How to retire in the US in 33, with three young children and $ 1,3 million savings
Early retirement in the United States is possible, but many believe that having a family and children makes this process very difficult, because at first glance it seems that it is almost impossible to postpone a significant amount in a short period, having children.
However, if there is a desire and the right strategy, then nothing is impossible, writes the publication Twho brought together the stories of the early retirement of two men with young children.
One of the heroes was Carl Jensen, the founder of the site 1500 Days to Freedomtelling how he managed to retire in 43, having a wife and two children who are now 11 and 8.
The story of Justin McKerry, the founder of Root of Good, who retired in 2013, at the age of 33, seems even more incredible. He is married and has three children who are now 13, 11 and 6.
Different ways of early retirement
McKerry, who lives in Raleigh, North Carolina, planned to retire early, but after he was suddenly fired from his job, that day came earlier than he had imagined.
“It was that moment when I asked myself:“ Do I need to look for a new job, or am I just retiring? ”- said McKerry.
He checked his financial plan and realized that he had fulfilled it on 99%, so the man decided that he could retire and no longer work.
Jensen, who lives in Longmont, Colorado, began to explore the idea of early retirement after a bad day at the office.
“I googled something like 'how early to retire,'” he said.
The search engine gave him a link to Mr. Money Mustache, a well-known personality in the FIRE movement ("financial independence, retirement" - financial independence, retire early), behind this pseudonym is Peter Adeney.
On the site, Jensen was offered to begin the path to financial independence. At that time he was 37 years old.
“We didn't live very frugally,” says Jensen, but guided by a financially difficult childhood, by that time he and his wife had already saved nearly $ 600 and had about $ 000 paid for a house worth $ 150. ...
As a result, they sold this house and bought a house for $ 167 000.
“I figured we would need about $ 1 million and no debt, I figured it would take a little over four years or 1500 days,” Jensen said.
How did they reach their goals?
On the day he retired (when he was fired as a transport engineer at the age of 33 years), McKerry earned about 69 000 dollars a year, at that time he and his wife put aside about 1,3 million dollars. His wife earned about 70 000 dollars a year and retired two years after McKerry.
When Jensen retired, his income as a programmer was about 100 000 dollars a year. He and his wife had an investment of about 1,2 million dollars (including real estate investments, but not including the house in which they live).
His wife was a housewife, but after he retired, she started working full time. She works for one of her favorite sites - article writing, podcasting, and more. The woman is not doing this for the money.
“She never had the intention of going back to work, but she found the job of her dreams,” Jensen says.
Jensen and McKerry used the “4%” rule to figure out how much money they need to postpone before they can retire. This rule, based on years of historical stock market data, states that you can safely withdraw 4% from a diversified investment portfolio every year and live on this money for 30 years.
What will happen in 30 years? "The 4% rule should be a real conservative base," Jensen says, citing recent research that shows a high likelihood that investment portfolios will be larger than their original amount, even after 30 years of 4% withdrawal annually, thanks to the return on investment. during these decades.
“This is what gives me the confidence that my investment portfolio will last for the rest of my life,” he says.
Also pay attention to costs.
“To know how much money you need to retire, you need to know how much you spend each year,” says Jensen.
He began to track the expenses of his family after he set the task of early retirement. According to him, they currently spend around 50 000 dollars a year.
McKerry used the 3,5% rule. That is, he focused on creating sufficient savings in order to take 3,5% from the investment portfolio every year. According to him, he spends 40 000 dollars every year.
Answers of Carl Jensen and Justin McKerry to questions about early retirement
How did you manage to postpone such savings?
Jensen: The main thing was to get rid of our expensive home (a new house means lower property taxes, insurance and mortgage costs).
In fact, we do not save too much on vacation, but we have reduced our travel expenses with the help of credit card bonuses; in addition, when traveling, we stay with friends, not in hotels. We travel more, but we do it for less money.
McKerry: It comes down to a deliberate lifestyle change. The goal is to save most of what you earn, and for that you need to distribute your finances so that you can do it. Look at the three main items of your expenses, because that’s where you spend most of your money: lodging, transportation, and food. Can you spend less without sacrificing quality of life?
How did you manage to retire early with children?
Both McKerry and Jensen sent their children to state schools.
Jensen: If you go to work, you have childcare costs while you work, and it is very expensive, but the children themselves do not cost much. They don't need all these fancy toys. The best gift you can give your child is your time: walking or cycling costs nothing.
McKerry: We managed to achieve a good compromise between keeping our children busy without spending a lot of money. But I also think that we have a different philosophy, which implies that children should not be busy around the clock. This is normal, if not every minute is organized and planned.
We found several summer camps that are completely free. For example, an adventure camp from law enforcement, where children visit the forensic laboratory and the courthouse.
Jensen: At some parents, children participate in 5000 activities. I definitely think some of them have value. But I think these parents overdid it. It is expensive, but it also takes time. I do math with children for two hours a day every summer. After that we ride a bike or go down to the creek and walk.
Not working and just having time to interact with your children is a huge benefit. It is a luxury that I am grateful for, and I think that in the future children will be grateful for it too.
How will you cope with the expenses of your children?
McKerry: Only in terms of 529 savings have we put off enough to pay three years of study for each of them. They can live at home and attend a state university nearby. This is a STEM based educational institution. If they really want to connect their lives with technology like me.
Jensen: I am sure that my children receive a certain degree in one way or another, but I want them to take part in this process. I still think how it will be. Perhaps we will offer to add 4 dollars to every dollar they set aside for training. We may be looking for a way to push them to study at a low-cost college.
How do you pay for health insurance?
McKerry: We use the Healthcare.gov portal. Every year we see what plans are available, compare the indicators and buy the plan that suits us.
Jensen: We used to use the Affordable Care Act. Now the wife receives medical insurance for the whole family through her employer.
Where do you invest your money?
McKerry: We have 90% shares.
Jensen: Promotions and real estate.
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