Early Retirement 101 — How Long To Financial Independence?

Richard Reis
Jan 24, 2017 · 7 min read
By Richard Reis

Hello dear,

A lot has happened since our last interaction. There’s president Trump, lots of people marched, and the rain has finally stopped.

You think I’m going to talk about politics huh? Not a chance.

What amazes me is that it’s been 7 days since our last interaction. 168 hours. And we’re living in a different world already. Think about it.

A small change in time led to a big difference in conditions. That happens often you know? When itty-bitty changes make a big difference.

That is the theme of today’s letter. We’ll address the top 3 misunderstandings about early retirement. And we’ll see what small changes make a big difference.


Misunderstanding #1: You only retire when you’re older.

When most people think of retirement, they picture an attractive older couple strolling down a beach. I don’t think it’s too far-fetched to say that, all I did was Google images of ‘retirement’.

Why is that? Maybe because for most of modern history this was true.

That was until only 25 years ago (in 1992), when Joe Dominguez, who retired at age 31, decided to teach everyone how he did it.

He and his partner, Vicki Robin, co-authored a bestselling book “Your Money or Your Life”.

Since then, people have repeated Joe’s success and written about it over, and over, and over again. In turn, this led their followers to try it out and tell all their friends about it. Which in turn led to you and I right in this moment, right in this series.

So the first misunderstanding is debunked. Not only can you retire in your 30’s or 40’s, but that knowledge is growing so fast that a generation or two from now, this might become the norm.

Misunderstanding #2: Retirement means never working again.

When I told a friend of mine I was writing about retirement, his reply was “oh, isn’t that for lazy people?”.

No, Bob, that isn’t for lazy people.

We can’t blame Bob though. That perception is so widespread, to the point where even early retirement bloggers prefer to stop saying “early retirement” and say “financial independence” or “FI” instead.

Look, I get why people think you’d be lazy. If all you wanted to do after retiring was bike around wearing an American flag as a cape, you could.

However, I’d be willing to bet pretty heavily that after a few weeks or months of debauchery, you’d be bored out of your mind.

What happens with most people who retire early is they get to work on anything they want to and dedicate 100% of their time to it since money isn’t an issue anymore.

Not only that, they don’t even have to worry about those projects making money. Since stress makes you less creative and competitive, the logical thing to do is remove it.

Want to be an actress? You can stop working part-time to pay the bills and audition every day for the rest of your life.

Want to write a book? Write 20. You have all the time in the world and no bills to worry about.

Want to travel the world and blog about it? Enjoy and let me know so I can write about you.

There are an endless number of things you can do once “paying the bills” isn’t an issue.

Key words: voluntarily poor. Remember that, it’s very important.

Picture this for a moment. What wonderful things would you accomplish if money wasn’t a worry? I bet this exercise feels great.

Bob was wrong, I doubt you’d be lazy.

Misunderstanding #3: I cannot retire on an average income. Only if I was like, a gazillionaire.

Not true.

If you don’t plan on making more money, you can still retire early by focusing on saving.

Remember what I said in the first letter? There are 3 areas where you should focus: Saving money, investing money and making money.

If you don’t want to worry about making more money, fine. But you should find ways to spend less.

Last week, I gave the example of someone making $50k/year, spending $47.5k a year needing $1,187,500 so she could retire early.

Well, imagine she lived on $25k a year (very easy with the mortgage paid off and no debt) she’d only need a $625,000 net worth to retire early. Half the amount of time and work!

The less you need, the faster you’ll enjoy the freedom of retirement.

In a few seconds, allow me to demonstrate it. Let’s use the below graph (I made it using inspiration from this post).

Beautiful isn’t it? It shows a lot in one table.

If you spend 100% of what you make, you’ll never retire.

If you spend 95% of what you make, you’ll retire in 66 years.

If you spend 90% of what you make, you’ll retire in 51 years (hence why people who are ‘advised’ to save 10% of their income, retire in their 60’s or later).

If you spend 50% of what you make, you’ll retire in 17 years (closer to what Mr. Money Mustache did).

If you spend 25% of what you make you’ll retire in 5 years (closer to what Jacob at Early Retirement Extreme did).

If somehow you spent 0% of your income. (you found a way to live for free like a monk) you’re retired. Congrats!

Choose when you’d like to retire and work backwards.

See why you don’t need to be a gazillionaire to retire early?

If you’re still not fully convinced, I suggest taking a minute to study the following example:

Using this Vox article, we can see how the average American spends their money.

We already know $50k a year is what the average American makes, so we’ll go with the second table (where the person spends $52,184 a year). Let’s say she makes a total of $54,930 and saves $2,746. That’s 5% of her income.

Using our table above, I bet you know how long it would take her to retire. You do you say? Fantastic. You know she’s spending 95% of her income so she’ll take 66 years to retire.

What if we could cut some unnecessary expenses, though? Here, like this.

Tobacco product and smoking supplies: $365/ year

Alcohol: $385/ year

Cash contributions: $1,340/ year

Food-away-from-home: $2,247/ year

School debt: $764/ year

“Pets, toys, hobbies, and playground equipment”: $602/ year

Now we’re getting somewhere.

If she paid off her debt, ate at home, stopped smoking and drinking, and delayed cash contributions or owning pets for when she retires she’d gain $5,073 in savings every year!

Remember what I said before? With a few itty-bitty changes comes a big difference. She’s making $54,930 and saving $8,449. Now she’s saving 15% of her income.

You know she’s spending 85% of her income. Using the table above again, how long would she take to retire now?

That’s right. 43 years! Incredible. A few itty-bitty changes removed 23 years from her working life!

Twenty. Three. Years!

As one part of you agrees, the other part says “but I like my dog, my alcohol, and my cigarettes”.

I’d say “fair enough” and ask “Is having those things now instead of saving them for later worth working an extra 23 years?? The average person in America only lives 78 years. Choose your battles wisely.”

Note: I’m not saying you can never have a dog or drink alcohol. I’m saying save those things for later. Work your butt off and sacrifice a little for the next 10 or so years (maybe after that time you’ll realize you don’t need alcohol and cigarettes 😉). That way, you can enjoy more of your life with your new puppy, Fido.

Have you ever wondered how long it would take you to retire? This spreadsheet will answer that (big thanks to Tobias Rott for the link).

Whatever your number is, I believe you can go deeper though. How many years can you shave off that number?

You could focus on spending less. You could focus on making more. Or you could focus on both and turbocharge your engine.

Hence why this series will talk about specific ways to do all those things.

Well dear, you’ve officially acquired new knowledge. This covers today’s lesson.

Today you learned the true meaning of early retirement. You also know how long it will take you to retire early, no matter your income.

See you next week (follow the series here to be notified).

Be well.


Thanks for reading! 😊If you enjoyed it, test how many times can you hit 👏 in 5 seconds. It’s great cardio for your fingers AND will help other people see the story.You can follow me on Twitter at @richardreeze to find out whenever others just like it come out.📚 Do you like books? If so you might enjoy my latest obsession: 
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Since I write about finance, legal jargon is obligatory (because the guys in suits made me). Before following any of my advice, read this disclaimer.

Personal Finance Series by Richard Reis

Learn (in 52 letters) the finance basics used by early retirees.