People Are Retiring Earlier Than Ever—Here’s How
Ever since millennials entered the workforce, we've been redefining career goals.
We're the generation that bore the gig economy, social media influencers, and the side hustle. We prioritized flexible hours, self-care and personal satisfaction in the workplace. We believed our dream job was out there if we just kept working to find it . But then, something shifted.
Call it disillusionment or just getting older, but the new millennial career dream is not having a job at all. Blame burnout in the digital age, where work-life balance is nearly impossible; or blame companies like Google and Facebook, who once topped the list of ideal employers before wage gaps, election hacking, privacy infringements and other scandals tarnished their reputations.
Whatever the reason, for some, the dream job has been replaced by the dream of early retirement. Enter the FIRE (Financial Independence Retire Early) movement—a rapidly growing collective of big-thinkers who are saving to retire by their 30s and early 40s.
Hard work pays offPractical Money Skills
FIRE sowed its seeds on Reddit forums and millennial money blogs—which preach the gospel of 70%, AKA saving 70% of your yearly income for a fixed amount of time. Attempting as much on an average salary involves a lot more than coupon cutting. Every penny saved—through blood, sweat, second jobs and serious downsizing—goes into income-earning investments like low-fee retirement accounts.
It may sound far-fetched, but for some 30-something savers, retirement is already a reality. In September, The New York Times profiled several individuals, formerly employed in tech, finance, creative, and recruiting fields, who have already called it quits on the working world.
While some FIRE folks have had the benefit of hearty six-figure salaries, others have managed to punch out their time cards indefinitely by maximizing more modest salaries. But fair warning: it isn't easy.
Members of the FIRE movement looking to retire ASAP work round the clock and pinch pennies to the extreme—we're talking no dinners out, no movies, no gym memberships, and no life until their retirement finances are in order.
So how much downsizing are we talking about? One couple, Scott and Taylor Rieckens—both in their 30s and earning a combined $160,000 prior to ditching their 9-to-5 jobs—moved their family from California to Oregon to scale back on rent, sales tax, and gas mileage. They also swapped one of their cars for a more cost-effective bicycle. But on the plus side, they no longer work day jobs and have more time to spend raising their child and developing pet projects.
The RieckensThe New York Times
"The whole retire early thing is unimportant to me. It's more about gaining control of your time," Scott, a former creative director, told the Times. "If you dive into the definition of retirement, what you're retiring from is mandatory labor. It's not necessarily about piña coladas on the beach."
Las Vegas residents Joe and Ali Olsen can attest to that. Both began as teachers in 2004, when they decided they wanted to work less and travel more. By taking on extra jobs—from teaching summer school to running fitness programs—they slowly but steadily increased their earnings by about 50% without increasing their spending habits.
Joe and Ali Olsen with their childBusiness Insider
"We kept driving the same cars... We also ate at home, a lot. Eating out was rare, and a treat," Joe told Business Insider in 2017.
The couple continued living on a $20,000-a-year household budget and saving around 75 percent of their combined $80,000 annual income until they accrued enough to buy a rental property. Then they bought 14 more.
"When we started acquiring rentals, friends and family would ask when we were going to move into one of these three-bedroom, 1,800 square feet places, rather than our tiny condo," Joe told Business Insider. "But we were happy where we were. We never felt like we were depriving ourselves, because simple pleasures were enough."
A search of the FIRE Reddit forum, which boasts around 430,000 subscribers, reveals that some of the biggest hardships are letting go of the small indulgences. One user bemoans saying goodbye to craft beer, another gave up bowling. One user misses pizza delivery the most, while a few gear-heads have traded in their prized wheels for used cars. But many agree that a life without Starbucks and gym memberships is worth the long-term independence.
While there's no precise formula for extremely early retirement, there are some hacks to get started, including setting up auto-recurring bank transfers that withdraws money at set times depending on your paychecks, so that portions are allotted to checking, savings and investments automatically.
"When it comes to investing, the most common investment strategy of FIRE folks is to max out traditional IRAs and 401(k)s and put the remainder of their money in low fee index funds," notes Vice's Shomari Wills, who covered the phenomenon back in June. "Compounding interest helps the money pile up faster."
Then there are the bargain-basement tricks that the Reddit community shares with each-other—from renting video games at the library, to coupon-ing, and maximizing credit card points and other hacks.
Every penny counts www.valpak.com
But for all the bargain-hunting brags, the journey to financial freedom can take its toll. "Anyone else tempted sometimes to 'give up?'" one FIRE Redditer asked, before describing another taxing day of work and hardcore savings.
While financial independence gurus like the blogger behind Mr. Money Moustache and author Vicki Robin have fueled the movement, it's not without its detractors.
"Individuals who retire early are choosing to stop their earned income, which is the greatest defense against life expenses," Hank Mulvihill, a Dallas-based senior wealth adviser warned Marketwatch readers. "This is a decision not to be taken lightly."
One issue with retiring so early is unexpected expenses— think surprise pregnancies or health issues. If emergency money is tied up in retirement funds, penalty fees for early withdrawals will set you back. The precarious state of the healthcare system also makes planning ahead a challenge.
Then there's the issue of putting your happiness on hold in the hopes of future financial freedom.
"Financial independence shouldn't come at the cost of your happiness as you work endlessly and never enjoy the fruits of your labor in fears of derailing your early retirement goals," writes Hank Coleman on Yahoo Finance.
Time to relaxamp.businessinsider.com
Remember the Olsens? They have a different take. In 2015, just eleven years after entering the workforce, the couple had saved over $1 million, and decided to quit their teaching jobs in order to travel around the world. While they still oversee their many rental properties, they've gained the flexibility to pursue the dreams they never had time for before. They also keep a blog, Adventuring Along, where they chronicle their travels and offer financial and real estate coaching.
"Teaching was one of our lives," the pair shared on their blog. "We loved it, but we also love our new one of travel and kids. Financial independence gives us the ability to take the risks to explore these lives. Despite loving our jobs, we quit, and couldn't be happier."
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Ready for retirement? Best & Worst places to do it
While retirement may be the last thing on your mind at this stage in your career, others are planning right now for a major life change as this new and highly-anticipated phase of life is just around the corner. No matter where you are in the process, thinking about and planning for retirement is a smart move, as it is something that ought to be well-prepared for… and the earlier, the better.
Money, safety, and overall happiness are all top of mind when it comes to being able to retire meaningfully and comfortably, and that is why the personal finance website, WalletHubhas recently released an in-depth study covering 2018's Best & Worst States to Retire.
All 50 states were compared in terms of "retirement-friendliness" by WalletHub's team of experts. Affordability, health care, and quality of life were evaluated and broken down further into 41 relevant metrics including topics such as cost of living, cost of in-home services, taxpayer ranking, percentage of workforce aged 65+, number of museums per capita, number of theaters per capita, percentage of population aged 65+, life expectancy, property crime rate, weather, quality of public hospitals, and so on and so forth.
Before you make retirement plans, check out the 10 best states to retire:
And which states are not as rad for retirees? Here are the 10 worst:
Head down south to the "Sunshine State" to spend your golden years among other satisfied retirees enjoying the good life. As per WalletHub, "Florida has the highest share of the population aged 65 and older, 19.1 percent, which is two times higher than in Alaska, where it is lowest at 9.4 percent." Great weather and a well-deserved relaxing and fulfilling quality of life brings folks to Florida to live out their retirement years among peers who have put in many years of hard work and now wish to bask in the rays of the warm Florida sun.
Is retirement something you would rather get moving on sooner than later? Perhaps you have the option and ability to retire early but you are not sure it is the right move at this stage in your life. Here arethree perks of retiring early to consider before you hand in that resignation slip and call it quits.
For further in-depth information about this retirement-based WalletHub study and deeper insight into their unique methodology as well as the full 50-state ranking, see the entire 2018 report.
Happy retirement, when-and wherever it may be!
Should You Switch to Part-Time?
Are you a full-time employee who has been starting to feel like living the part-time work life? The change is not something to do on a whim or take lightly, but if you are considering this career move, here are four questions to ask yourself to be sure this switch is smart and the right one for you.
Are You Stressed Out?
Stress can be a messunsplash.com
Most people have some degree of stress, and some are more stressed-out than others, even to the point that they know something's gotta give. According to Investopedia, "Study after study has revealed how perennially tired and 'worn out' many full-time workers feel."
Your mental and physical health are a major priority, so perhaps a shift in the way you work can alleviate the anxiety and pressure. Fewer work hours can give you much-needed time to decompress and take time to care for yourself properly.
As Lifehack notes, "You'll have more time to rest your body and mind and notice improvements in your immune system, digestion, circulation, and other key signs of physical health compared to an exhausted full-time worker."
With your newfound energy and happiness, you can put your full self into your part-time gig.
Do You Want More Time for Other Things?
Make time for hobbies and other interests unsplash.com
For some, it's all work and no play… and they like it that way. But for the rest, there is little, if any time for pursuing hobbies, fitness, family time, travel, or even a second job. A part-time job will free up a good deal of your time to devote to these other areas of interest you have put on the backburner.
According to Wise Ones, "With the ability to control your own time comes the freedom to decide what to do with it." Flex Jobsadds, "A part-time position will allow you to have better work-life balance."
Do You Want to Advance Your Education?
It is never to late to go back to school unsplash.com
You may enjoy your job, but perhaps you want to advance to the next level, which requires more training or schooling. A full-time job may not afford you the time to get in those hours or earn that degree.
Wise Ones notes, "Having more time allows you to develop personal skills or even pursue some further education." And as per Flex Jobs, "When you work part-time, you'll have extra time in your day to take classes to add onto your education and apply for the position you really want or earn a potential promotion."
After learning more and advancing yourself, you may wish to get back to full-time work with more knowledge and skills under your belt. If part-time is still for you, consider your education beneficial for your status and soul.
Are You Planning to Phase Out of the Workforce Soon?
Retirement is on the horizon unsplash.com
If retirement is on the horizon, switching to part-time work before making the drastic change from working all the time to not at all can make the transition smooth and steady. You can take this time to get settled into your new lifestyle, get back into family life at home, meet other retirees in the area, or plan for what you will do during this new phase of your life.
On the flip side, you may want to go back to work after you have been retired for a while. Perhaps life out of the workforce does not fulfill you like you thought it would. As per Wise Ones, "For people over the age of 55 years, being part of an organization is also about using experience and knowledge, being with other people, interacting and socialization. It's about mental and social health, as well as financial well-being."
If money is not a primary issue and you can afford to work part-time, and you have answered these questions to your satisfaction and with confidence, now is the time for part-time!
Why My Kids Won't Have a College Fund
By Rachel Hall
If you have kids or are planning to have to have kids, it's likely that generations above you or even your peers have mentioned the looming "college fund" that we are supposed to have for our children, both born and unborn. And yes, if you come from a family with immense wealth, then perhaps your unborn spawn already have a fully mature, vested, pile of coins set aside for their presumed Ivy League capabilities. For the rest of us mere mortals, whatever you want to call the generation who currently has kids and is somewhere between 30-Something and 40-Something, chances are, we are not going to make the herculean efforts that most people would have go to, to even attempt (and likely not be able to succeed) in order to have a college fund for our mini mammals.
No, it's not that we are trying to raise illiterate, uneducated, anarchists. We are not saving for college because we just don't have the money, and because we see that college "savings" didn't really guarantee us careers that left us carefree about our finances. Most of us are still paying our own student loans (not me, thanks mom), or at the very least, are lucky enough for our families to still be paying them (again, thanks mom). If you are super lucky, likely living pay-check to pay-check, you might possibly qualify for deferment programs, which lowers your monthly payments, but just delays the inevitable. We are the generation that was told, JUST GO TO COLLEGE and EVERYTHING WILL BE FINE. You will get a job, pay back loans, make bank, and boom. Well the joke was on us (and some of our generous parents), if not completely, than at least partially.
Of course it is a privilege to have been able to go to college. I am one of those people who will say that college was some of the best years of my life…though I think 50% of that is manipulated memory. That being said, when my single mother and I sat down with the guidance counselor and she suggested a small liberal arts school across the country, we both said YES, this sounds great! Looks smart! Looks quaint! I want smart and quaint! Well guess what? A degree in Psychology (or whatever liberal arts degree you studied) pretty much only prepares you for another degree. Upon graduating in the early millennium, most of us made less than $40K a year and likely had over $25K to pay back. Factor in cost of living and you have a generation who has no idea what our long-term financial abilities will be. We assumed we would be financially independent, living on our own, and saving money. Clearly that's not the case.
Some folks knew all along that we would seek an additional degree and immediately after graduation signed up for more loans and pushed ahead towards another degree of sorts. We did this in hopes of accessing better jobs, and to gain a leg up on the "lesser educated" and "less hirable" so to speak. Some people just did it because we didn't know what to do after our life had been structured for us for the past 20+ years and we just craved that collegiate container. Either way, yes it was great to be able to write Masters Degree on the 5000 resumes I sent out, and yes I am personally happy and extremely grateful I could be financially supported to receive my degrees. That being said, I think it would be financially irresponsible for our generation to put money in a college fund when we barely have retirement funds, health insurance, or enough (or any) long-term investments. This generation is wondering how they will maintain health insurance, how they will afford rent, and barely can imagine buying a home. Most of us have very little retirement plans and little faith that the government will provide retirement benefits in 25-35 years. This generation needs to figure out how it will support themselves for the rest of their lives. This generation also knows their kids can go in-state to college, take out loans, or even defer college and work until they know what field they really want to get a degree in. So many of us are working in fields that have nothing to do with our degrees, we wonder if we went to college simply because everyone else was going.
Right now, plumbers, contractors, and electricians can make more money than the average teacher and pay much less for their training. We have an expensive and inflated education system and this generation is not sure what the ROI is. We also can't believe we (or our parents) paid thousands of dollars a year for a dorm and a meal plan, just so we could pretend we were independent, while our families footed the bill. Some of us worked in college, which at least brought us closer to reality, but still, attending university at 18 years old often just seemed like the thing to do…not a personalized plan. If one is to invest over 50k in themselves, you would think we would stop and think…is this the best investment for me? It might have been. I just don't think middle class and even working class people stopped to really consider what they were paying for. What is the true cost of college? Before we put our families and ourselves in immense amounts of debt, we should really know.
We can't just assume shelling out tons of money for college will be a great financial decision, particularly, immediately after high school. This is what I assume; I assume my kids want me to be self-sufficient, in good financial standing, and in a place where my financial concerns do not have to be theirs. For that reason, I don't have the extra funds to put towards their college right now. I'm too busy paying for their healthcare, day care, non-toxic organic food, ect… When the time comes for them to discuss going to college, I can offer them free rent, food, a place to study, and they are welcome to commute. If all goes well, I hope to be able to help them pay for school in some meaningful way. However, being able to pay $25k-$55k/year so they can have a go at feeling (but not actually being) independent is not something I am going to save for. Independence is something that can't be faked or funded. Education can be funded, and that I am prepared to help them access and consider. It just might not look like a dorm room shower caddy with a $50k price tag.
By Rachel Hall, Rachel has a Masters in Cultural Gender Studies, and a BA in Communication & Culture. She is a frugal Certified Life Coach, and can often be found hiding in her laundry room from her two children. More about her on her website.
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