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How much is enough to retire? When planning for retirement, I used to think that everything mattered. I'm not an engineer, but I have heard a number of engineers make the statement that, "Nothing doesn't matter." Before I decided it was really time to get out of the race, I kept increasing the amount of money I thought I would need in order to retire. My purpose was to make sure that I never would regret not waiting until I had saved a little more to take care of every eventuality. When I decided that I really needed to get out of the race, I looked at two things: what I really would need; and what I really would like to have. I had more than I really needed, but I had a little less than I wanted. All in all, it seemed like the two lines had gotten as close as they needed to get and that it was time to retire. I have never looked back. The time to retire is when the "I really need to" joins up with the "can do," thus making it possible "to do." Eeverything else just gets in the way.
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I'm curious--has anybody here whose work compensated them at an "ordinary" rate--whatever that means, but let's say under $60K a year--retired early?

Also, has anybody used the Financial Independence guidelines outlined by Vicki Robin and Joe Dominguez in their book, Your Money or Your Life? (They claim you can retire in seven years, no matter what you make, by following their program.)

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I'm curious--has anybody here whose work compensated them at an "ordinary" rate--whatever that means, but let's say under $60K a year--retired early?


Welcome to the board, Xcentric


Though not a perfect answer, Art created a couple of polls in september asking how much the folks on this board earned-but he let us partly retired and not yet retired answer mixed in with those fully early retired.

http://boards.fool.com/Message.asp?mid=13242852

http://boards.fool.com/Message.asp?mid=13242860


Ad Sach - waiting for some 'average joe' success stories to encourage you - I know they are there.
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"My purpose was to make sure that I never would regret not waiting until I had saved a little more "

Part of my epiphony was the realization that I'd reached a point where I wouldn't move forward financially much faster working than I would RE'd. So why shouldn't I sit on my butt and send my money out to work instead of myself?

mark
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mhtyler writes,

Part of my epiphony was the realization that I'd reached a point where I wouldn't move forward financially much faster working than I would RE'd. So why shouldn't I sit on my butt and send my money out to work instead of myself?


A very profound comment.

If you look at the Pay Out Period Reset model

http://www.geocities.com/WallStreet/8257/popr.html

You'll see than an early retiree with a 50-year pay out period has a 50/50 chance of more than doubling his withdrawals after inflation.

There are a lot of 40 and 50-year old workers whose pay increases don't even MATCH inflation.

intercst
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"has anybody used the Financial Independence guidelines outlined by Vicki Robin and Joe Dominguez in their book, Your Money or Your Life? (They claim you can retire in seven years, no matter what you make, by following their program.)"

That sounds mighty tough, but I haven't read the book.

Are they including social security in the income, and at what age did they say you could implement this plan?

__________________________________
Without SS or a pension, - case 1

Off the top of my head, assuming someone started at zero assets, and saved 40% of their salary, meaning they were living on 35% of it, taxes taking the rest, and they wanted to retire with 30% of their salary in income, I would conjecture for a 4% withdrawal rate they would need 25 times ( salary x 35%), or about 8 years total pay saved away. Seeing that they were only saving about 1/3rd of their salary, that wouldn't get them there.....

Year Salary Savings
1 60,000 24,000
2 60,000 48,000
3 60,000 72,000
4 60,000 96,000
5 60,000 120,000
7 60,000 144,000

After seven years, not including the effects of inflation or the probably net gain of about 6% per year on their savings, which would add another 30,000 maybe, they have 175,000 total in assets.

If they were living on $21,000 a year, and wanted that in retirement, I don't see anyway to take 21,000 a year out of a nest egg that small.

_____________________________
With social security or a pension

If you were assuming SS would pay them $12,000 or more a year, then they could take $7,000 a year (4%) out of the nest egg, giving them close to the spending level they were living on. ($19,000 yr)

Is that the basic premise of the book?

That would work for people needing that level of income.

It doesn't scale....if you need 60,000/yr, and SS only provides you 12,000/yr, it won't work. Your essentially back to the first case.

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telegraph asks,

<<<<<has anybody used the Financial Independence guidelines outlined by Vicki Robin and Joe Dominguez in their book, Your Money or Your Life? (They claim you can retire in seven years, no matter what you make, by following their program.)">>>>>

That sounds mighty tough, but I haven't read the book.

Are they including social security in the income, and at what age did they say you could implement this plan?


The late Joe Dominguez reused his tin foil and wax papar and lived on $7,000 per year. (He retired around 1969 at age 29 with a $100,000 nest egg.)

Most people will find that to be too frugal for their taste.

intercst

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Hi Xcentric,
I'm an average Jane. I think I can RE. If you are young, the power of compound interest is on your side. Start saving and investing early and you will be well set for life.

I read YMOYL. I found a lot of value in it and would highly recommned it. I think it really makes one look at what money really is and what it means. For instance, I once quit a pretty good job that required a lot of travel. Once I costed out what my salary was really worth, divided by all the hours I was really working, I was making something really ridiculous like $2.50 an hour. So I quit. I read the book later, but that is the kind of thing in the book that is so valuable. They do make you think about what your time is really worth.

As for paring down, most of us can cut our expenditures drastically and it won't affect our happiness level. Taken too far though, a subsistence lifestyle doesn't attract me too much, although LBMM does. When things are cut too much to the bone, I fail to see the difference between YMOYL, and poverty. I guess one's approach to what is it one is doing, may make poverty bearable. But when I am re'ing, I don't want to worry all the time about not having enough money. Being poor will just feel like being poor to me - no matter what I call it.

ADsach, thanks for posting the polls.
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Part of my epiphony was the realization that I'd reached a point where I wouldn't move
forward financially much faster working than I would RE'd. So why shouldn't I sit on my
butt and send my money out to work instead of myself?


Although I'm not retired yet, I had a similar realization about a year and a half ago. I had a chance to move from a reasonably high pressure management job with a major software company to a lower stress job at a university two miles from my house. The university job paid less although it offered 5 weeks vacation, twice as many holidays, more reasonable workdays, etc. I initially had to deal with the psychological barrier of going from a fairly robust salary to a more modest one and I also thought this would have an impact on my RE goal. When I started looking under the hood a little more I realized that since I had already acccumulated the major portion portion (about 80%) of my desired retirement nest egg, I would not significantly accelerate my retirement date by staying at the higher paying position. That is, most of the gains I expected over the next couple of years would (hopefully) come from growth inside the nest egg rather than from "new money" I would add from employment. Once I figured that out, it was a "no brainer" to leave behind the 10 - 12 hour days, only two weeks vacation, longer commute and an "electronic leash" to the office.

jtmitch
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Ad Sach - waiting for some 'average joe' success stories to encourage you - I know they are there

I have the 'average joe and jane' success story of my parents, though a bit dated.

My parents retired 18 years ago at 58. They did this with a final salary of around $50K for my dad and $13K for my mom. They were both in education with my father in administration, and my mom a teacher. (Amazing that with 2 masters degrees she finished her career with a salary of only $13,000 working full time, but that is another post altogether!) Factor into this expenses involved with raising 6 children and paying half their way through college, where ever we chose. Mom's salary also only started at around 45 years old, since she only went to college after I was born. They figured she had better get a "professional" paycheck if they were to get us through college.

How was this done? They were consumate LBYMers. They didn't smoke or drink, (but occasionally,). Their grand passion was going to see live productions at a local playhouse, with a ticket price of about $5. My father believed if you could read you could do anything and almost never had any help around the house for repairs. Early in their family days, they would work 2 and 3 jobs each to get ahead. My dad's starting salary was $5,000 a year with two children.

We didn't go out to eat, at all. It wasn't a hardship, and now that I have two children of my own I realize this was probably as much due to the logistics of keeping 6 children tame in a restaurant as for money reasons. The big treat I remember was when my dad would get Arby's coupons and would come home with bags of their roast beef sandwiches. To this day I still think of them as a treat.

Dad was the king of coupon clipping, and would go to more than one grocery store to shop the specials. Hand-me-down clothes were an accepted annual ritual, with these huge boxes coming out of storage every August to see what fit for the new school year. Being the youngest, I got hand-me-downs not only from my older siblings, but with the age difference between us, these clothes had also made the circuit through the cousins as well. When my new bike got stolen because I hadn't put it away, I did not get a new one until I grew into my sister's old one, which took a couple of years.

Our vacations were not luxurious by todays standards, but loads of fun, and we thought we were particularly fortunate. The 8 of us and the dog would pile into the station wagon, and head south to Florida for 10 days towing an old tent trailer behind us. It was old in age, but per usual dad had customized it with much hard labor. A pack of cards was great entertainment, as was the bag of marshmellows around the camp fire. We had no need for hand held video games or individual high tech things of that nature as we would actually take walks and talk to each other.

There was lots of peer pressure growing up, as we lived in a relatively affluent town. But we knew the score and there would be no use in arguing it. Babysitting and odd jobs came early, both to buy extras and to save for college. We knew what was expected of us and didn't question it all that much. Life was much better in our family than it was for many of those around us with their freer spending style. I used to think my best friend's family was rich because of all the things they had. Her dad still works, because he has to, even though he made six figures back then.

At times I question whether I am handicapping my boys with all the things they have. True, their video game consists of a recylcled Colleco Vision rescued from the closet of my husband's bachelor days, but my oldest is 6. Surely he doesn't need the Play Station 2 my same best friend just bought for her 6 year old at twice it's value because of the PS2 shortage for Christmas. And at 5 he started to save for college with odd jobs and produce sales from our garden, but I need to work on that consumer mentality that has started to take hold of him. He is well on his way to learning how to save, but I think I needed to remember how less can be more, and pass that on to him. I don't want my dad's lessons to stop with one generation.

Well, this is straying a bit. Enough for now.

InParadise
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I'm curious--has anybody here whose work compensated them at an "ordinary" rate--whatever that means, but let's say under $60K a year--retired early?

Well, I am making less than 60k, not factoring any salary increases into any of my planning, and it certainly looks like I will be able to retire early, in my mid 40s.

I'll let you know for sure when I get there. <g>

Cindy
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Great post. It should be required reading for all kids.
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Xcentric16 says has anybody here whose work compensated them at an "ordinary" rate--whatever that means, but let's say under $60K a year--retired early?

I was definitely below $60K until my last 2 years (as an independent contractor). Retired at 50.

has anybody used the Financial Independence guidelines outlined by Vicki Robin and Joe Dominguez in their book, Your Money or Your Life?

Like most people who have read the book, I've done some of the steps and not others. I figured out my "real" wage with extra costs added in (commuting time, work clothes, etc.). I also did the budget thing where you track ALL your costs. I still do it. It helps me keep my spending under control. After doing it for so long, I find it very easy to do - just save receipts, keep track of non-receipt items (about 4 a month), and every once in a while, put it in a spreadsheet. Of course, I'm the kind of person who has a spreadsheet with 6 years of data on everything I bought for Christmas presents and the cost. Keeps me from giving the same thing next year. I definitely don't follow their investment advice :-).

arrete - who is pleased to note that the cost of Christmas is going down while the quality of gifts is rising - I have more time to think of the perfect present (one more RE advantage).
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