How To Retire In Your 30s (MY PLAN!)

work in a cubicle from nine to five during the best years of your life with only 14 days of vacation a year and then when you're 67 you can retire and finally start living life maybe even play golf every day okay that sounds like a terrible idea sometimes you have to question societal norms that we just take for granted and that's what this video is all about we all want to have more freedom and more flexibility in our lives now not 40 years down the road so as a result i think the idea of traditional retirement where you work for several decades to save and you enjoy all your money at the end this whole notion is becoming less and less relevant these days in fact according to census data 66 of millennials have nothing saved for retirement and you know what i don't blame them even if you have plenty of money left to save as a millennial after you make all those student loan payments and all that i don't think anyone gets excited by the word retirement i know i preach all day about iras and investing on my channel but even i'm not excited about retirement i don't want to wait till i'm 67 i don't want to play golf all day and i want to travel and pursue my passions now not later enter the fire movement fire which stands for financial independence retire early is a growing movement of people who are going against the norms to aggressively save money and retire decades earlier than most other people when i first started reading about fire it really resonated because deep down i always knew i wanted to achieve financial independence well before the age of 67 but i didn't really know that this was a thing and that other people were doing it so the idea of fire was very exciting to me however for the last six years all i could think about was just paying off my student loans i wasn't even thinking about retirement let alone early retirement now i'm happy to say i literally just finished paying off the last of my student loans earlier this year so now that i'm finally debt free i have been thinking a lot about what big financial goals i want to pursue next retiring early is one of them so in this video i want to explain step by step how to run the numbers for retiring early i want to talk about some hacks to get there faster and of course share with you my plan to retire in my 30s so let's get started running the numbers for early retirement is a three-step process step one is to define your number what is the amount of money you need to have invested such that you can live off your investments for the rest of your life without running out of money then step two is to decide how many years are you going to give yourself to hit that number since this is about retiring early it's probably going to be a short timeline like you're giving yourself 10 years or maybe even five years then step three is to reverse engineer how much you need to contribute every month in order to hit your number within that time frame let's walk through an actual example of how to do this since financial independence means that you have enough money invested to cover your annual living expenses in other words the income from the investments whether it comes from dividend income or capital gains income all that is enough to cover your annual expenses so in order to define your big number it all starts with first knowing what your living expenses are that's where it all starts once you know what you need to live on every year say forty thousand dollars you can then apply what's called the four percent rule the four percent rule says that if you have a nest egg a retirement nest egg of x amount the safe amount to withdraw it from it every year is four percent if you withdraw more than four percent every year say five or seven percent then there is a chance that your nest egg will run out of money during your retirement if you withdraw less than that like three percent then your money is pretty much guaranteed to last forever and you'll even be able to pass it on to your children the four percent safe withdrawal rate is based on an extensive study called the trinity study this was done by professors at trinity university in 1995 and in the study they did a bunch of really fancy advanced financial modeling on historical stock and bond market returns since 1926 and they did this to figure out what is the optimal withdrawal rate in retirement what's that rate such that the growth of the stock market and your portfolio is going to be enough to sustain the withdrawals in such a way that you don't have too much money left but you don't have any like zero money left and that optimal rate they found was four percent to be more specific the studies discovered that on a portfolio of 50 stocks and 50 bonds withdrawing only 4 a year while also adjusting that amount for inflation each year this would give you a 95 chance of your money lasting at least 30 years and it would also give you a 100 chance of your money lasting at least 25 years to say it another way if you want your nest egg to be guaranteed to last at least 25 years plan on only withdrawing four percent from it every year in retirement so if your living expenses are say forty thousand dollars a year then according to the four percent rule you would need one million dollars in order to retire why because if you withdraw four percent on a one million dollar nest egg every year that would give you a 40 000 a year annual retirement income also if you're not good with calculating percentages or it's not very intuitive to you a quick hack is to just multiply your annual living expenses by 25. that will also give you 1 million and that's just another way to calculate what your number needs to be the 4 rule is super simple but very powerful and a lot of successful fire people follow it however it does come with one caveat it assumes a 30-year retirement however if you retire early your retirement is going to last more like 40 50 or even 60 years so if you really want to be bulletproof and certain go for a three percent withdrawal rate as for me a four percent withdrawal rate is already conservative according to the study so i'm cool with four percent but if you really want to be sure you can also consider adjusting that down now assuming you're going with a four percent withdrawal rate one million dollars is your number based on forty thousand dollars a year in living expenses so the next step is to decide how many years you're giving yourself to hit that number let's say you're giving yourself 10 years which is obviously extremely aggressive now this will be a function of how soon you want to retire but also what is actually achievable and realistic for you then on to step 3 and of course you may have to go back to step 2 and just kind of fine tune it's both of them are a moving target but step three is to figure out how much you need to invest every month every year in order to get to your big number in the time frame that you've given yourself so in this example how much do you need to invest every month in order to reach 1 million dollars in 10 years there's a lot of good online calculators for this such as the one on bankrate.com so i put the link below if you want to try it out for yourself but first to use it you first punch in your number one million dollars then 10 years let's say you have nothing invested yet you're starting off with zero then i would put seven percent in the rate of return which has been the average after tax total return of the s p 500 over the last 90 years or so then let's say you contribute say 5 000 a month well according to this calculator in 10 years you'll have 855 000 which is a little bit short of your 1 million dollar goal so then you have to go back to step two and or adjust the monthly contributions and play around with this calculator until you come up with something that you can actually follow so let's say you increase your monthly contributions to six thousand dollars a month that would get you to your goal a little over one million dollars in ten years okay so six thousand dollars a month is a lot obviously the only way to put away that much money every month is to first have a very high income and then also to be very frugal you kind of have to do both there's no way around it if you want to have a high savings rate you need to be frugal and make a lot of income yeah if early retirement were easy everyone would be doing it however here are some hacks to make it more doable for you one way to retire early faster is by doing something called geoarbitrage geoarbitrage is a concept popularized by tim ferriss in his book the four hour work week and it's where you relocate to another city or country with a lower cost of living while maintaining the same income so you're arbitraging the geography where you make a high income in the higher cost of living country but your expenses are in a lower cost of living country for example if you retire in a foreign country where the dollar stretches a lot farther instead of needing forty thousand dollars a year to retire you might only need twenty thousand dollars a year so places like vietnam colombia bali the currency there is a lot weaker so you actually could live quite comfortably on twenty thousand dollars a year and there's a lot of large expat retiree communities doing just that i first experienced the power of geo arbitrage when i went on a backpacking trip around the world at 18 years old i was traveling with savings from waiting tables in high school so it's not like i was flush with cash during this trip however in kenya i could rent a sweet house right on the beach for thirty dollars a night and i could do things like have fresh ceviche every day in peru for just like a dollar fifty a bowl so geo arbitrage is really really powerful if all you need is twenty thousand dollars a year to live on while not uh compromising on your quality of life then your number goes down by half instead of needing a million to retire all you need is half a million which means instead of having to save six thousand dollars a month you can just save three thousand dollars a month and then you can still retire in ten years or you can contribute more every month and retire in a shorter amount of time so the possibilities are really endless geo arbitrage means you can just not make a lot of money but you can also still live well no compromises also you don't have to straight up move to another country because if you're able to work remotely you could even just live abroad somewhere cheaper or even just live somewhere in the same country but to a cheaper city and that way you can save up a bunch of money to help you reach fire faster in addition to jiro arbitrage something else you can do to speed up early retirement is to go for a part-time retirement this is also known as barista fire where you work part-time to supplement the income from your investments you could work a couple days a week as a starbucks barista which is kind of the original concept and that's where the term came from but you can also just make money in retirement doing something else like side gigs or consulting work and this way you can possibly get health insurance through your job and of course have extra money coming in believe it or not there are a lot of companies that provide health insurance to part-time employees so starbucks is one of them but so is verizon whole foods ups and costco and there's a lot more so if all you need is twenty thousand dollars from your investments in retirement and the remaining twenty thousand that you need you can earn from a part-time job then early retirement suddenly becomes a lot more doable sure i know this isn't like a real retirement since you'd actually still be working but then again i don't think anyone actually wants to just sit around and do nothing when they're retired right working part-time in retirement could be nice because it creates structure in your life it gives you a reason to be out with other people all while making some money another hack for speeding it up is by earning more now i know this is a really hack it's just obvious but if you want to reach early retirement faster you have to think of ways to increase your income by a lot and i really like focusing on this of course saving money and being as frugal as possible is really important as well and if you can make some drastic lifestyle changes like moving to a smaller home or giving up your car or even like living out of a van or a tiny home you can do all those things but still there's always a rock bottom to how low your expenses can go no matter how frugal you are we all need a roof over our head and put some food on the table so i like focusing on ways to increase your income because there's actually no ceiling on how high your income can go a lot of the fire bloggers and youtubers that i stalk um on instagram on youtube and that have retired early successfully when i look at their stories i see that they've all made pretty high incomes from their primary job and or from their side hustles and that is how they retired early a lot of them either made high salaries from their jobs and or they did airbnb they had an online business they had a blog a youtube channel something else that brought in money so if your main job isn't gonna get you there and if it is you're very lucky but if not consider starting a side gig i have a lot more videos about ideas for side gigs coming up so stay tuned for those but for now here are some rapid fire ideas to get you started and you'll see that the possibilities are endless you can fix things on taskrabbit you can make deliveries for ubereats postmates or instacart you can charge scooters for bird or lime you can trade options you can cook meals for people on my table you can babysit or take care of seniors on care.com you can resell clothing on poshmark you can take care of pets on rover if you like animals you can provide bookkeeping services to a local business you can do graphic design or some other online work on fiverr you can do consulting on upwork you can start a blog you can sell things on amazon you can start a youtube channel you could work weekends doing catering events for a catering company you can start an airbnb you can clean houses on handy i could go on and on bottom line is no excuses these are all things that either i have made money in or i personally know people who are making money on the side doing these things you have skills that you can monetize so dig deep and find a way to increase your income if retiring early for you means you need to save six thousand dollars a month instead of feeling discouraged because that's a lot of money and you have no idea how you can afford that start asking yourself how can i afford that ask yourself productive questions so you can get productive answers all right and now for my plan to retire early drumroll please so my goal my crazy goal is to get to one million dollars within six years wow it feels really crazy to say that out loud but i want you to hold me accountable using the four percent rule one million dollars would mean for me forty thousand dollars a year in retirement i would of course supplement that income with part-time work because 40 000 a year is pretty bare-bones mostly because i would just go crazy sitting around doing nothing i really do enjoy working being productive using my skills providing value to society so that's why i'm going for a part-time retirement so right now in addition to youtube i have some online courses i do consulting and options trading so if all goes as planned i should be able to put away the 10 000 ish a month that i need to save in order to retire in six years especially since i don't have to pay student loans anymore those were so annoying anyway we'll see uh you guys can hold me to it so after crunching the numbers and doing a lot of thinking this idea of a hybrid retirement is really starting to make me very excited and i really think this is going to be the new way people don't want to retire per se they just want to buy their time back and have some breathing room in their lives and spend their days in a way that they enjoy and with a hybrid retirement or barista fire you can all get there much sooner than you think even though this whole video was about money and retiring early we all know it's not actually about money it's about buying back your time so that you can do all the things you want to do with your life i would love to learn french build my own burning man art car live by the beach go back to school and learn classic piano and get like 10 french bulldogs so that i can play with them all day so just daydreaming for now but daydreaming is a lot of fun how about you guys what are the top three things you would do in early retirement and to make it more concrete what is your magic number what's the amount you need to retire early share with me in the comments below and let's work on it together thank you so much for watching i really appreciate you i post new videos every wednesday so be sure to hit subscribe and join the family for more videos about making money saving money and investing money i'll see you next week same time same place bye [Music] you

Channel: Rose Han

Views: 265,288

Keywords: how to retire early, fire movement, financial independence retire early, how to invest for early retirement, can i retire early, how to calculate your fire number, investing for early retirement, how much money do i need to retire early, how to achieve financial independence, how to retire in your 30s, the 4 percent rule, how to retire young, investing with rose, how much do you need to retire, personal finance, how much money to quit your job, early retirement planning

Id: C_MIRVB_tZU

Length: 17min 3sec (1023 seconds)

Published: Wed Oct 21 2020