Syd
- San Francisco
- Age: 47
- Retired at 44
While most people try to save a fixed amount before retirement, Syd took a different approach to early retirement and looked at her costs instead. "I've never believed in calculating your retirement nest egg based on a percentage of your annual income," says Syd, who regularly blogs about retirement. Instead, she calculated that her postretirement expenses would be 65% of her preretirement spending. After three years, she found it was an accurate estimate -- often, she has spent a bit less.
It took Syd 15 years to build a nest egg 33 times her total projected annual costs. With this amount of money, she has been able to withdraw 3% of her savings -- which means she will not run out of money as long as her investments perform well. She actively tracks her portfolio and rebalances her investments when they underperform.
Syd has followed different strategies to build her investments and make them last. Before retirement, she invested aggressively in stock funds to increase her net worth as quickly as possible. Now she is more conservative, with more than 30% of her portfolio in cash and the rest in diversified mutual funds.
Jacob
- San Francisco
- Age: 36
- Retired at 33
Jacob named his website "Early Retirement Extreme," where he describes his philosophy and financial strategy. After working in academia for five years, Jacob decided to quit.
This was possible because of his aggressive savings strategy. While working, Jacob saved nearly 80% of his after-tax income by eschewing a consumerist lifestyle. Then he began managing his own investment accounts.
"If you're retiring at my age, it's because you prefer time more than money, which is a somewhat rare attitude in this day and age," Jacob told Bankrate last winter. "Fortunately, I've learned to live quite well on little money." He cut costs by using a bicycle instead of a car, eating at home and enjoying low-cost activities.
Jacob lived on about $7,000 a year -- $1,000 of which went to sports hobbies, while the rest covered his basic expenses. He described himself as a conservative investor who focused on nongrowth, dividend-yielding stocks, and he tried to withdraw less than 3% of his portfolio annually.
After more than four years in retirement, Jacob recently returned to work as a quantitative analyst for an investment firm. He credits his early retirement for giving him the financial independence to pursue a job that he loves. But technically, by his own definition, he is no longer retired.
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