Table Of Content

How To Retire Early Your Guide to Getting Rich Slowly and Retiring on Less BY ROBERT & ROBIN CHARLTON Copyright © 2013 by Robert Charlton and Robin Charlton All rights reserved Printed in the United States of America How To Retire Early: Your Guide to Getting Rich Slowly and Retiring on Less ISBN: 978-1482653724 First Edition This book or any portion thereof may not be reproduced or used in any form without the express written permission of the author except for the use of brief quotations for review purposes. While every effort has been made to provide accurate information with regard to personal finances in this book, the author is not engaged in rendering legal, accounting, or other professional services by publishing this book. If any such assistance is required, the services of a qualified financial professional should be sought. The author will not be responsible for any liability, loss, or risk incurred as a result of the use or application of any of the information contained in this book. Author website: http://www.wherewebe.com Table of Contents Introduction Chapter 1. Getting Started Chapter 2. The Specifics: How We Retired Early Chapter 3. More Specifics: Life After Retirement Chapter 4. Your Roadmap to Early Retirement Chapter 5. Invest in Yourself First Chapter 6. Get Out of Debt Chapter 7. Start Saving Early Chapter 8. Determine Your Retirement Income Needs Chapter 9. Calculate Your Nest Egg Chapter 10. Make a Long-Term Investment Plan Chapter 11. Invest Regularly in Index Funds Chapter 12. Take Advantage of 401(k)s and IRAs Chapter 13. Live Below Your Means Chapter 14. Keep Home and Car Expenses Low Chapter 15. Keep Your Life Portfolio Balanced Chapter 16. Health Care in Retirement Chapter 17. Extended Travel in Retirement Appendix A. Detailed Salary and Investment Information Appendix B. Creating Your Own Investment Spreadsheet Introduction At the age of 28 my wife and I had just $16.88 to our name. I still have the checkbook showing that disheartening little entry next to the date of August 15, 1991. We owned no home. We were renters in an apartment in Boulder, Colorado and we were getting seriously worried because our monthly rent had just shot up and we had no clear way of paying it. I was unemployed and couldn’t even find temp work. We had college and car loans to pay off. My wife Robin was working as a travel agent for the painfully low sum of $14,000 per year. She was frazzled enough about our financial situation that she was talking about taking on a second job at a local convenience store just to make ends meet. At least she had a job. Since moving from Boston in January 1990, the best I had been able to manage was temp work as a word processor making $7 per hour. I had a string of failed career attempts behind me and no clear career path in sight. I was six years out of college and going nowhere fast. How had I managed to make so many wrong turns since college? Was I ever going to turn things around? Sometimes it seemed like the answer the universe was giving me was a resounding no. Is Retiring Early Really Possible? We begin our book at the financial low point of our lives to make it clear that even from unpromising beginnings such as these it is possible to get back on track and retire early. Not through get-rich-quick schemes but through simple hard work and consistent savings. No matter what your starting point, no matter how hopeless things may look right now, you can change your life around and set yourself on a path towards financial independence. And it doesn’t have to take forever. We did it in just 15 years, beginning in 1992 when we bought our first home and ending in 2006 when we walked away from our full-time jobs for the last time, hardly able to believe it ourselves. We were 43 years old at the time and had managed to scrimp and save our way to nearly a million dollars – enough to buy us a simple early retirement. Frankly, if we can do it, so can you. This book is designed to show you how. It proposes a “get rich slow” approach to early retirement that has nothing to do with market timing, day trading, options, or high-risk investments of any kind. Rather, it provides practical advice on how to set a realistic retirement goal 15 or 20 years down the line and take the necessary steps to achieve it. These steps are surprisingly simple. They don’t require an advanced degree in business or finance. Just about anyone can do it, including you, as long as you take a self-disciplined, slow-and-steady approach to investing. So let’s get started by answering a few questions you may be wondering about. Who Is This Book For? This book is primarily aimed at hopeful early retirees in their twenties and thirties. However, anyone – including those in their forties or early fifties who are just getting started saving for retirement in a meaningful way – can use the concepts in this book to retire in 15 to 20 years. In fact, latecomers to the game may be able to retire in just 10 years. Why? Because they may already have a higher salary, more home equity, and more money set aside than younger investors, giving them a leg up. Empty nesters may also have fewer distractions, financial and otherwise, allowing them to focus in on their retirement goal with greater intensity. If you already have a high-powered salary and are able to live very well in the present while also investing large sums of money for the future, then you probably don’t need this book. In fact much of the advice it offers may sound strange to your ears. Why bother making sacrifices and getting rich slowly if you are already on the fast track to financial freedom? But for the rest of us, it’s good to know there is an alternative approach to achieving financial independence. It takes a slower track but gets you there all the same, and we think a slower track is much better than no track at all. Why All the Specifics? We intend to be as up-front and honest with you as possible in this book and not sugar-coat the truth. We lay our own finances bare, showing you how we got where we got and how long it took. We give you hard numbers on what we earned, how much we saved per year, and how much we spend per year now that we’re retired. We’ll share with you the simple Excel spreadsheet we set up to track our investments. We’ll tell you where we went wrong and what we would have done differently if we had it to do over. Of course the specifics of your own situation will differ from ours, but our feeling is that the more concrete, quantifiable information you have, the easier it will be for you to plan your own early retirement. You can extrapolate from the specifics we provide and apply that information to your own situation. If you happen to live in a very expensive city like New York City or San Francisco, for example, you may have to compensate for the much higher cost of living there by adjusting our income and expense information upwards. Are You Financial Experts? We aren’t financial experts but we do consider ourselves financially savvy. I passed the Series 7 Exam and actually worked a brief stint as a licensed stockbroker early on in my career before deciding to take a different tack. But we both learned the most about investing simply by doing it over the past two decades: what works, what doesn’t work, what’s the simplest approach, and what may sound good on paper but isn’t so good in practice. We made enough mistakes along the way to serve as human guinea pigs for what doesn’t work, and we share those mistakes with you in this book so your own path can be a little easier. Frankly, we think we have something interesting to say not because we’re experts but because we’re not. We’re ordinary people who set a long-term financial goal and achieved it. If you’re looking for specialized advice from a financial guru, we suggest you look elsewhere. But if you want practical guidance with plenty of examples on how to retire early from people who have been where you are now, you may want to consider what we have to say. We’re probably not all that different from you, and it can help to get the perspective of other travelers who have ventured down the same road you’re thinking of taking. Did You Have High-Powered Jobs? I worked primarily as a technical writer and proposal coordinator in the aerospace industry, and my wife worked as a travel agent then as a registered nurse. Our jobs started off paying poorly and got better with time, as most people’s do, but neither would be considered high-powered. In fact our combined gross salaries for the 15 years from 1992 to 2006 averaged just over $89,000. Most people take comfort in hearing we were able to achieve our early retirement dreams with relatively normal jobs. We provide our annual salary information and investment amounts in this book so you can judge for yourself. Did You Get Any Financial Help? We had no financial help in achieving our early retirement goals. We did not receive an inheritance. We did not win the lottery. There was no trust fund to draw from, no cash settlement, and no secret gifts of money from rich parents to see us through hard times. We have been financially independent throughout our adult lives, and we like it that way. In the interests of full disclosure, our parents did pay for most of our college education (but not graduate school or nursing school), and they did loan us $7,000 to help with the downpayment on our first home back in 1991 – an amount we paid back over the next three years, with 8% interest. We mention this up front so you can decide for yourself if we achieved our early retirement goal essentially on our own. Do You Have Children? We don’t have children, and that did of course make it easier for us to retire early. While we had originally planned on having kids, the universe had different ideas for us, so early retirement became our plan B. Given our modest salaries during most of our investing years, we can say with some certainty we would not have been able to retire at age 43 with children. However, we believe we still could have retired by age 50 or earlier with children. If you have kids or plan on having them, you can still use the concepts in this book to retire early: you simply may want to give yourself some extra time to achieve your goal. Instead of a 15-year plan, you may want to put together a 20-year plan. That way, if you were to start investing by age 30, you could still retire before age 50. The power of compounding is such that an extra five or ten years of investing (and not drawing down on your investments) can make a huge difference, even if the amounts invested per year are smaller than they would have been otherwise due to the myriad expenses associated with children. What’s It Like Being Retired Early? Early retirement is one of the few things in life that really lives up to its