Ditch the Rugrats
If you want to retire by the time you’re 55 years old, don’t have kids.
If we didn’t have a child, I could retire right now and blog all day for fun. For real. Believe me, I love my son. I could spend all day giving him hugs and kisses, but children are financially draining! Any working professional who doesn’t have children or parental care on the horizon should be well on their way to retirement. No excuses.
Despite being tied down by an energetic toddler who woke up at 5:45am this morning ready to PLAY, I’m on the path to retire at 55 years old. Here’s my strategy.
Max Out Retirement Savings
I have made the maximum contribution to my employer 401k since I started working full-time post-college at the age of 22. I wasn’t making much, but I knew it was important. The trade-off back then was roommates, top ramen, and generic medication, but it paid off. I’ve stashed away $500k with a 1-year personal rate of return of 16% and a 5-year of 11%.
If I left my employer and put that money into an IRA with way more investment options, I could be making even more. One colleague said that’s why he jumped ship. He can now retire earlier than if he had stayed because he’s maximizing his retirement returns.
Invest Aggressively
Another tactic is investing in the stock market, also starting early. I remember telling myself that when I got my first paycheck, I was going to try my hand in the market. I had no fear back then! I didn’t know anything about investing, but I thought, what do I have to lose? As long as I monitor my portfolio, I’m golden.
Yes I’ve made some really bad investments and lost money, but I’ve always bounced back. 1-year personal rate of return of 46% and a 5-year of 20%. Check out those returns!
I was also strategic when it came to buying property. I didn’t want a single family home. I wanted a duplex so that we could live in one unit and have renters in the other unit foot the mortgage.
I read somewhere that one formula for retirement is commanding $51k/year in investment income. That’s because the average American needs $51k/year to retire.
Always Be Negotiating
I negotiate the shit out of everything. I scrutinize my credit card statements as if my life depended on it.
Here’s a real-life example that went down today. I called Geico life insurance and got the following quote from Pacific Life: $750k for 15 years at $32/month. That’s half of what I currently pay with AIG and they’re only covering me for $700k for the next 12 years. Send over the medical examiner, I’m making the switch!
I try to ask for a raise whenever possible, especially if I feel it’s deserved and in line with the market. If a 15 minute conversation could result in an extra $5-10k, would you do it? Of course. So do it. You have to ask. Sometimes plead.
I’m also learning that when it comes to pricing, price high. If you’re a contractor, let’s say a photographer, and you’re trying to decide whether to charge clients $100 or $200, always charge the higher price. Let me repeat: always charge the higher price! There is something subconscious about higher pricing being better value. Don’t be left out.
Hire an Expert
I have a financial advisor (free). Every year, she runs my finances through her process and gives me the low-down.
- You are doing a great job saving towards retirement.
- If you continue to max out retirement savings and you supplement that with saving $1500/month total in a taxable account, you’ll be on track to retiring at 55.
- Planning is all about trade-offs and levers. If you wanted to retire earlier, it would mean increasing savings. If you wanted to spend more than $10k/month in retirement, it would also mean increasing savings or working longer.
Once I joked about retiring in the Philippines, which she could relate to since her husband is Filipino, and she said I could retire now if that were the case.
So if all else fails, you can all join me in my tropical ancestral land. Mabuhay!
Fearless Girl statue photo credit: Anthony Quintano
Well that first option blew by me after having not one, but two kids here! But still great financial advice and definitely bookmarking to refer back to now. Thanks Catherine 🙂
Just reading it, Cat, it straightens my facial wrinkles. It seems like you’re great financial strategist. I know you know what you’re doing and hope everything goes well for you and Dean and Franco. Don’t forget to take good care of yourself too – healthwise. An awesome read. Very proud of you.
Had my two kids before I was really established in life but I love them.
I can actually retire (or get some money at 55) with my pension. Yes, I have one. Cal-Pers is super. I get 2.5 % a year. If I leave right now, I get 50% of my salary and since I am at 20 years, I get medical for life. Plus, when I get to 62, I can collect Social Security. Plus, I have a little something in a 403b and 457. Plus, I will be working at least part-time until I am just too old.
Patrick, sounds like a great retirement plan and you totally did well for yourself. A pension?! It’s like you won the lottery.
I’m not having kids, and I’m super smart with money, but yeah, prob no early retirement here unless I get it together quick. I’m doing the “right” things but maybe just not enough of the right things. You were pretty smart to have just one kid though. Multiples makes it that much harder I imagine.
It’s probably not in the cards for me because I’m cut like my mom/grandfather. He was an artist and worked until his late 90’s. I think writing/photography are forever. My husband, though.. he’d like to retire by 55!
Fifty five to sixty is actually the right age to retire, however some might not retiree even after this age. For those these ideas can be helpful. One advice I would like to add by myself is, if you are over 60 and retiree and as well free from all your responsibilities such as children’s marriages and have your own property then you accurately matches sell and stay scheme’s rules. It helps such people to live old life in a better way.
Here’s the short version of what allowed me to retire at 50: I sold my overinflated California real estate in 2005 and moved to Colorado. That play will probably work again, but the window is closing.
Steve, you made the right move! Especially with the new tax plan, Californians are going to suffer. I know several people who have moved or are considering a move to Colorado.
My husband would like to retire at 55, but it may be closer to 60. Of course, if I had stayed in the workforce we’d be in a different situation, but that’s another story. We had kids early, though, which means when he is at his highest salary, our expenses will decrease dramatically. By age 52 we will have no children to support, so we can sock away a ton!
Dana, I’m hoping my son can work part-time and take care of some of his expenses when he’s old enough (i.e., 14 years old), but I’ve been reading that kids no longer have the milestones we used to (working in high school, getting a license at 16), so I’ll have to take that option off the table!