September 9, 2018

How to retire in your 30s with $1 million in the bank

Hacking your way to retirement

Millennials have embraced this so-called FIRE movement—the acronym stands for financial independence, retire early—seeing it as a way out of soul-sucking, time-stealing work and an economy fuelled by consumerism.

Followers of FIRE tend to be male and work in the tech industry, left-brained engineer-types who geek out on calculating compound interest over 40 years, or the return on investment on low-fee index funds versus real estate rentals.

Indeed, much of the conversation around FIRE, on Reddit message boards or blogs like Mr. Money Mustache, revolves around hacking one’s finances: strategies for increasing your savings rate to the hallowed 70%, tips for cheap travel through airline rewards cards, ways to save nickels and dimes at the grocery store.

Some practice “lean FIRE” (extreme frugality), others “fat FIRE” (maintaining a more typical standard of living while saving and investing), and still others “barista FIRE” (working part-time at Starbucks after retiring, for the company’s health insurance). To be “firing” is to slash one’s expenses to maximize saving while amassing income-generating investments sufficient to support oneself. To have “fired” is to have achieved that goal.



“A lot of people think you’re a new-age hippie,” said Jensen, who sold his four-bedroom, four-bathroom house, downsized to a more modest home and maxed-out retirement accounts while firing. “They can’t even wrap their minds around it.”

In retirement, Jensen and his wife and two daughters plan to live on roughly $40,000 a year generated from investments. Because his wife works, they have yet to draw on those accounts. It’s a life rich on time but short on luxuries: groceries are bought at Costco, car and home repairs are done by him.

“People always assume there’s an external circumstance: ‘Oh, you must have received an inheritance,’” Jensen said. “We’ve just chosen to live far below our means. That itself is a radical idea.”

Equally radical is opting out of the workforce in your 30s or early 40s, a time of life when men and women are normally leaning into their careers or, less happily, enduring the daily grind to pay the bills until Social Security kicks in.

Jason Long, a pharmacist in rural Tennessee who retired last year at the ripe old age of 38, said his father had a hard time understanding why Long couldn’t continue to work and collect his $150,000 salary.

But Long said he was deeply unhappy in his job, where over his career he witnessed drug costs skyrocketing, sick people battling health insurers and the over-prescription of opioids and the addiction crisis. His customers, angry, financially stretched, often lashed out at the person behind the counter.

“There were days when I had 12- or 14-hour shifts where I didn’t use the restroom, where I didn’t eat, because so much work was piled up on me,” Long said.

Like Jensen, he had been saving a sizable portion of his income over the past decade, and he and his wife had a paid-for house and an investment portfolio worth a little more than $1 million. Why stick around?

“The reality is the numbers are there for me,” Long said. “To go to a job that’s making you miserable every day, it doesn’t make sense to pad the bank account at that point.”

Why they hate work

Quitting the rat race isn’t a new concept. From the Shakers of the 1700s to the back-to-the-land hippies of the 1960s and ’70s, a strain of Americans has always embraced simple living. One of the bibles of the FIRE movement, ‘Your Money or Your Life’, which teaches readers to reduce their spending and value time (or “life energy”) over material gain, was published in 1992.

But Vicki Robin, who wrote that financial guide with Joe Dominguez, said the FIRE crowd is a different breed of dropout from those in the ’90s. “Our aim was not just to have a whole bunch of people quit their jobs,” Robin said. “Our aim was to lower consumption to save the planet. We attracted long-time simple-living people, religious people, environmentalists.”

The FIRE adherents are, by contrast, “very numbers oriented, fascinated by the minutiae of taxes and accounting,” she said.

They are also benefiting from a lengthy bull run in the stock market and, in some cases, the privilege of class, race, gender and background. It’s difficult to retire at 40 if you work a minimum-wage job, say, or have crushing student-loan debt, or did not have the same opportunities as others because you grew up poor in a crime-ridden neighbourhood.

But if, as Robin said, FIRE adherents “don’t have the aspirational part” of earlier generations, why are they so determined to quit the workforce? Many millennials haven’t been working longer than a decade, if that.

It’s about having agency, she said: “The worker in this economy has very little sense of control over their existence. People are expendable. You’re a young person and you look ahead and you say, ‘What’s there for me?’”

That accurately describes how Kristy Shen and Bryce Leung felt. The married couple from Toronto became minor celebrities (and the target of online haters) when they retired from their tech jobs in 2015 to travel the world full-time. They were in their early 30s at the time.

Shen’s wake-up moment came when she watched a fellow IT colleague collapse at his desk after clocking 14-hour days. For several years before that, she and Leung, following the path laid out by their parents, had tried to buy a house in Toronto’s ever-escalating real estate market.

But, Shen said: “It didn’t matter how much you saved, it was a goal post that kept moving. And I was seeing people stressed out paying their mortgages.”

Although they had good educations and well-paying jobs in the booming tech sector, Shen and Leung faced the looming threats of outsourcing and artificial intelligence, and had no hope of a retirement pension, or even that their employers would exist in five years.

At the same time, their jobs were all-consuming. Rather than chain themselves to a costly mortgage, and therefore to high-pressure jobs, the couple decided to pour their money into an investment portfolio and peace out.

“The rule books our parents have given us is advice that’s perfect for 1970,” Shen said. “We have to throw out that rule book and write a new one.”

Leung spoke of the challenges his generation faces more bluntly. “We don’t have jobs that will take care of us,” he said. “We have to take care of ourselves.”

Go where it’s cheap

By ditching a big city, Shen and Leung exemplify another reason for the popularity of FIRE: the high price of urban life, especially in places like New York and Southern California. There are the insane housing prices, the high cost of child care, the temptations of so-called lifestyle creep.

“We were spending nearly $3,000 a month on rent, and that was considered a good deal,” said Scott Rieckens, 35, who, along with his wife, Taylor, 33, and their daughter until recently lived in Coronado, California, across the bay from San Diego. “We made something like $160,000 between the two of us, but we didn’t have a whole lot left over.”

After hearing a podcast interview with Mr. Money Mustache, aka Pete Adeney, whom The New Yorker called “the Frugal Guru” (he retired at 30), Scott Rieckens became fired up. He told his wife they should ditch their leased BMW and quit eating out so often. But even with those lifestyle cuts, they couldn’t increase their savings rate substantially unless they relocated to a cheaper community, a deleveraging tactic the FIRE crowd calls “arbitrage”.

The idea, Adeney said, is “to reap the high salary” of a place like Silicon Valley, “then take that nest egg out to any of the thousands of nice, affordable cities and towns we have in this country and begin a second stage of life on your own terms.”

Taylor Rieckens, who works in recruiting, was initially reluctant to give up her BMW and beachy life and the prestige that went with it, until she saw a retirement calculator that showed they could retire in 10 years if they adopted FIRE and moved, or when they were 90 if they continued their upscale lifestyle in Coronado.

“I never paid attention to the finances. I thought it will all work out,” she said. “After I had a baby, I had stress around how I could spend more time with her. I was almost a slave to my job because of the way we were living.”

Last year, the couple left Southern California in search of a community that would give them more financial freedom, a journey Scott Rieckens, formerly a creative director for a creative agency, is chronicling in a documentary, Playing With FIRE.

They ended up in Bend, Oregon, where there’s no state sales tax and they could afford to buy a house. Gas for their used Honda CRV with 186,000 miles (they got rid of the BMW and downsized to one vehicle) is a dollar-per-gallon cheaper than in San Diego, although Scott Rieckens often rides his bike around town.

“The whole retire-early thing is unimportant to me. It’s more about gaining control of your time,” he said. “If you dive into the definition of retirement, what you’re retiring from is mandatory labour. It’s not necessarily about piña coladas on the beach.”

‘This Is Life’

A retirement that starts well before you go gray and lasts 40, 50 even 60 years is an anomaly in modern life. How do you fill all those days, months, decades?

On a recent weekday, Jensen was taking his two daughters, ages 8 and 11, to the Boulder County Fair. “I told them, ‘OK, we’re going to wait until Thursday for half-price day,’” he said. “’And by the way, we’re walking there. It’s 2 miles from our house.’”

Fearing boredom, Jensen at first took on way too much, and he found it strange to be at the local rec center exercising alongside senior citizens, or shopping at empty big-box stores on a Tuesday. He also beat his own mother to retirement, which made for awkward family get-togethers.

But one year in, he has settled into his life of leisure, enjoying time spent raising his daughters, making sure they never see him vegging in front of the TV. Jensen also practices an activity that for many FIRE achievers seems to be the new golf: writing a financial advice blog.

Other FIRE retirees turned bloggers include Early Retirement Dude; the husband and wife behind Our Next Life; the Frugalwoods, a young married couple with children, who wrote a book about their transformation from suburban Boston high earners to retired Vermont homesteaders; and Shen and Leung, who when not traveling the world are calling for a Millennial Revolution (“Stop working, start living”).

It’s hardly surprising that a tech-savvy generation would proselytize on the internet. Also, blogging can provide the holy grail of early retirement, an additional income stream.

Perhaps Long, the pharmacist in rural Tennessee, has given the most detailed, thoughtful account of someone who has fired. In a series of posts to Reddit’s financial independence message board, he chronicled with dry wit and self-effacement his first year in retirement.

One month into FIRE, he wrote of the guilt he felt spending money (on video games), and his concern that he would be over his household budget. He spent his days with family, at the gym, doing housework, exercising. He had no regrets so far: “I made the right decision. This is life.”

In the second month, Long reported a 2.8% increase to his portfolio over the first two months,even after living expenses, and listed his accomplishments as more reading, more cooking, volunteering and “faster Rubik’s cube solves”. Stress levels were way down, he wrote: “A friend of mine said the sense of dread from my face was gone.”

In the months that followed, he rewatched the mini-series Roots, lost all interest in talk of FIRE now that he had achieved it, feared a stock market crash, had nightmares that “I’m back at work and arguing with morons,” finished a marathon in a personal best time, felt moments of social isolation, took a two-week road trip across the heartland, and went twice to the beach in Florida with his wife and watched their net reach its highest point, despite not working, which he attributed to “the passage of the tax cut for wealthy job creators like myself”.

Oh, and he started a blog.

“My life is so much better than it was before,” Long wrote seven months in. “I hope everyone here finds this peace.”

Speaking by phone, Long acknowledged it was possible that he’d simply burned out, that all of this FIRE stuff was just a needed break until he found a more satisfying career. When he was recently offered a job back in the pharmaceutical field, it induced a mild panic attack.

That morning, he’d woken up on his own, “not when an alarm clock told me that I had a responsibility.” He’d read the news for 30 minutes, went on a 7-mile run, napped and “watched the ceiling fan spin around for a little bit”.

He had been watching the movies from They Shoot Pictures, Don’t They? a website that ranks what it calls the 1,000 greatest films. He’d watched 600 or so. He had work to do.


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