Retiring in Your Thirties?

Traditionally, a middle class lifestyle is structured a bit like this:

  • A few years having your diaper changed, learning motor and cognitive skills
  • 15-25 years of schooling to prepare you for the work world
  • 35-60 working years, for some, even till death
  • If you make it through the last one, a brief retirement in your old age to travel, fine dine, do whatever you like with your time. This is of course assuming  40+ years of job related stress has not left you weary and unable to enjoy life to the fullest.

Is this it? Are we all doomed to follow this path unless we dumpster dive or start the next Amazon? Of course, you COULD quit the rat race if you lived in a landfill. You also could create a company that tops Amazon. Is there a simpler way out? The answer to this question is a definitive YES. The answer has been right under our noses all along.

We all have total freedom of choice as to what we spend our hard-earned money on. Many of us do not realize this, and are brainwashed into a high convenience, high consumption lifestyle. The widespread misconception that increased material consumption will increase your quality of life is not only false, it will often lead to a DECREASED quality of life. By depending on external sources for happiness, you become trapped in the endless pursuit of obtaining more stuff. When you realize just how easy it is to cut out all the waste and amass large amounts of cash, you begin to realize you can live on less than you imagined without sacrificing quality of life (so actually, no dumpster diving is necessary).

It is well documented that there are people around the globe living perfectly happy and healthy lives, all on an amount of money that would have most people in western society saying “gasp! these people must be so deprived! They don’t have any stuff!”. We have all heard it before, happiness comes from within. It is only when this idea is TRULY embraced do we see the results. We learn how to live the good life. A life where happiness does not depend on external factors, and therefore nothing can take that happiness away. As a nice side effect, our banks accounts overflow with the ridiculous surplus of wealth coming from our high consumerism-supporting salaries.

You see, in high wage earning countries like the US or Canada, we a quite lucky in that we have the ability to amass huge savings simply through adopting a more sensible lifestyle.

After the waste is cut, you may find yourself beginning to daydream about the possibilities that come with your now surplus cash. You may even feel a little paralysis with all of this new choice. What to do with all this money?

The answer to this question is personal and may not be the same for everyone. I will tell you however what the answer is for me.

What if you could put that money towards changing the structure of your middle class life? Imagine now that the typical structure were more like this…

  • Same start, crying and learning how the physical world works
  • 15-25 years of schooling to prepare you for the work world
  • 7-16 working years
  • Quitting your day job between age 30-40, still feeling fresh and healthy due to a brief career, and enjoying a 50-70 year retirement. Flying freely though life with limitless possibilities. No hobby is left unexplored, no personal project uncompleted. If you wish to start a family someday or already have kids, imagine having the time to be with them all day. Without a 40 hour work week sucking up all your time and energy, your life takes on a new form.

But how much do you need socked away to live off for the rest of your life?

For retirement living, a safe withdrawal rate of 4% is a great time-tested rule of thumb. This is how much you can reliably expect your savings to grow each year. With this in mind, you will need 25 times your annual spending saved in order to produce a passive income that you can live off sustainably.

Looking at savings rate of 50%, how long will it take to save 25 times your annual spending? About 16 years. The beautiful thing about this is it does not matter how much you make, what matters is your savings rate. THE ONLY THING THAT DETERMINES YOU NUMBER OF WORKING YEARS IS YOUR SAVINGS RATE, AS A PERCENTAGE OF YOUR TAKE HOME PAY. It doesn’t matter if you’re making $50,000 a year or $500,000.

Although the person making $500,000 and socking away half of it would amass a larger fortune much quicker, they would still have to save enough to support a $250,000 lifestyle. Your number of mandatory work years is ONLY a function of your savings rate.

Take a look at the chart below to see how savings rate affects working years.

Savings Rate (% of Take Home) Working Years
0 Infinite
5 62
10 51.4
15 41.5
20 36.7
25 31.1
30 28
35 24
40 21.6
45 18.5
50 16.6
55 14
60 12.4
65 10.2
70 8.8
75 6.9
80 5.6
85 3.9
90 2.7
95 1.2
100 0

Like to see the math? Here is a neat spreadsheet I made just for you, which conservatively assumes 5% growth on savings per year.

So what can you spend all that money on? The ULTIMATE LUXURY, retiring early and living your life by your terms. How many years do you want to depend on a 9-5? Analyze your own savings rate and see where you currently sit on the chart. To lower your working years, increase your savings rate. You can do this by taking initiative and having the right perspective.

You may even find you are ready to retire right now.