I want to retire by 50, do you? My dad was working full-time at the age of 60 and I always ask myself this question. Do I see myself doing a 9-5 job in my fifties and sixties? And the answer I get every time is different. After spending many years thinking about this question and discussing this topic at length with my beloved wife, April. I have come to the conclusion that I do see myself working for as long as I can. But I can’t imagine working for a paycheck for a very long time.
This year I celebrated my 40th birthday and I have given myself 10 more years to be financially free. Once I retire early I will not worry about a paycheck and I will work because I want to work and not because I need a paycheck. So if you are wondering how do I plan to retire by 50 I will lay out my plan here in this post for you guys to reference and I will also share my methodology behind my plan so you can use the same methodology to come up with a plan that can work for your unique situation.
Plan to FIRE by 2030 – Retire by 50
In this post, I’ll not bore you with my story of how I got started on the FIRE journey but if you are curious about it you can read about it here.
Let’s start with a brief history – A little over 10 years ago, we didn’t have any savings and literally had about $2000 in our bank account and April and I decided to embark on the FIRE journey to be financially independent by 2020. As we inch towards 2020, I want to give a sneak-peek into where do we stand from our initial goals and what is our plan going forward.
1. Start with a Goal
I think the first step to being able to retire by 50 is to set up a financial goal, a number that you think will make you not worry about how you are going to pay your bills. There are many ways to reach that number some very mathematical while others not so much. But when we started At that time we started with the conception – $1M will take us a long way and we set that as our initial target. Now that we are target has definitely moved and is much bigger than our initial goal.
Our new target is $5M net worth and that is the reason for adding 10 more years to the initial timeline. Now you might be wondering why did our target grew 5x and in my mind there are two reasons for it:
- Lifestyle creep – As we got older and our earnings grew we kind of got used to a more expensive lifestyle and that’s one of the reasons we shifted out original FIRE goal of $1M to a FatFIRE goal of $5M
- New Information – During initial planning we kind picked a number out of thin air and now we realize there are many things that we didn’t account for like kid’s college, medical costs in retirement, last but not the least Inflation
I think with all this new information I think it was a wise decision for us to extend our timelines and give us a bit more time to reach the goals which will really set us up for success. For the curious, we did hit our goal of $1M net worth a couple of years back and we are on track to hit our goal of $5M by 2029.
2. Build a Plan
Once you have a goal that you need to achieve the next step is to build a plan that will help you achieve the goals. Really this plan needs to be really simple. I follow a very simple formula:
- Spend less than you earn
- Invest your savings
Now I am aware it is easier said than done but seriously you need to focus on a handful of things and you’ll be on the right path:
- Understand your expenses and income
- Increase your earnings
- Invest your savings – maximize 401K, IRAs, HSA, After-tax investments, real estate, online business, etc.
- Build passive income streams
- Repeat till you reach the goal
3. Execute the Plan
Once you have the plan you have to religiously follow the plan. When we started on our FIRE journey we began with cutting down everything that we felt was not a necessary expense and we did it to a point where it started hurting and was painful. But we very quickly realized that a lot of people can live a minimalist lifestyle and be happy with LeanFIRE but we are not one of them. We really enjoy eating out every now and then, we enjoy the experience of visiting new places, meeting new people and in order to reach FIRE we didn’t want to miss out on these things and neither did we want to be paycheck slaves for rest of our lives.
What We Did So Far?
Hence early on we focused on ways to forcefully saving and not leaving too much free cash in our bank. I started maximizing my 401K every year without fail and in 2014 April started working we started maximizing her 401K every year as well.
We also bought an investment property in the suburbs of Seattle in 2014 and rented it out. This turned out to be a really great investment as when we sold this property we made about 40% return (not bad in about 3 years)
We have also been religiously investing into index funds for the last few years which have given a very handsome return but this might be the side-effect of a very strong bull run in the market for the last 10+ years.
We also ran an online e-commerce website which we decided to sell when we moved to Thailand in 2017 on 2.5 years work assignment and now that we are back in the USA we continuously think about what other passive income streams we want to setup. Honestly speaking this blog is also part of my passive income strategy 🙂
That said we also had some key learnings which have also prolonged our journey to retire by 50 – we lost a bit of money in cryptocurrencies, and derivates (will write about these in a later post)
To summarize having a plan and being nimble to make necessary adjustments to the plan as you acquire new learnings and discover new opportunities is a must-have to retire by 50. I am really thankful to my beloved wife for being a very supportive partner on a really bumpy journey.
I would love to hear your thoughts and feedback. Please do share it in the comments below.