What does it take to retire early, or to retire at all? How much do you need to save before you can make the leap? And once you're retired, how will you manage your investments for reliable income?
Almost everybody faces these questions eventually. If you’re thinking about them sooner than later, then you’re ahead of the game. Those with successful careers and a taste for simple living have the best options. That was my situation: Instead of climbing further up the corporate ladder, or inflating my lifestyle, I retired at age 50.
How did I do it? I was fortunate to grow up in a military family where I learned integrity, economy, and the value of hard work. In college I earned an engineering degree, discovered personal computers, and taught myself to program. Eventually I started my own small software company, which I merged with another, and helped grow into a larger company.
But I'm not a dot-com millionaire. I didn’t become financially independent from selling a business or flipping real estate or trading hot stocks. I did it the traditional way: hard work, frugality, prudent investing, and patience. Financial independence was a slow process: I began serious saving and investing in my mid-30′s—maxing out my retirement contributions, invested raises and bonuses—and ultimately it paid off in early retirement.
Along the way, I had the help of some wise financial mentors, and my wife Caroline, who, like me, has always been happy living below our means. We ignore what other people are buying, and splurge in the few areas that matter to us. I track our expenses and keep a detailed budget. We can number on one hand the times we didn’t pay off credit card balances in the same month, and it’s been decades since we had a car loan. We paid off our house early too. Even when it might make economic "sense" to borrow, we don't, favoring the simplicity and security of living debt-free.
In my investment portfolio, I also focus on simplicity and accountability. After some early detours, I've resisted the urge to pick stocks or chase the latest hot idea. The bulk of our portfolio now consists of just 10 holdings (all low-cost mutual funds or ETFs) in just two accounts. I’ve tracked our net worth for many years, and calculated our overall portfolio return each year, so I would understand if we were going in the right direction, and why or why not.
At heart, I'm still an engineer. When it comes to managing money, my top priorities are simplicity, reliability, and safety. Now my mission is to help others get on track to financial freedom, through my blog and other writing about personal finance. Whatever your starting point—whether you're just leaving school, working to get out of debt, or building your retirement savings—you can reach financial independence sooner by using the principles I'll discuss here.
In the months ahead I'll be drawing on my experience plus some of the latest research to explore strategies for saving, investing, and retiring earlier. My favorite topics include saving big, cheap travel, passive index investing, retirement calculators, and early retirement lifestyles. You'll get my best tips and lessons learned—first-hand knowledge for becoming financially independent and retiring sooner in the real-world. So stay tuned!
Darrow Kirkpatrick is a software engineer and author who lived frugally, invested successfully, and retired in 2011 at age 50. Now he writes regularly about saving, investing, and retiring on his blog CanIRetireYet.com. This column will appear monthly.
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