Current Age: 24

Target Retirement Age: 45. (Ideally 40).

I hope to own my own home and have $1.5M in assets by the target retirement age.

Please feel free to share any advice, your own goals, and suggestions!

I wish you every success. By the way, give income real estate a look. After all, stocks are not “real” like real estate is.

Thank you sir! The good news is that with no kids, an 8% average annual rate of return, and the benefits of compound interest + time on my side, I am hopeful to attain this goal. The reason I chose 1.5M is that I plan to withdraw 4% of my assets for life, and that 4% number lets me withdraw indefinitely without ever running out of capital. 4% of 1.5M is $60K, which I think provides an excellent living standard when you own your own home. I could see myself using that money for travel, etc. The real benefit is not being reliant on my job for economic security.

I do intend to invest in income-producing real estate. I just don’t have enough capital for that yet. Also, I’m not too eager about managing the real estate on my own…so I’d probably enlist a property management company.

So I’m starting out with putting everything I earn in mutual funds. Once I start making more, I’ll buy a duplex, 4-plex and so on.

Have you had success with real estate?

Search this site for real estate. I wrote plenty. It amazes me how many men are pussies about a clogged sink when… A future million is in your path for handy responsible souls.

It’s not a matter of being a pussy about a clogged sink. I will be working 40-50 hours a week as a doctor. Real Estate investing will be just that for me: investing. I don’t want to manage it on my own because I’d rather spend the time on my hobbies and doing what I enjoy.

Paying 5-10% of rental income for a property management company to find the tenants, collect the rent for me, enforce the policies, etc. sounds like a bargain to me, and that’s what I will do.

Now if real estate were my DAY JOB, then yeah I’d read up on electrical, plumbing, etc. But it’s not.

We have very similar goals 😉

My tip would be; take a look at your life, recognize what you need, what you don’t, and stop buying everything that you don’t need.
If possible, take up cooking / focus your hobbies towards things that will benefit yourself financially. Ie, doing your own car maintenance.

Oh, and for the most part; never buy a new car. Avg car depreciates in value at around $5000+/yr over a 10 year period. Buy a $50,000 car, 10 years later it’ll be $1000. Buy an $80,000 BMW, 10 years later it’ll be around $5000.

I started saving at 21; same year i bought my own apartment and despite dicking around for a year, i’m about 10% towards reaching my goals 🙂
So… i can certainly say that being a minimalist works!

And to show the bigger picture; The current average age for one moving out of their parents place is 27. By the time our generation reaches that point… it’ll definitely be 30+

So… being a minimalist and not wasting money on things like alcohol, tobacco, cars that we can’t afford, over priced services… really works well 🙂

Another great way is 401k with your work. A lot of companies will match up to a certain percent what you put in. It’s great because I told them what age I wanted to retire and with how much, they said you should put in this percent of your income.

Nice! I’ll look into that. Do you mind sharing what percent of your income they let you put into your 401K? I understand that 401k plans have a limit since the contributions are tax-free.

So far, I have the following retirement accounts in mind:

1) 401k; tax-deductible contributions, tax-free growth. Taxed withdrawals.

2) IRA (5K allowed per year); tax-deductible contributions, tax-free growth. Taxed withdrawals.</span>

3) Health Savings Accounts coupled with high-deductible health insurance. Another 4K a year allowed.

Put together, I hope to cut future taxable income down by at least 20K/yr. That and moving to the great state of TX, TN or FL with no state income tax.

Thank you for sharing the point about 401k!

Age: 23 Goal: Leave society @ 30 and live in the middle of nowhere, financed income from $1 mill+ in assets & living off of the land We have very similar goals ? My tip would be; take a look at your life, recognize what you need, what you don’t, and stop buying everything that you don’t need. If possible, take up cooking / focus your hobbies towards things that will benefit yourself financially. Ie, doing your own car maintenance. Oh, and for the most part; never buy a new car. Avg car depreciates in value at around $5000+/yr over a 10 year period. Buy a $50,000 car, 10 years later it’ll be $1000. Buy an $80,000 BMW, 10 years later it’ll be around $5000. I started saving at 21; same year i bought my own apartment and despite dicking around for a year, i’m about 10% towards reaching my goals So… i can certainly say that being a minimalist works! And to show the bigger picture; The current average age for one moving out of their parents place is 27. By the time our generation reaches that point… it’ll definitely be 30+ So… being a minimalist and not wasting money on things like alcohol, tobacco, cars that we can’t afford, over priced services… really works well

Hey! Thank you for responding, and hooray for similar goals.

When you say live in the middle of nowhere, what do you mean? and why leave society? I mean I get it, situation is pretty toxic in the US, but I’m planning some awesome sex and travel escapades to Asia for when I retire :D.

I completely agree with your philosophy on spending. And CONGRATULATIONS on the 10% milestone! Only gotta do it nine more times and you’re there!

I’m learning to cook. I will always buy cars with cash and used. Not going to spend more than 5-10K on a car. I don’t know if you know Mr. Money Mustache, but he has an excellent blog on living an amazing life, early retirement, and not worrying about money. He’s a multimillionaire right now, but his family lives on about $30K a year because that’s all they need to be happy. And they have a blast! They bike all over, enjoy everything life has to offer, spend months upon months vacationing in Hawaii. They own their home, have a rental property, have millions in assets like I said. He’s been retired since age 30 I think. Anyways, check it out at http://www.mrmoneymustache.com if you want.

Just some pointers I’d give…

1.  Limit your expenses, as HotNoob has already suggested.  If you can live on a 20k a year budget, going by the 4% rule just as a guide, you’d need 500k to get to your goal.  If you need 40k a year to survive you need 1 million.  That extra 500k you’d need might mean another decade of working.  If you are one of those people making 6 figures living paycheck to paycheck, you’ll never hit your goal.  Obviously living frugally is your friend.  My goal is to keep my budget down to around 20k a year, so I can hit financial independence as soon as possible.  Once I am at that point however much longer I decide to work is just fluff…extra money for toys, traveling, and investing just for additional peace of mind…but soon as I hit my minimum at least I have the peace of mind that I can say f~~~ it and walk away from the full time work world whenever I want.

2.  Careful with the retirement accounts.  Obviously there are benefits to various retirement accounts, but they have a lot of rules and penalties involved with early withdrawals.  If you want to retire in the 40-45 range you aren’t going to be doing yourself any favors by having all your funds in retirement accounts.  Plus when you withdraw money from a tax deferred account you have to pay income tax rates on it.  This country is totally f~~~ed up financially…income tax rates will probably be higher 20 years down the road than they are now.  Don’t be afraid to start a post tax brokerage account and put some of your savings into that if you are serious about retiring in your 40s…at least you’ll have penalty free access to it if you retire early or hit a rough patch in employment in the future.

3.  Real estate – do the math!  I know some guys on here have done well with it but it doesn’t work for everyone…it really depends on your income(as you pay income tax rates on rental income) and your area, as some states have income taxes and/or higher property taxes.  I know for my income and my area if I had any rental income coming in it would be getting taxed at a 39% rate, plus if hire a property manager there goes another 5-10%, plus property taxes.  If I had rental property right now and planned on using a property manager in my crappy high cost of living area 50-70% of my rental income would be gone before I even factored in maintenance, vacancies, eviction costs, mortgage interest(considering most real estate investors aren’t going around paying 100% in today’s low rate environment), or insurance.  Of course if your in a state with no/lower property/income taxes, and you aren’t already in a high income tax bracket to begin with, rental properties make a lot more sense…just something to think about if you are going to be a doctor as you’ll probably be in a high income tax bracket.  Even if you end up in retirement with a lot of money in pre-tax accounts…you’ll end up putting yourself in a high tax bracket with rental income being added to your 401k/IRA withdrawals + SS…but again…if you don’t have much in those type of accounts and your primary income is rental income it will be at a much lower rate…real estate is something you definitely want to research and think about how it fits into your overall plan before you jump into it.

4.  Don’t ever get married.  Divorce laws are stupid.  The higher your income, and the higher your net worth, the more a divorce is going to cost you.  If one of your major life goals is early retirement divorce is the easiest way to f~~~ it up, so why risk it?

I’m 31 now…early retirement has been one of my goals since my first job at 16 lol.  Currently have a net worth of around 100k split between real estate equity, retirement accounts, and post tax accounts, a 30k a year pension waiting for me when I’m 64…obviously inflation will eat it up but any money in my pocket is good, and most importantly my only debt is a small mortgage at less than a 3% rate so I’m in no hurry to pay it off.  Bought my first property at 22 so I didn’t have to pay rent to someone else and it worked out well as I’m currently paying about 200 bucks a month less to own than a renter in the same building, and I paid for college as I went so I avoided student loans but it hurt my savings rate for a while…its all good now though as I have no student debt hanging over my head.  The goal is financial independence by 35 and to be in a position where by 40 I can at least semi retire and just work part time sometimes if I feel like it…it depends how burned out I am from my job at that point. Just some pointers I’d give… 1.  Limit your expenses, as HotNoob has already suggested.  If you can live on a 20k a year budget, going by the 4% rule just as a guide, you’d need 500k to get to your goal.  If you need 40k a year to survive you need 1 million.  That extra 500k you’d need might mean another decade of working.  If you are one of those people making 6 figures living paycheck to paycheck, you’ll never hit your goal.  Obviously living frugally is your friend.  My goal is to keep my budget down to around 20k a year, so I can hit financial independence as soon as possible.  Once I am at that point however much longer I decide to work is just fluff…extra money for toys, traveling, and investing just for additional peace of mind…but soon as I hit my minimum at least I have the peace of mind that I can say f~~~ it and walk away from the full time work world whenever I want. 2.  Careful with the retirement accounts.  Obviously there are benefits to various retirement accounts, but they have a lot of rules and penalties involved with early withdrawals.  If you want to retire in the 40-45 range you aren’t going to be doing yourself any favors by having all your funds in retirement accounts.  Plus when you withdraw money from a tax deferred account you have to pay income tax rates on it.  This country is totally f~~~ed up financially…income tax rates will probably be higher 20 years down the road than they are now.  Don’t be afraid to start a post tax brokerage account and put some of your savings into that if you are serious about retiring in your 40s…at least you’ll have penalty free access to it if you retire early or hit a rough patch in employment in the future. 3.  Real estate – do the math!  I know some guys on here have done well with it but it doesn’t work for everyone…it really depends on your income(as you pay income tax rates on rental income) and your area, as some states have income taxes and/or higher property taxes.  I know for my income and my area if I had any rental income coming in it would be getting taxed at a 39% rate, plus if hire a property manager there goes another 5-10%, plus property taxes.  If I had rental property right now and planned on using a property manager in my crappy high cost of living area 50-70% of my rental income would be gone before I even factored in maintenance, vacancies, eviction costs, mortgage interest(considering most real estate investors aren’t going around paying 100% in today’s low rate environment), or insurance.  Of course if your in a state with no/lower property/income taxes, and you aren’t already in a high income tax bracket to begin with, rental properties make a lot more sense…just something to think about if you are going to be a doctor as you’ll probably be in a high income tax bracket.  Even if you end up in retirement with a lot of money in pre-tax accounts…you’ll end up putting yourself in a high tax bracket with rental income being added to your 401k/IRA withdrawals + SS…but again…if you don’t have much in those type of accounts and your primary income is rental income it will be at a much lower rate…real estate is something you definitely want to research and think about how it fits into your overall plan before you jump into it. 4.  Don’t ever get married.  Divorce laws are stupid.  The higher your income, and the higher your net worth, the more a divorce is going to cost you.  If one of your major life goals is early retirement divorce is the easiest way to f~~~ it up, so why risk it?

Wow. Just…wow- thank you SO much for this. I love it. Congrats on reaching the 100K mark!

Do you know if your pension is indexed for inflation?

I will respond to your points in the order of presentation:

1. Limit Expenses- Agreed; I think that this is where investing and compound interest really shines. Reaching 1M is not easy, but if you invest consistently and over a long time horizon, it should be do-able. I’m aiming for a 4% withdrawal rate each year because that is the maximum safe withdrawal rate that studies have demonstrated that one can have while maintaining an infinite source of cash flow. This is based on a Trinity study that I found on…you guessed it, Mr. Money Mustache’s website! (http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/).

The nice thing about the 4% rule is that it adjusts for inflation so you never lose purchasing power. So for example, let’s say my fund grows by 7% in year one (very reasonable). 3% of the growth is actually just inflation. 4% is the interest on my capital. I withdraw that 4%. I’d like to start with $60K, so I need capital pool of 1.5M. The next year, it grows by 7% and reaches just above 1.6M, and I get 4% of that or $64.2K. This way, I maintain purchasing power.

I know it sounds hard to reach 1.5M, but I genuinely believe that with the support of compound interest as well as continuous investing, the goal can be reached.

2. Thank you for sharing this point about retirement accounts. I had not considered this, and you just brought up a very important thought that will ultimately change my strategy. THANK YOU. So what would you recommend I do? My current fund (since I’m just a student and not employed) is in a taxable individual account. Should I skip out on IRAs/401ks or still contribute? The tax advantage right now is nice, but yeah I do want to “retire” at age 40 and the penalties could easily reverse the gains I made.

Hmm…I need to think about this…Maybe I should still sock away the max IRA and 401K allowed each year, and just let it compound from age 40 to 59.5?

I’ll be averaging about 100K from age 27 to 31, and then 150K-200K from age 32-40 or 45. So what I’m thinking is…put the 22K in these retirement accounts each year. Let them grow. Sock the rest away in taxable accounts for age 40 which I can withdraw whenever. So essentially, the age-40 accounts will be the taxable accounts and will have the bulk of my money. I will open up the income stream at age 40. The age 59.5 accounts will be the tax-deferred. They will not have the bulk of my money, and they will supplement my income stream at age 59.5. Would you agree with this approach?

3. Yeah now that you describe the math, real estate does seem like a tough choice for high income producers. Correct me if I’m wrong though, but I think you can set up a corporation to own the real estate. The Corporation collects the rental income. The benefit here is that the corporation pays taxes after spending as much money it can on appropriate business expenses. So I think I would make myself an employee of the corporation (which I’d own). The corporation would collect income, spend it on more real estate (business expenses) or on the property mortgage, and then would pay taxes on what was left.

4. Never getting married. Never having kids. My family thinks I’m going to change my mind…how wrong.  100% agree with you.

Thank you for your insight. It’s really helping me form a plan.

I want to sit down with a financial planner and go over this with them…
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