geo Metro to replace it. He ate out infrequently, cooked cheap meals at home and shopped for clothes and household goods at thrift stores.
The Sun Microsystems job paid well and had benefits, although Ecks never cracked the $100,000 annual pay mark. Still, he saved 50% of his gross income while still pursuing his passions, including learning to sail and traveling. He visited Mexico and Guatemala on a Green Tortoise bus and drove to Alaska, among other destinations.
He wanted more meaning in his work, though, so in 1999 he took a computer job with Greenpeace at the environmental organization's world headquarters in Amsterdam, Netherlands. Although his pay was less than one-third of what he'd been making at Sun, his cost of living was lower as well, and he still managed to save 25% of his income.
After a year or so, he was ready to come home. He convinced Greenpeace to let him work half time in San Francisco. He then bought the "world's smallest condo" -- a 307-square-foot space, about the size of a decent hotel room -- in downtown San Francisco shortly after Sept. 11, 2001. He paid the $127,250 purchase price with a check.
By the end of that year, he was ready to say goodbye to paid work. He told Greenpeace to stop paying him even though he continued working four hours a day as a volunteer. He now had the ability to take off when he wanted, which he soon did by sailing to Mexico with a friend.
He'd also met a woman who shared his passion for simple living and financial independence. Ann Haebig, now 38, said she's "always been frugal"
"Even in college I had in mind the idea of saving 'enough' and eventually quitting," said Haebig, who works as a database architect. "I didn't know how to make that goal real in any concrete way until I found 'Your Money or Your Life' in 1999 or 2000. I started charting my progress in earnest then."
Setting sail
Eventually, Ecks sold the condo for $235,000, and the couple rented a house for a while before buying an old houseboat for $3,100. They had it towed to a marina in south San Francisco where Ecks could also moor his 30-year-old, 27-foot sailboat. Berth rent and a live-aboard fee set the couple back $600 a month.
Ecks figures his total monthly expenses run about $1,500, which is actually less than his investments earn. Ann works half time at CompuMentor and expects to be retired entirely within seven years.
Interestingly, Ann's passion for her goal of early retirement isn't as strong since she stepped down from full-time work to part-time employment a few years ago.
"I used to be a dot-commer working too many hours at a job I just didn't care about. Now I'm working half-time at a nonprofit and still saving money, while spending my freed-up time on projects I really care about," Ann said. "If I have to keep working longer because my salary's decreased, that's OK with me. The journey's pleasant enough now that I'm not racing to save that magic number of dollars like I once was."
Some baby boomers can expect to live comfortably on pensions and Social Security, but many still need to build their nest egg.
Ecks is concerned enough about the eroding power of inflation that he keeps half of his portfolio in stock-market investments (the other half is in Treasury bonds). But his experience, and that of many others who have embraced simple living, is that expenses actually go down over time as they get better at trimming costs.
In any case, Ecks said, the couple feels wealthy where it counts: in time and freedom.
"It's not what you have," he said. "It's how little you need."
In my next column, I'll introduce you to three more couples who have taken somewhat different paths to early retirement. In the meantime, here's what you can take away from these two stories:
* What matters more than what you make is what you save (although a bigger income and rising home equity can get you to your goal sooner).
* The decisions you make on the big expenses in your life -- where you live, what you drive, how much energy you burn -- have a profound impact on how much you can save.
* That said, no expense is too small to review if your goal is to get out of work early. Trimming expenses not only allows you to save more, but means you can live on less in retirement, thus speeding you to your goal.
