2/27/2012 1:21 PM ET|
5 tips for retiring before you're 50
For one couple, retiring early so they could travel the world became possible after they followed a carefully laid-out plan. Here's how they did it.
At 31, Robert Charlton had grown disillusioned with his job as a technical writer.
"The idea of doing a desk job for another 30 years seemed painful to me, so I came up with this idea of trying to retire before 45," he says. He shared the idea with his wife, Robin, who was then 31 and working as a travel agent.
Robert read up on personal finance instead of hiring an adviser and looked at taxable accounts they could draw from before turning 60. During that period, Robin completed an accelerated nursing program to become a registered nurse. By age 43, they'd gone from $16.88 in their checkbook at age 28 to saving up enough money to leave both their jobs and live off the interest. (Are you saving enough for retirement? Find out with MSN Money's calculator.)
Now, years later, they travel the world, sky diving in New Zealand, hiking through India, sailing through the Chilean fjords and documenting their adventures on their website, wherewebe.com. Although many people struggle to retire in their 50s or 60s, Robert believes it's possible for others to retire early, as he and his wife did.
"Really, we're very average people," he says, admitting that it's harder, though not impossible, for those with kids. "We never had power jobs. We just both took intelligent steps."
Here are some of those steps:
1. Cut housing costs
The Charltons spent a year carefully tracking their spending to see where they could cut back. But, as Robert says, "the truth of the matter is, we really didn't have that much fat to cut out."
Still, they agreed to rent out half of the bilevel starter home they owned in Boulder, Colo., so they could pay off the mortgage and pad their savings. Switching from a 30-year to a 15-year mortgage also helped the couple reach their goal. "You save so much on interest that it does result in a higher monthly payment, but not as high as you would think," says Robert. They later sold their house and put the equity into a bond fund.
2. Agree on your priorities
Instead of buying new cars, the couple kept their old ones, and Robin stuck to grocery shopping lists instead of buying whatever caught her eye.
"That's how he shopped (without sticking to the list), so he was cut off from shopping," she says. Keeping their shared goal in mind kept their eyes on the prize. "We were both on the same page," adds Robin. "We both knew we wanted to put the money towards experiences."
However, because they value travel so much, the Charltons didn't completely deprive themselves while saving up for retirement. As Robert says, it's important to "balance living for tomorrow with living for today." If saving feels like too much of a chore, it's easy to fall off the bandwagon.
3. Live below your means
Now that they've left the workforce, the Charltons live modestly by staying in hostels and focusing on less expensive travel destinations. They estimated needing between $30,000 and $40,000 annually, and they've managed to stay in that range, though they're averaging closer to $40,000.
Last year, they splurged on a trip to Italy and Switzerland for their 25th wedding anniversary. However, Robert says, "we typically have tried to travel places where the dollar goes further, like Argentina and Chile, where the exchange rate was in our favor." Destinations like India and Nepal have higher airfare but low day-to-day expenses, so they stay for several months at a time to balance out the airfare costs.
4. Stay in the game
Although the Charltons' portfolio has had its ups and downs, they've resisted the urge to try to time the stock market or get out altogether. "We did some of our best investing during the bear market of 2000 to 2003," says Robert. "We bought stocks 'on sale' and reaped the rewards afterwards." Although they could have gotten a higher return on investment if the timing had been different, he says, they also underestimated future earnings, so that helped them reach their target more quickly than planned.
5. Don't rule out temporary work
Dips in the market have made it more challenging for the Charltons to live off their interest. So when Robert was offered a six-month consulting project in 2009, he jumped at the opportunity to rebuild their capital. Although he'd once dreaded going to work, he actually liked the temporary arrangement. "I genuinely enjoyed working hard during that window because I knew it wasn't endless, which was the thing I found challenging early on when I first came up with this plan," he says.
Robin adds that they're open to making adjustments as they go or returning to work if needed. However, she values the change to traveling and being active while they're young and healthy. "Working as a nurse, I realize so many people save so much, and a lot of people don't get all the years they thought they'd get," she says.
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I've read most of these comments and I find myself wondering how people can find reasons to consistently diminish and dismiss the achievements of others. It's disheartening to read some of these posts that imply there's something wrong with deciding on a path to live your life, that does not coincide with their opinion and the lifestyles others choose. What difference does it make why these two people wanted to retire and spend their time enjoying what life has to offer them? Why should it matter to anyone that they chose to have no children? That's their business. If they achieved their goals, and can now do what they want by having earned and saved their way to an early retirement, why would anyone object?
It makes no difference what jobs they had, or where they live, or how they spend their money. They simply decided what was important to them, and acted on that decision. What could possibly be wrong with that? Isn't that what life basically boils down to? I live my life by a simple rule: "The decisions I make, dictate the life I lead". Haven't we all made some mistakes and bad decisions in our past? Aren't we likely to make some again in the future? Learn from your mistakes, try not to repeat them, and do whatever you must to achieve your goals. These people should be applauded for 'doing the right thing', preparing for their future, and deciding not to be a burden on their families or society. If everyone did as these people did, we wouldn't NEED social in-security!
I also don't have children. But I do have nephews and nieces. I enjoy spending time with them, but for me, children was not an option. So, I will do the best I can, post-work, in keeping myself busy and doing what I enjoy - because I prepared properly for my retirement when it was appropriate to do so. It wasn't easy, and it did require 'sacrifice' (a concept unfamiliar to many people) on my part. As a society, we MUST move past the fallacy that 'someone else' is responsible for our situation or circumstances at any point in our lives. YOU are responsible for your life and the outcome. No one else. If you've run out of time to prepare, and will have to scrape by, it's your responsibility, not mine, not your neighbor's, not the governments - yours.
Start saving for retirement now. Every penny helps. Pay OFF your debts. No debt in retirement means a much better quality of life. How much you 'have', may be less important than how much you 'owe'. Forget the $5 Starbucks and the unnecessary vacation. Save some money and you'll be in a much better place later in life. It's not rocket science or brain surgery. It's always up to you...!
Retire, work, live life! Who cares, what's important is you live life to the fullest, be good to others and follow your dreams. Life will have a tendency to intervene at times.
You want to retire early, great, do it,
You want to work and make a truckload of money, great do it.
You don't want to work, great, just don't expect a handout.
Although I didn't hear anything about children, illness or anything else. I was going to retire at 50, current age 45 but I had another son and my oldest son was diagnosed with cancer. I'd like to see those financial "experts" plan for that!
I retired at 55 because I was tired of all the BS at work. I loved the work but hated all the crud that went with it, office politics, etc. I built my last home and was able to sell it at the peak of the market then built my retirement home during the crash and was able to get good deal on construction material, (lumber, fixtures, drywall, etc.). As a result of building my last two houses, selling one at the peak, investing heavily in 401K's, IRA's and SEP's I was able to retire debt free and pay cash for everything. We did buy a home while we were building our retirement home so we are renting it out rather than dump it at a loss, furthering our monthly income.
I guess the moral is, if you work hard, save, invest, and live within your means, the American dream is still alive even in these times. The one silver lining in the disaster is people are finally getting back to reality and being much more responsible about debt and extravagance.
I retired at 50 after working continuously for 32 years, I am child-free, by choice, and both of my parents died when I was 32 years old. I inherited very little money; the most important thing that I did was to make sure that I had all of my debts paid off prior to retirement. Yes, 50 is long before the usual retirement but not all of us were fortunate enough to have a wonder, fulfilling job that we loved to go to. One of the posters mentioned they would be happy breaking rocks but I doubt that if they actually got that job, they would want to spend the rest of their lives doing it.
I am curious though as to the apparent anger being vented here towards people who choose not to have children. Why is it always considered selfish to remove yourself from the gene pool? How do you know that there isn't a medical reason, perhaps infertility or an inherited problem, that causes someone to not procreate? Did you ever think that those of us who don't have children find those of you who do to be selfish? How much additional in taxes do we have to pay for schools for kids that we don't have and that aren't appreciated or cared about by a lot of the students? How about the burden on the community for kids who get into drugs, commit crimes, have their own babies at 16 (there are so many that they even have a "reality" show about them) and then have to go on welfare to support themselves. I know that there are a lot of really great kids who have been good students, law-abiding citizens and gone on to have productive lives, but there is an abundance of the others too.
I have three children ages 24, 22 and 12, My husband and I will be debt free this year with the exception of my car (this will be paid in full in 2014!) and our mortgage. We have a home that we live in that will be paid off in 2023 and a retirement home that will be paid off before we ever move into it. Planning for retirement takes discipline. It does not matter if you have children; the basic and fundamental idea is all in this article. Live below your means, SAVE SAVE SAVE pay off all debt and if you don't have the money for what you want DON'T Buy it!
I will retire in my 50's and I am very happy to be able to do this!
There are two keys to retiring at any age: 1. live as far beneath your means as possible, while still enjoying life. it is a balancing act. 2. Have a small as possible financial footprint of monthly expenses and depreciating assets.
If you combine the savings from #1 and the small annual expenses of #2, once those two curves intersect, you can cut yourself loose from the daily grind.
I know many people who make tons of money, spend it all, or most of it and have huge monthly committed expenses (mortgages, car payments, etc) and have a million or so in savings, but would burn thru that in five or less years because they refuse to rid themselves of those fixed financial commitments.
Not sure why some people think that retirees don't pay taxes on their retirement income, I have paid plenty of taxes on my retirement income during the past nine years.
There isn't any free ride.
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