If you are anticipating retirement in the next three to five years, you have probably noticed that much of the media’s focus for upcoming retirees has been on having enough money saved. I recently read that 31% of Boomers don’t have any retirement savings. Yet there is a group of people retiring in their 30s–part of the Early Retirement Extreme (ERE) movement–who are able to live financially independent lives at a much younger age.
So how are they doing it?
According to Greg Daugherty in his nextavenue.org post, What 30-Year Old Retirees Can Teach the Rest of Us, these ERE advocates employ the following strategies:
- Adopt a frugal lifestyle.
- Save upwards of 75% of their income and invest it.
- Retire once investments equal 25-40 times their annual expenses.
Daugherty interviewed two such retirees, Jacob Lund Fisker and Mr. Money Mustache, for more specifics on this movement. Fisker, who retired at age 33, is author of Early Retirement Extreme: A Philosophical and Practical Guide to Financial Independence. His website, earlyretirementextreme.com, contains lots of suggestions for cutting back on expenses, including a 21 Day Makeover, featuring topics ranging from finding a place to live and going car-free to finding a free hobby and investing for early retirement. He recommends losing the habit of watching TV and learning several skills worth $35 per hour to augment your income. On his blog, Fisker says that the end goal is simple: How can I have a happy lifestyle on the lowest amount of spending possible while maximizing my savings?
Mr. Money Mustache, who, along with his wife, retired at 30, also has a blog with more than 300 posts. If you click on the Start Here button on his blog, you will find an article, Getting Rich: From Zero to Hero in One Blog Post, that explains how he came to this lifestyle of frugality. One sentence in that post stuck out to me: “Your current middle-class life is an Exploding Volcano of Wastefulness…”
The point of this post is to suggest that if people in their 30s can economize to the degree that they can save upwards of 75% of their income (without six-figure salaries or winning the lottery), we can apply some of these same strategies to make retirement a reality for ourselves.