3 reasons why I won’t be a millionaire when I retire

Published August 31, 2016   Posted in How to Retire

What if I told you that my wife and I are planning to retire early at the end of the year, and we won’t have a million saved? Well, that’s the deal. We aren’t waiting around for a million before we call it quits, and there’s a good reason for that…three, in fact.

Pinterest: Why we don't need a million to retire earlyThere’s no question about it: Admission into the double-comma club is great (or so I’d assume). It’s another one of those milestones that feels wonderful to achieve. Imagine it: a million bucks.

It’s like becoming debt free, “mission accomplished”.

It’s a wonderful milestone, but we don’t need to reach it before retiring early. There is nothing inherently magical about the million-dollar figure, aside from all those zeros. It’s a completely arbitrary number. In fact, we may never need to reach it to keep our jobless dreams alive, and here is why.

3 reasons why we don’t need to be millionaires to retire early

1. Three years of living expenses in short term savings

Upon retirement, we’ll have a solid three years of living expenses in our Ally savings account. Living off of this cash will allow our investments to grow during the onset of our post-retirement life. We won’t begin to withdraw from our investment accounts until our savings dwindles down to the point where all that remains is reasonable emergency saving.

Arguably, the first decade of early retirement is the most crucial. If your net worth increases (or at the very least, doesn’t shrink), then your chances of long-term success increase significantly. Our plan to use short-term savings the first three years will help to ensure our wealth continues to build.

With two full-time paychecks currently, my wife’s after-tax earnings fund our Ally account. My paycheck funds our current living expenses. Additionally, both of us max out our 401ks at work. Any additional money gets funneled into our Vanguard brokerage account and pads our retirement stash.

We track all this beautiful money using Personal Capital. Check out their wicked cool retirement planner, BTW.

2. Our frugal post-retirement lifestyle

Our lifestyle is damn cheap, and it’s about to get even cheaper. This year, we sold both of our homes and bought an Airstream RV in cash. We live in Charlie full-time at a campground in Tucson until the end of the year, at which time we quit and start traveling.

Our Airstream, Charlie, under the stars

Our Airstream, Charlie, under the stars

Our planned post-retirement spending budget is in the neighborhood of $25,000 to $30,000 a year. We will do this by boon docking as much as possible on BLM land, which is free government-owned wilderness to call home – usually for a maximum of 14 days before you need to move on. Find a spot, park your rig and enjoy nature. Of course, no hookups available, so you’ll have to provide your own power, truck in water and hold onto your waste products or dispose of them safely (thank you for making that job easier, Mr. Composting Toilet).

Our soon-to-be-installed solar power system will enable off-grid living for extended periods of time, reducing our living expenses significantly. We are 100% debt free. Both my wife and I understand what “enough” means to us, and we’ve built a smooth and streamlined lifestyle that we both enjoy, and one that doesn’t require a ton of cash. Light on spending, but heavy on fun and exploration.

3. We remain completely flexible and willing to change

I tout our flexibility a lot on this blog, but it happens to be a critical element of our post-retirement lifestyle. If things don’t work out exactly like we planned, we change. We find a solution. It might include us working a seasonal job or two. Or, maybe we look for ways to reduce our spending. Choosing a lower cost of living area is another idea, to include overseas travel to areas like Thailand and Costa Rica.

It is amazing what the impact earning $10,000 a year doing odd jobs has on our long-term probability of success. When your expenses are low, every earned dollar is that much more valuable to your lifestyle. Earning an extra $10,000 a year for someone who spends $100,000 is nothing. But, an extra $10,000 a year for a couple who doesn’t spend a penny over $30,000 suddenly becomes meaningful earnings.

It won’t take much for us to make up for any stock market losses. A frugal lifestyle has a profound effect on how resilient we can be during periods of sub-optimal growth in our investments.

To us, a million is just a number. We’ll have close to a mil at retirement, but we won’t be there – and that’s just fine. We honestly don’t care. Our probability of success without a million remains extremely high. We’re capable and willing to take on work here and there as the mood strikes us. We won’t touch a dime of our investments for at least the first three years. And, we’re flexible people.

What say you? How many have determined their net worth goal at retirement? Anyone think they need over a million to retire comfortably? Do share!

We track our net worth using Personal Capital



Comments

91 responses to “3 reasons why I won’t be a millionaire when I retire”

  1. I wouldn’t get caught up with having a million or not either. It sounds like you folks have a good plan and are willing to embrace flexibility which really is key for any early retiree.

    We plan on having a few million when we retire as our plan differs slightly from yours. First, we have one kid already and hope to continue to grow our family and we cost of living will be higher. Having Charlie rather than a house certainly reduces a significant cost factor. While we have a decent size house now, we’ll likely consider a downgrade as the kids move out (still a long ways for that to happen though…he’s only two!).

    • Steve says:

      Thanks for your comment, Green Swan. A mortgage and kids definitely adds a lot to your living expenses, so I understand your desire to accumulate more than we’re looking for.

  2. Love this! I am in total agreement with the flexibility piece and we are already pretty frugal too. If you are willing to do some work here and there – you are so right that every dollar makes a difference. I am working a temporary gig now because I want to and it makes sense and the mood “struck”. Next fall? No way – we’ll be out west camping too. I think the flexibility is what will make this all work.

    • Steve says:

      Thanks Vicki. Flexibility is so damn important than it’s tough to emphasize enough. Start with a plan, then adjust as necessary. And west camping sounds fun! 🙂

  3. Great post! Why save to a million if you don’t need that much? If you can buy your freedom at a cheaper rate, then more power to you!

    I agree 100% on the importance of flexibility. If you can change and adapt as new challenges come your way, then you don’t need to plan for every possible obstacle ahead of time.

    • Steve says:

      Thanks Matt, appreciate the comment and you taking the time to read. It’s true and a very good point – if you plan to be flexible, then you don’t need to have a plan for *every* eventuality. Such a thing would be downright impossible anyway, so you might as well just be willing to change things up.

  4. Arrgo says:

    With not owning a house, frugal life style and your flexibility, you should be fine even without a million. I agree that earning some extra money can be a good buffer for your finances and piece of mind. Keep your eyes open for opportunities that suit you. I don’t mind working. I just don’t like committing 40-50 hours a week of my life plus commute time!

    • Steve says:

      Hey Arrgo – yup, we’re going to keep our eyes open for interesting opportunities, but we don’t *plan* to work another day in our lives after we retire. If we do and bring in some extra dough, that’s just icing on the cake.

      And I know exactly how you feel. I do enjoy the type of work that I do, but I definitely don’t like devoting 40+ hours every damn week to do it!

  5. Josh says:

    I have been looking forward to this article since the Friday feast let us know you were putting it together! I don’t think I ‘NEED’ a million either to early retire, but we’re planning on waiting until the spreadsheet hits the double comma. Having a little extra padding makes us feel more comfortable leaving the workforce full time and not needing to look for ways to make money, even though they will show up on their own. Should be able to accomplish this still in my 30’s.

    The retirement media seems to throw around a million as either the magic number or not enough. Fact is, most retirees don’t have a million liquid, let alone net worth. And, these are people who worked well into their 60’s.

    • Steve says:

      Josh – I agree, never anything wrong with a little extra in the bank account, and if that makes you feel more comfortable at the time of retirement, then it sounds like it’s the right decision for you. Ain’t nuthin’ wrong with that! 🙂

  6. Mr. PIE says:

    I don’t doubt for a minute that you both have the smarts to react to whatever the next years through your way. Its gonna be a helluva lot of fun. :>)

    Although our situation is different (kids future to consider), we have realized that our needs are much more basic than we ever imagined. The old adage of needs versus wants. And our investments are going to do a lot for us in that respect.

    Challenging the cost of everything, intentional spending with travel hacking thrown in for good measure is a powerful trio that makes you think about the number you actually need much more carefully. The media really messes with people with a lot of scaremongering and bogus information which many sadly fall prey to.

    Life throws stuff at us at invariably the worst times so being open to changing plans is wise. You can’t predict but you can prepare.

    • Steve says:

      Thanks Mr. PIE! Realizing how basic your *needs* are is a remarkable discovery, isn’t it? Instantly, things become much more simple. Possibilities open up in front of your very eyes. Congrats for figuring that out! Not many people do.

  7. LazyFIGuy says:

    I’m glad you posted this. Too many people in the FIRE community perpetuate the belief that you need to reach a million dollars to safely pull the plug and that’s necessarily true. I’ve kept a very accurate budget for the last year and continue to watch my savings and, more importantly, my expenses. I look for areas to cut those expenses without living a life of deprivation. My target number is 625k on the very lean side, but I hope to pull the plug at 675k, which would give me a lot more wiggle room for my annual expenses. It allows for a few more creature comforts. Of course, having the option to work periodically if/when I choose is also a comfort because it means doing work on my terms while padding my nest egg. In the meantime, I’ll keep coming back to see some of your beautiful photography. Best of luck to you both on your travels..

    • It’s amazing how different people have such different requirements for FI. We are at just over $3M and I don’t think we’re all that close to being able to retire. Of course, we have 2 kids (both under 3) and live in pricy Southern California, so our expenses are much higher.

      As for hitting the $1M mark, I was surprised at what a non-event it was. One day I pulled up our net worth in Quicken and saw we were over $1M. I told my wife, she nodded her head and said, “cool”, and that was pretty much it.

      • Mr. PIE says:

        Wow! I guess SoCal is WAY more expensive than I ever imagined. And you clearly have very high expenses. Eye opening this sort of comment, but that’s the power of blogging and our FIRE community. Learn something new every day……every circumstance is unique….thanks for sharing.

        • Well, to be fair, we aren’t exactly living a spartan lifestyle. Partly that’s because of the kids and partly because I really, really love our lifestyle today. I don’t need MORE than we have now (and I obviously don’t NEED what we have now). I’d be happy with this level of spending at least of the foreseeable future. So if we get to the point where this lifestyle is self-sustaining, then I’d be happy.

          And I’ve run the numbers – if we moved someplace cheaper (midwest or the South) we’d be able to retire soon, if not today.

      • Steve says:

        Your non-event was very similar to our debt-free moment. I kinda thought it was going to be more exciting, but once we officially hit 100% debt-free-ness, it was like…”Oh, cool”. That was about it.

        • I’m wondering if actual financial independence will be like that as well. So many of us in the FIRE community work, plan, save, and invest with that goal in mind, but I expect that once we get there it will be another non-event.

          All the more reason to have plenty of hobbies, a strong family, and an active social life to keep us all engaged, right?

          • Steve says:

            That’s right, Money Commando. I’m really curious how it is going to feel. It might finally hit me on the following Monday that, ordinarily, would have been a work day for me. We’ll see.

          • My guess is that it won’t REALLY hit for a month or so. Until that point it will just feel like a vacation. But eventually you’ll get everything done that’s on your to do list and you’ll have to figure out what’s next.

    • Steve says:

      Thanks LazyFIGuy, appreciate the kind words and encouragement! It definitely sounds like you know exactly what you need to be happy. 🙂

  8. Maarten says:

    I used the million dollar mark as a milestone to my plan but it in no means meant I was able to retire. It took another few 100k before I was semi comfortable leaving work. 2 years later that decision is still put to the test.

    Being able to lower your cost of living is a much more powerful tool than building more wealth. Another Great Recession can decimate your wealth but won’t do much to your spending pattern. As a matter of fact it will allow you to weather the next recession so much better.

    Good luck, I’m rooting for you guys!

    I have to admit reaching the million did feel awesome 😉

    • Steve says:

      “Being able to lower your cost of living is a much more powerful tool than building more wealth.” – that is an awesome quote, Maarten, and I couldn’t agree more. Very well said, and thanks for commenting!

  9. Agree: a million is a totally arbitrary number. It’s “F4240” in hexadecimal. Completely random number. If you are just under $1million and need $25-30k per year, congrats! That’s a very solid and conservative withdrawal rate.
    I would even argue that 3 years worth of living expenses in cash would be almost too conservative. If, say, you have a total of 900K in savings, 90K in cash and 810K in equities, then the equity portfolio will pay about $16k per year in dividends. That’s already half your living expenses every year. So, your 3Y worth of cash is actually 6 years worth of cash flow necessary on top of dividends. Well, in a stock market crash dividends flow a bit more slowly, so let’s call it 5 years, but normally companies try hard not to cut dividends in a recession. So you could still sustain the equity principal and only live off your dividends. Just a thought! 🙂

  10. Joe says:

    Go for it! You won’t know if it will work unless you try it. If you can keep your living expense down, you won’t have any problem with ER. I think that is really hard over the long haul, though.
    I’m a bit more conservative and saved up 30x our expenses which was a little over a million.

    • Steve says:

      Thanks Joe! Oh, we’re going to dive in head first, that’s for darn sure. If it works just as expected, great! Otherwise, we’ll change. No big deal. 🙂

  11. Awesome – good for you two! My wife and I retired two years ago (ages 43 and 44) and, similarly, built up a huge savings account (also at Ally). We opted for five years living expenses but I admit that’s probably too much cash sitting around doing nothing. I will say though that we do have over a million saved for retirement, but even still, like the cash. Honestly a million dollars doesn’t do nearly as much today as it did ten years ago, and will be even less valuable in ten more years. That’s why we hold the cash, remain frugal, and also work toward some side income to supplement our lifestyle.

    • Steve says:

      Thanks Coach Brad, appreciate the kind words. “That’s why we hold the cash, remain frugal, and also work toward some side income to supplement our lifestyle.” – Yup, exactly! That sums it up so well. 🙂

  12. My expenses are significantly higher, so we saved a lot more. Multiple millions in fact.

    But if you can fund your life with less, with a reasonable withdrawal rate, then go for it!

    Nobody knows what the future may bring.

    If an asteroid destroys life on this planet in 5 years, at least you’ll have had those 5 years to spend how you want it!

    • Steve says:

      Amen to that, Mr. Tako! Can’t let the “what-ifs” in life prevent you from having some fun and taking some chances. We certainly aren’t. Anything can happen. Life is short. Might as well just take the plunge! 😉

  13. First of all, I have to say Charlie looks beautiful under those stars 🙂 !

    I love this post – your flexibility and lifestyle (one I would love myself – camping full time? Yes, please) will get you by just fine on less than a mil.

    We have a similar mindset about our retirement lifestyle and flexibility, but the kids make it look a little different for us. We will keep our roots until they are at least out of high school (5 more years til the last one graduates) and then decide what we want to do. It may involve selling the house to take an immediate early retirement, but it really depends on what the kids are doing. We have a determined net worth we need for our current lifestyle, but if we were to change it up and dump the house, we wouldn’t need nearly that much. Only time will tell.

    • Steve says:

      Thanks Amanda! So many ways to play your retirement. Agreed that remaining put until the kids are out of high school is probably best from a stability standpoint. But once the kids are out, all bets are off! The sky’s the limit. 🙂

  14. This is very cool. Being flexible, and the ability to earn income in retirement results in much lower nest egg needs. The “value” of those $10,000 in salary income is equivalent to a portfolio worth $250,000 – $330,000 today ( which in itself would take years to accumulate)

    And the ability to cut expenditures also is incredibly valuable. If you cut spending to $25K from $30K, you need $125K – $167K less to accumulate.

    By the way, do you expect to have at lest 25 – 33 times annual expenses in retirement?

    In the current environment, I am shooting for an average dividend yield of 3%… So if I spend $30K/year, I would need $1M. If I spend $18K/year, I need $600K…

    Dividend Growth Investor

    • Steve says:

      Thanks for your comment, Dividend Growth Investor. Yeah, we are aiming for around 25x expenses. Might be a hair below when we begin, but that’s okay. There are so many opportunities out there to help supplement our income, so we aren’t worried.

      I love how simple that you make your retirement number. Simplicity is wonderful.

  15. Tawcan says:

    The million dollar concept doesn’t hold true for everyone, especially if you are going to be very frugal post retirement. There’s really no point saving that much if you don’t need it. 🙂

    • Steve says:

      Thanks Tawcan – yup, if you don’t need it, might as well not hang around accumulating it…especially if you aren’t all that thrilled about your job. And, umm…let’s just say that I’m not! 🙂

  16. TJ says:

    I know people who can’t fathom that even a million would ever be enough.

    Funny world we live in.

    I like your plan, it sounds like you guys will be fine.

  17. I have always felt that most people have this “number thing” all wrong when it comes to retirement. Most refer to the amount of money they have saved. Yes, that is important but, what is more important is what is their cash flow. Cash flow is more important. One could have a million but, due to low rates of return, see a small amount of cash flow for use without touching principal. Another person can have a small amount of savings but, see passive income from 5 or 6 investments that allows them to receive a good cash flow and be able to retire. 500K or 1 million…….forget the number and focus on cash flow. What cash flow do you need to retire and then build your portfolio to deliver it. Steve

    • Steve says:

      There is a lot of truth to that, Steve. Control your expenses and you’ve literally got life figured out. Simply having lots and lots of money isn’t the key to a good life.

      Thanks for your comment, Steve!

  18. Stockbeard says:

    Our target is over a million. In my defense, I have 2 kids (and apparently a third on the way) and we don’t own a home, so my retirement numbers need to plan for a mortgage payment or rent. which you don’t have now with Charlie 🙂

    • Steve says:

      Kids will definitely effect things that way, and yeah, the whole mortgage/rent thing. Definitely sounds like you have a firm grasp over what you truly need to retire. That’s way more than half the battle. 🙂

  19. Lady Locust says:

    We’re a couple years out yet, but if Charlie sees Mrs. Calabash on the road, be sure he winks at her. (She’s an Aristocrat 🙂 You 2 will be fine~ you have such a practical outlook. What a phenomenal feeling that will be. Sooo happy for you both.

  20. Wow, it’s really incredible how low you’ve been able to get your “overhead.” For us, the number is probably going to be a couple of million. We’re not adventurous enough to take off in a trailer, and I imagine the big comfy house is in our future for the long run. We have two kids now and I suppose grandkids in 20-30 years? We’d like to have that home base for them.

    Best of luck, I’m really looking forward to hearing about your adventures once you cut the 9-to-5 cords and take off!

    • Steve says:

      It’s true, cut your overhead down, live frugally, and your flexibility to do whatever you want to do opens up dramatically. Appreciate the kind words!

  21. Michelle says:

    Where in Tucson are you parked? We were in Tucson for a few months at Justin Diamond RV Park and it’s our favorite! We plan on going back later this year or the beginning of 2017. Would love to meet up 🙂

    We’re not sure how much we’ll want saved before we officially retire. It’s something we do think about, though. It’s nice that we really love what we do so we are not too rushed.

    • Steve says:

      Hey Michelle! We are in the KOA in south Tucson and would love to meet up once you guys get back into town. We plan to leave in February, but any time before that we’d be good to go. 🙂

  22. I’m on the contrarian side. I want to become a millionaire at some point in my life because I know how hard it is and it would be a great accomplishment.

    It’s still good to hear the other side of my perspective. It’s all about the probability of success and how comfortable one is with that probability. Thanks for sharing!

  23. Jef Miles says:

    Awesome, interesting & thought provoking article here Steve!
    I’d say for me it’s more about either a level of investment income i.e. 50K annual or if I’ve established a process that doesn’t require the regular 9 to 5.. Of course 50K may seem a lot however Australia has higher costs of living..

    Could definitely move elsewhere i.e. Thailand, Costa Rica as you say although see what happens 🙂

    Cheers!

    • Steve says:

      Thanks for the comment, Jef. We’ve considered living abroad as well to help save costs if it comes to that. We aren’t opposed to Thailand or Costa Rica either. Could happen!

  24. I think as long as you have back-up plans that you’re a completely comfortable with, then I agree with everybody else that 1 million is just a number. The main things I would be thinking about if I were in your position would be if I could afford rent somewhere desirable in the future if I decided that long-term RV travel wasn’t for me, but it seems like you’ve thought that through, and of course you’re looking at international options as well. 🙂

    • Steve says:

      Yup, we are definitely open to international options. However, if we do eventually get tired of long-term RV travel, there’s always the option of us settling down somewhere, but still remaining in our Airstream as well. That would help keep rent down and utilities to a minimum, which would be nice. But, that’s most likely a long, long time in the future.

      • Jason says:

        Herbert Hoover would admire your rugged individualism. He’d also sneer at my complete lack thereof. Not to mention I remain completely traumatized by childhood family vacations in motor homes.

        But it brings out an essential question that retirement calculators/advisors never ask: where do you want (or are willing) to retire. My inner masochist once led me to scroll through the comments on a retirement article on a national news site and lodged between the brain damaging unibomber screeds, “Obama stole my ability to think straight” posts and kidnapped Nigerian diamond magnates promising high returns for hostage donation pleas, I found a pearl of wisdom from an actually sane person posting on the internet: “If you have $500K in savings and a house valued at minimum of $250K completely paid, off, you should be able to retire in a reasonable manner in a reasonable area of the US.”

        That has become my retirement mantra.

  25. @Guyon_FIRE says:

    I love your first point about have three years D living expenses ready to go in the form of cash. I have never thought about doing this personally, but now I am definitely considering. This is a great way to allow your nest egg to gain a few extra years of compounding.

    Also, I hope the average person issues this article to realize that you do not need $1 million + to retire.

    • Steve says:

      Thanks for your comment, GuyOnFire! Appreciate your kind words and taking the time to give this post a read. And yup, keeping your hands out of your investments for as long as you can after retirement will definitely help to extend your retirement! 🙂

  26. Nope, we’ll be nowhere near a million. Maybe 500k plus rental income.
    The thing is once you’ve paid off your debt and got a cheap place to live, life can be sooo cheap. I think we’ll be able to live well for under 2k/mth once the mortgage is paid off.

    Then, when we want to travel we’ll just house-swap with other PF blogger, early-retiree types who can be super flexible on travel dates. We’ll totally come stay at your Airstream and you can mind our place in New Zealand.

    Actually, maybe we should start a house-swap site for personal finance bloggers?

    • Steve says:

      Good on you, Emma, for getting your financial house in order! It’s true that once your debt is gone, your freedom expands rapidly. Opportunities open up. Wealth accumulation happens quickly and consistently.

      And the house swap idea sounds awesome. 🙂

  27. Bryce says:

    The 3yrs of living expenses in cash…to me that sounds like a good idea if you think we’re headed for a recession, then you have $ to weather the storm in a very safe investment and you’re not drawing down your principal in your riskier stock portfolio. But if you think we’re headed for continued growth (the market always goes up more than it goes down given enough time) then that 3yrs of cash isn’t gaining you a return (well not much if in a money market or savings account) and helping you to stay ahead of inflation or reach that historical 7% market return that is crucial to the 4% rule. So am I correct in thinking you are market timing by forecasting a downturn in the market? Thanks!

    P.S. Come say hi at http://www.cheaprvliving.com/ I plan to full time in a small RV/Van/Fiberglass Trailer as well!

    • Steve says:

      Hey Bryce! Our plan to accumulate 3-years of living expenses before retirement is completely independent of the stock market. We never try to time the market – that’s nearly impossible. Our primary motivator is keeping our hands out of our longer-term investments for as long as possible, and a larger short-term savings pot will allow that.

      That, and my wife tends to be pretty cautious, so even though that 3-years of living expenses (which we’ve already accumulated) isn’t netting us anything at the moment, it represents a peace of mind that my wife likes to have in her pocket.

      Also, we visit your site quite a bit. Love it!

  28. Mr. Groovy says:

    Hey, Steve. Our plan is very similar to yours. We’re retiring in a month, and our goal is to not touch our investment portfolio for at least four years. I’m curious about your asset allocation, though, if you wouldn’t mind divulging it. Right now, Mrs. Groovy and I plan on ending this year with a 40/60 split between equities/fixed income. We’re following the Phau-Kitces approach to the first five years of retirement: low equities to avoid sequence-of-return problems. What are your thoughts? I’d love to get your perspective.

    • Steve says:

      Hey Mr. Groovy! To be perfectly honest, we don’t pay much attention to many strategies to help avoid this or that. That said, it doesn’t mean those strategies are bad – not at all. We just keep things simple around here. We have an 80/20 split between stocks and bonds at the moment. We’ll have a little income from blogging and YouTube, too. That’ll help bring in some dough here and there. A little extra never hurts! 🙂

  29. Lake Girl says:

    I totally agree with your thoughts on good beer and wine! Personally I don’t need a million bucks to retire! I have chosen the route of simplifying my life and enjoying it NOW rather then working until ager 65. I spend as much time in mylittlebluekayak.com as possible (AKA my happy place)!.I work per diem making decent money and then do other odd jobs that I enjoy. As long as I max my ROTH and HSA and build up some other funds, I am happy! Charlie sounds great!

    • Steve says:

      Thanks for the comment, Lake Girl. Charlie is great, wonderful way to streamline our expenses and set us up to really begin to explore our world. Sounds like you have a good thing going on in your neck of the woods, too. 🙂

  30. Kurt says:

    You make tremendous points. The constant chatter and debate about how much one should have saved before retiring is so much bunk. “Retirement” does not necessarily translate to “living large” or never earning another nickel. Building a respectable starter fund, living cheap, and being open and responsive to opportunities or needs to earn cash makes a mammoth difference in the size of a nest egg needed to ‘retire.’ Good for you!

    • Steve says:

      Thanks Kurt – you’re right, it is bunk. I understand that it’s an easy way to sensationalize this whole thing, but it really just comes down to how much you spend. The less you have, the less you spend. 🙂

  31. You guys seem to have a good plan Steve. As GS rightly said, I wouldn’t worry about hitting a baseless milestone target just because it sounds good. I wish the finance industry focused less on ‘what’s your number’ and more on what’s your percentage, that is your withdrawal rate during your first year of retirement. That’s the metric that will matter. Sounds like you guys are on top of your game there. Here’s to more beautiful evenings under the stars!

    • Steve says:

      Thanks Ten Factorial. Totally agree, it’s the percentage of your wealth that you’re using that’s a much more important and significant number to consider. Thanks for the comment!

  32. It’s funny I kind of have the 1 million dollars in my mind although I’m still trying to figure out what a realistic yearly expense in “early retirement” would look like. Your post is inspiring to me that sometimes we get fixated on a number but forget there is almost always opportunities to lower our expenses and thus lower our “number”. Thanks for the post.

    • Steve says:

      You’re most welcome, and thanks for the comment. There are definitely two sides to this coin. Increasing income is one, but lowering expense is the other. I find lowering expenses to be much, much easier! 🙂

  33. Since your expenses are only around $30,000 on the high end of things then based on some of the general rules of thumb, you don’t need a million anyways. So it sounds like as long as you are careful and plan (which is sounds like you are) then you should be fine. I am envious and wish you the best of luck!

    • Steve says:

      Thanks for the comment Mrs. SimpleFinanciallyFree. Yup, our expenses are pretty low so a million bucks would definitely be on the upper end of things from a net worth perspective. We don’t need it, so we aren’t going to be working extra to get it. 🙂

  34. […] Since he is one of the BIG names in early retirement, Mr. Money Mustache is showing the world how it’s done! Steve over at Think, Save, Retire has also argued that you don’t need to be a millionaire to retire. […]

  35. Great article! This is right along the same lines as our 7-year plan (now 5.5) to have the option to “retire” early. Roughly 3 years of “runway” along with maybe half a million of retirement savings we plan to leave alone. I don’t think I’ll be able to convince my wife to live in an airstream, but we’ll live comfortably frugal without debt.
    That “runway” would be enough time to get going on projects that may generate some money (who knows, could grow into a lifestyle business). If the projects don’t work out, 3 years is plenty of time to figure something else out. I think people really underestimate their ability to adapt and figure things out. $1 million just sounds like the right amount of money to most people, because it’s a nice round number and it gives a warm fuzzy to say “I have a million dollars”.
    Love it!

    • Steve says:

      Hey Adam! It’s true that once we retire, people assume that there simply won’t be any more opportunities for bringing in some cash any longer. It’s almost as if we automatically become *incapable* of working on things (for money) that we particularly enjoy. Maybe it’s the thought that if we take a job, then we aren’t officially “retired” along longer. That’s retirement police nonsense!

      Thanks for the comment.

  36. Joe Freedom says:

    Absolutely agree: there is nothing magical about $1mm. It’s just a number. And if the calculation works for you at a lower number, that’s it. Others have pulled the work plug at a number well below $1mm (e.g., MMM).

    The multi-year cash reserve issue is, I think, mostly a psychological one (ie, what are you comfortable with in light of current market conditions). You’ve couched it in terms of letting your existing investments grow for a longer period. But of course by keeping that much in cash, you are keeping those amounts out of the market and depriving them of any time to grow at a faster clip (in theory). With that being said, I’m doing something similar right now. I have more in cash than I ever would have dreamed not too long ago. The reason is twofold: (1) It’s a really tough time to be putting any money with a short-term time horizon to work in the US markets right now; and (2) when you get to a point of ACTUALLY having to pull the trigger and liquidate investments to buy groceries, the game becomes much more real. (It sure is easier to be an investor when your time horizon is 20+ years!).

    Regarding point (1): as we all know, domestic equities are at all-time-high valuations (not foreign equities, but I digress), and bond yields are largely at historic lows with rates set to rise (and thus prices to fall). So if you’re holding cash that you’ll need for beer and bread in the next 12-24 months, putting it in either of these places seems to be a risky move. And if you were inclined to put the cash in a bond fund because it is short-term money (say something like Vanguard’s Total Bond Fund BND), you’re only going to reap a yield of around 2.4% along with the virtual guarantee that principal value will drop at some point in the next couple of years as rates rise. You’re getting around 1% in cash at Ally with a principal guarantee. That 1.4% yield delta is not worth the risk for me. For now I’m comfortable keeping more in cash than I would otherwise with the idea that I’ll probably increase bond exposure after rates/yields rise and prices fall. That will be a better place to keep short-term money (once the bond markets return to something resembling “normal;” I know, I know maybe this is the new “normal”). And I still think of any money that I’m going to need for bread in less than 4-5 years to be “short-term” money because you can’t count on equity values to necessarily be higher in that short of a time frame. (Note here: I’m a big proponent of an aggressive equity portfolio allocation, but I’m sitting at about 95/5 equity/bond, so now that I have an actual need for short-term money I’ll most likely be expanding that 5% to at least 10%.)

    ERN’s point above is well taken because it essentially advocates the lump-sum investment approach as opposed to dollar-cost averaging. You can either put the money in right now in lump sum, or you can put it in over time as you re-invest the dividends that you don’t need to use for bread because you keep the lump sum out. The data that I’ve seen fairly clearly establishes that over the long-haul, the lump-sum approach (get it all in right now) will yield a better result. But the DCA approach brings with it the psychological value of potentially tapering off the volatility that comes with putting it all in at one number. I usually prefer the route proven by data and math to be superior as opposed to a feel-good approach, but this is one where I’ve opted for a little bit of feel-good.

    Sorry for the long soliloquy here, but the discussion of this point forced me to walk back through my own logic.

    Oh, and AWESOME picture. I presumed it was a stock until I read your caption. Nice.

    • Steve says:

      Wow, epic comment Joe – and thanks for your kind words regarding the picture. I agree that there are pros and cons to keeping so much money out of the market. It’s something that we’ve wrestled with, too. I suppose that such easy access to a great deal of money provides a “peace of mind” value that is greater than the potential return on our investment if that money were to be thrown into the market. The nice thing is there are so many ways to go about this kind of thing. And I tend to agree, the lump sum approach would be our go-to strategy as well, for sure. 🙂

  37. To me a million dollars is just a number, it doesn’t represent anything. If I had to choose between a passive income stream of $150K a year or a 1 time lump sum of 1 Million, I’d take the continuous passive income everytime.

    • Bryce says:

      Is that kind of obvious? To build a truly passive income stream of $150k, you’d need a whole lot more than $1mil. Haha.

    • Steve says:

      Thanks Dave! Yup, if that passive income stream was dependable for many years into the future, then definitely. It’s tough to depend on a 15% return in the market if you had a million. 🙂

  38. Great post, Steve. Thanks for reminding us all that “it’s possible”.

    PS – don’t blind anybody with that shiny Airstream…

  39. Kirk says:

    Steve – what a great article!!! The “double comma club” guess that’s a new one for me. I love your proposed lifestyle. I retired in Jan of this year, with the 3 years of cash in savings and debt free and am finding it takes less than we assumed to fund the lifestyle my wife and I have chosen. I am a backpacker, having completed the Appalachian Trail am setting out for the Pacific Crest Trail in 2017. This year we completed some hikes and took a 4 week “car camping” trip through 7 National Parks. I will be following your blog, best wishes to you both.

    • Steve says:

      Thanks Kirk! I love your ambition and your lifestyle. We will have at least three years of expenses in a savings account as well that we will use before we even think about touching our longer-term investments.

      I couldn’t imagine hiking the entire Appalachian Trail, but that must have been an awesome adventure!

      Thanks so much for your comment.

  40. Miss Mazuma says:

    Awesome post with an actionable plan. I am intrigued to read more about your life in Charlie. I plan to be FI in the next 6 years and am looking forward to a similar lifestyle. Being frugal helps as does interest in the outdoors as free entertainment!

    As for the million – I wish more people realized the number isn’t what is important to the plan. One million is a lot of money to people who only spend 30k a year…then again, there are plenty that think “a million isn’t what it used to be”. They forget how many zeros that is!! Either way, live and let live. I am thankful for my frugal lifestyle and what it affords me as it seems you are as well.

    I’m off to poke around for more info on Charlie! 🙂

    • Steve says:

      Thanks for your comment Miss. Mazuma! I was very much one of those people who believed that a million is “nothing” any more. Now, however, I very much know how many years of productive life that amount of money can support! 🙂

  41. […] For the record, my wife and I will retire in our 30s with less than a mil. […]

  42. Ashley says:

    I love this!!

    I don’t plan to have $1 million portfolio when leave the 9-5, but I do plan to explore other sources of income (even if it is $10-20k to smooth the ride). I’m sure most people would consider that crazy because they feel like they’ll never be able to retire with less than multiple millions, but you are spot on with this.

    Living reasonably frugally, having a safety net, and being flexible are absolutely key to making it work. Looks like you have an awesome, well-laid plan, and I absolutely love the RV idea. That’s something I’ve been considering recently also.

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