Retire early? “Sure,” you might say, “I could do that — if it weren’t for the kids.” But even with a full house, it's not impossible.
Meet Carl Jensen, founder of 1500 Days to Freedom, a website chronicling his journey to retirement in 2017 at age 43. He’s married with two kids who are now 11 and 8.
Or take a page from the book of Justin McCurry, founder of Root of Good, who retired in 2013 at age 33. He’s married and has three children who are now 13, 11 and 6.
Different paths to early retirement
McCurry was planning to retire early anyway, but after an unexpected layoff, the day came sooner than he’d imagined.
“That’s the point where I said, 'Do I need to go out and look for a job, or am I just retired?'” says McCurry, who lives in Raleigh, North Carolina. So he checked up on his financial plan. “We were 99% of the way there. That day I figured out: 'I’m just retired. I reached the goal.'”
» Are your retirement savings on track? Use a calculator to find out
Jensen, who lives in Longmont, Colorado, investigated the idea of early retirement after a bad day at the office. “I Googled something like ‘how do I retire early,’” he says.
He came across Mr. Money Mustache, a well-known personality in the FIRE (“financial independence, retire early”) movement, and the alter ego of Peter Adeney.
Jensen was inspired to start on his own journey of financial independence. He was 37 years old. “We weren’t living a frugal lifestyle,” Jensen says, but, motivated by a financially insecure childhood, he and his wife already had saved almost $600,000 and had about $150,000 in equity in the home they’d purchased for about $400,000.
They eventually sold that house and purchased a $167,000 fixer-upper foreclosure.
“I figured we would need about $1 million and no debt to retire, and I figured it would take a little over four years … or 1,500 days,” Jensen says. Hence the name of his blog.
Although Jensen and McCurry are acquainted through the close-knit financial independence community, they were interviewed separately for this story. We combined the interviews below.
How they got there
On the day he retired — when he was laid off from his job as a transportation engineer at age 33 — McCurry was earning about $69,000 a year, and he and his wife had saved about $1.3 million. His wife earned about $70,000 and retired two years after he did.
When Jensen retired, his income as a software programmer was about $100,000 a year. He and his wife had investments worth about $1.2 million (including real estate investments, but not including the house they live in).
His wife had been a stay-at-home mom, but she took a full-time job after he retired. She couldn't resist working for one of her favorite websites — writing, podcasting and more. She's not doing it for the money.
“It was never her intention to go back to work, but she found her dream job,” Jensen says.
Jensen and McCurry used the “4% rule,” or a variant of it, to figure out how much money they needed before they could retire. That rule, based on years of historical stock-market data, says you can safely withdraw 4% each year from a diversified investment portfolio and live on that money for 30 years.
What happens after 30 years? "The 4% rule is meant to be a real conservative baseline," Jensen says, citing recent research that shows a high probability of portfolios being larger than their original amount, even after 30 years of 4% annual withdrawals, thanks to the value of investment returns compounding over those decades.
"That’s what gives me confidence that my portfolio will last the rest of my life," he says, though he notes that retirees should stay flexible and adjust spending based on market performance and their own situations.
And take note of spending. “To know how much money you need to retire, you need to know how much you spend every year,” Jensen says. He started tracking his family’s spending when he set a goal of early retirement. He says they currently spend about $50,000 a year.
McCurry used a 3.5% rule. That is, he focused on building up enough savings such that withdrawing 3.5% each year from his nest egg would cover his family’s current annual spending of $40,000. “That’s the point where I said, ‘Yeah, the finances will work,’” he says.
» Read more: What an average retirement costs
Q&A with Carl Jensen and Justin McCurry
How did you save as much as you did?
Jensen: The main one was getting rid of our fancy house. [The new house means cheaper property taxes, insurance and mortgage costs.]
Jensen: We actually didn’t cut back too much on vacations, but we cut back on our spending by using credit card points [and by taking road trips and staying with friends]. We travel more, but we do it for less money.
McCurry: It comes down to intentional living. That is, saving a big part of what you make and setting up your finances so you can do that. Look at the big three expenses, because that’s where you spend most of your money: housing, transportation and food. … Can you spend less without really sacrificing quality of life? [For example, McCurry’s family has just one vehicle, a minivan, and they’ve lived in the same home since 2003, before their kids were born.]
How did you retire early with kids?
[Both McCurry and Jensen send their children to public schools.]
Jensen: If you do go to work, there’s the expense of child care, which is huge, but kids themselves aren’t expensive. … They don’t need all these fancy toys. The best gift you can give your child is your time … it doesn’t cost anything to go for a walk or to go for a bike ride.
McCurry: We’ve managed to reach a good compromise between keeping our kids busy and engaged without spending a lot of money. But also I think we have a different philosophy where it’s OK if the kids aren’t always doing something. It’s OK if they’re not in an organized activity.
McCurry: We’ve found several summer camps that are totally free. [For example, a law-enforcement adventure camp, where the children visit a forensics laboratory and courthouse.]
“To know how much money you need to retire, you need to know how much you spend every year.”
Carl Jensen, Founder of 1500 Days to Freedom
Jensen: [Some parents have] their kids involved in 5,000 activities. I definitely think some of those have value. But I think parents overdo it. … It’s expensive, but even more than that, it’s a time suck, too. … I do math [with the kids] for two hours every summer. We wake up, we have breakfast, I have this big whiteboard. … We usually do that for a couple hours, then a bike ride or go down to the stream and walk.
Jensen: Not working and just being able to have time with your kids is a huge benefit. It’s a luxury I’m thankful for every day, and I think they’ll be ahead in life for it as well.
How will you handle your children’s college costs?
McCurry: Just in the 529s, we have enough for three years’ tuition for each of them. [He also has college savings in a taxable brokerage account.] … They could live at home and commute to the state university here. It’s a STEM-based school. If they do go into engineering like I did, there’s that option.
Jensen: I’m going to assure them [his children] that we will see they get a degree some way or another, but I want them to have some kind of skin in the game. I’m still trying to figure this out, but maybe it’ll be: "For every dollar you put in, we’ll put in $4." … And maybe somehow incentivize them to go to a cheaper school.
What about health insurance?
McCurry: We use the Affordable Care Act Healthcare.gov exchange. We go each year and see what plans are available, shop around and compare and figure out which ones are best for us.
Jensen: Before, we were on the ACA. [Now, his wife has family coverage through her employer.]
How do you invest your money?
McCurry: We’re 90% in stocks. … We’ve got about five years of living expenses between cash, bonds and CDs.
Jensen: Stocks [index funds and individual stocks] and real estate.