My Best Early Retirement Advice

My Best Early Retirement AdviceHave a great Memorial Day weekend! No new article this Friday.

Last week, I was on the phone with Brad, the publisher development at Zillow, to get their affiliate program back online. My links to Zillow weren’t working because they changed to a different advertising agency. It was a good call and we finished talking business in about 15 minutes. At the end of the call, Brad asked if I have any advice for a young guy. I get a question like this occasionally when I meet someone new. My standard answer is to save and invest as much as you can. This is a pretty good answer because it’s a simple message and we talked about it for a few minutes. However, is it really the best advice for early retirement?

Save and invest as much as you can is a bit too generic. It’s probably the answer to most personal finance questions.

  • How do I pay off my student loan?
  • How do I save up to buy a home?
  • How can I pay for my kid’s college education?
  • How do I retire by 40?

Saving and investing is a vital part of the early retirement journey, but it’s not the most important thing. Now that I had a few days to stew over it, I think the more important thing is to set the goal.

My Best Early Retirement Advice

I started saving and investing as soon as I got my first full time job in 1996. Soon after, I maxed out my 401k and Roth IRA, and even invested extra in my taxable account. This is pretty unusual because as a country, our saving rate is a woeful 5%. My family struggled financially when I was growing up so that influenced me to save more than the norm.

My saving rate was higher than usual and that gave me a huge head start, but I wouldn’t have been able to retire early at that rate. It was only after I made “retire by 40” my mission in life that I was able to overcome the mental barrier and crank up the engine. Previously, I thought I would find a new job or switch company. I was depending on the income from my career to last until I’m 65. That was the crutch that prevented me from doing something revolutionary.

Once I made it my mission to retire by 40, I was able to devote all my energy to make it happen. Instead of using all my creative energy at my day job, I channel it elsewhere.

  • I started blogging – Retire By 40.
  • I tracked our cash flow to see how we were doing month to month.
  • I invested in rental properties and became a landlord.
  • I converted our taxable account to a dividend portfolio to generate income.
  • We increased our saving rate even more. Eventually, we were able to pay the bills without depending on the paychecks from my old engineering job.
  • I looked for ways to generate income outside of my day job.
  • I read a lot of personal finance blogs to get ideas and connect with like minded people.

Now that I looked back, a bunch of stuff happened after I set the goal to retire by 40. The previous 14 years were much more stable. I worked, came home, and tried to decompress and have fun. That’s the way normal people operate. They save 10% and then use the rest of the income to make life as enjoyable as possible. If you want to retire early, you need to break out of that box.

Early Retirement is Reachable

I believe that early retirement is a reachable goal for most of us. You don’t have to be the CFO of Google to retire early. If you make decent income and set your mind to it, you can do it. Look at Jason at Dividend Mantra. He was a service advisor at a car dealership and earned a middleclass salary. The easy thing to do was to carry on like the other 160 million middleclass Americans, but he set a goal to retire in 12 years instead. In just 3 years, he built his dividend portfolio from $5,000 to $100,000. In a few more years, his dividend income will pay for all his expenses and he will be financial independent.

So that’s my best early retirement advice. You need to take a good look at yourself and make Financial Independence your moon mission. Going to the moon isn’t easy. It will take a lot of effort and there will be many setbacks, but you will succeed if you persevere and be creative about it.

What do you think about this advice? It will take a bit more time and effort to convince the other person, but it could make a bigger impact than save as much as you can .


Actually, I think it’s better to build a life that you don’t have to retire from than retiring completely.

Image credit: Cat poster from The Lego Movie

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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41 thoughts on “My Best Early Retirement Advice”

  1. You are spot on, “If you want to retire early, you need to break out of that box”. Love everything you said. Now I’m hooked to your blog.

    We (my husband and I) didn’t started with saving and investing until a few years ago. Even though, we’ve been married for 20 years. My husband wasn’t able to get a job until in his 40’s. And I didn’t have a real job until in my mid 30’s (I’m 41). We were struggling financially because of lack of stable income. We had been a single income family way too long.

    I want to retire early. But one thing for sure is I want to be financially independent. Last year, I had enough so I started my blog. This way I can hold myself/ourselves accountable. Hopefully, it can help speed up the process. I’m determined to be financially independent by the time we both turn 50. Thanks for sharing great posts. You’re truly inspiring.

  2. My goal was to retire at the age of 50.However I have some satisfactory feeling that I have earned and saved enough to spend my life without being a trouble to my children.Yes,saving and investing is the straight answer for every personal finance question but the value of that answer depends on whether you actually do it or not.If you proceed with saving and investing you will win easily,if not you will have to seek advice.

  3. I LOVE the idea behind “creating a life that you don’t have to retire from”. I was discussing this with a friend of mine the other day, where I revealed that I could do landscaping and gardening until I died. He replied, “Why don’t you?” Even though I have a degree in finance, it might be a good idea to start thinking about a life change!

  4. Joe – awesome, awesome post. Totally inspired. I love all of the things you said, and sadly most people don’t think the way you do. I remember getting my first job, I worked with a lot of kids my age at the time. While they were blowing their money on eating out every day, buying new cars, and going out every weekend to bars, I was brown-bagging it, putting what I could afford into my 401(k) (not maxing it out though, damn…), and having chill weekends with my girlfriend (now my wife, by the way).

    I truly believe that in order to retire early, you have to live a lifestyle that would make most other people laugh at you or question your sanity. Living below your means is one thing that I’d add to this list, and I say living WELL below your means. It’s not sexy, but it’ll make you wealthy in the long run. In addition, you’ll program yourself to live on less. Our culture promotes getting everything we want, and getting it fast. If that’s the “common” mindset – you gotta do the opposite.

    Awesome post… Tweeting it now.

  5. Excellent advice! After graduating, I began my first full time job and was just happy that I had a job. However, after several months of paying back my $30k in student loans, I realized that I wasn’t going to make a significant dent unless I pay much more than the minimum. At that point, I made it my mission to pay back my loans within 1 year. I was laid off from my job and was unemployed for 6 months, but I was still determined to pay it off. Now, one year and six months after I made the commitment to myself, I am finally debt free. Although, I took a little longer than expected, I still feel extremely accomplished.

  6. I love this blog because it keeps me inspired. It’s helped get me through 6 years and raising 2 babies in one unit of a multi-unit we own. People think we’re crazy but I’d rather tighten my belt now than later when I might have less energy. We are able to save a lot by living this way even though it’s a pain sometimes. Being a landlord isn’t for the faint of heart but it’s a great way to generate income.

    • Thanks for the comment. I need the encouragement too.
      Good luck with your journey. Being a landlord is a pain sometime. 🙂

  7. Did you say your retirement is in bond funds? Are bond funds more risky now that they say interest rates are going up? I’m getting close to retirement, so I want to find safer investments. I’m 51 and want to RB55.

    • We have about 80/20 stock/bond split in our investment. You might want to talk to a financial advisor. Everyone has their own definition of safer. I’m sticking with our stock/bond ratio for at least another decade because our investing horizon is still a long way out.

  8. I think this is great advice, and I agree that even comprehending that retiring by 40 is possible is the game changer. The rest is simple mathematics and discipline assuming a large enough income. As a result, I think fi blogs do a huge service to those young people who pay attention, because they show what is possible if nothing else.

    I’m on track to rb40 or 41 myself, but I am confused about whether I will even want to retire when the time comes. I worry about leaving behind a career, and if I will be under stimulated In retirement. That is one reason I have started my blog -to start building a creative outlet outside of work. Do you have any advice for this issue?

    • It’s great that you’re on track to achieve FI so quickly. It really depends on your personality. If you like working, then it would be tough to quit completely. You can work part time or find something that you like to do. You should explore your passion and see if you can fine anything you really care about. Good luck!

  9. My fiance and I will be married in July and this is a discussion that we need to have. We both just turned 30 and have done quite well with money. We have no debt, live in a paid-for house, and have roughly $100k in the bank. Ideally we will have children in the next year and she will “retire” from her job to become a professional homemaker. My path is a bit more hazy at the moment, but real estate and side-business income is the plan for now. To be honest, healthcare costs scare the crap out of me and might delay my retirement for quite some time.

  10. I think you’re right on Joe. First we need to have a vision. Then, with the vision firmly in mind, what we do day-to-day and month-to-month will begin to be influenced by that vision. We begin thinking about ways to make the vision happen instead of just ‘coasting’ through life.

  11. Good advice. Good goal setting is specific both in timing and outcome. Saying “I want to lose weight” is a terrible goal. Saying, “I want to run the local 5k in July in under 30 minutes” or “I want to lose 15 pounds by June 1” is a goal you can track and hold yourself accountable to.

  12. Simple advice is usually easy to understand, hard to actually practice.

    The thing I love about our blog community is that everybody who has started a blog has basically publicly committed themselves to taking action and actually doing the things that they advise themselves.

    Its easy to read about being like jason. It’s an entirely different matter to actually do it!

  13. As to Ed’s complaint about not earning enough at work, I’d say you don’t need to “work” harder, you need to make your own work. Buy at yard sales and sell on eBay. Manufacture a craft item for etsy. Start a dog-walking service. Write a great blog that supports advertising. Set up a food truck. Heck, set up a lemonade stand! Just DO something. You don’t get rich at a job; what matters is how you spend the time that you are NOT at the job.

    As to Ed’s complaint about not earning enough, fuhgettaboutit! Ed says that he is making $30k. If there’s even one family out there holding it together on less money than him (and I’m confident there is), what does that tell you? What it tells me is that our appetites will expand to match what we have available. It takes effort, but you CAN save, if you prioritize saving.

    Once you have the discipline to save, it still takes time to see meaningful results. That’s how compound interest works. You earn interest on interest, once you save money, invest it, and leave it invested. I would recommend two books to new savers: First, The Richest Man in Babylon, by George Clason. Second, Enjoy Your Money! How to Make It, Save It, Invest It and Give It, by J. Steve Miller.

    Keep up the good work!

  14. Maybe “as much as you can” isn’t specific enough, but I would say in general, the higher your savings rate, the earlier you can retire. This would have the usual caveats of steady income and expenses and investing most of your savings in common stocks. I don’t think having additional sources of income (I mean outside of your investment portfolio) is necessary if your savings rate is high enough.

    Frankly I don’t think this is possible for most people the way things are now, mainly because doing what it takes depends on being able to behave quite differently than those around us. This kind of “go your own way” streak is rare in my opinion even if we believe we are above it all. Most of us accept the false choice of financial independence or a decent social life (and never both). If you can get past the peer pressure whose seed is planted by those who profit from selling you things you don’t need, then your chances of success are good. And if you can cut your spending down to what many may regard as miser levels without feeling deprived, then I think you’ll get there quickly.

  15. Great set of ideas to aim for.

    And even if you don’t have a very early retirement in mind, it seems like having financial independence at some point in your life would take away all the money stress in your life. I know it did for us once we had a couple years worth of living expenses in our savings and investment accounts.

  16. Spot on advice, increasing your income streams and reduce spending will go a long way. When you have high savings rate and investing wisely, the snowball just gets bigger and bigger. The power of compound interest take affect pretty quickly.

    I think the main problem with most people is that they keep chasing the idea that they need huge income in order to save for retirement. They keep chasing this idea but as soon as they get a raise their lifestyle inflates as well, so this is a moving target chase. They’ll never get anywhere.

  17. “What do you think about this advice?”

    Great advice here and in general, but being a landlord isn’t for everyone. I tried it for eight years and could never make it pay. I know there are ways, but the hassle, time required, costs, turnover, etc. just made it unsustainable for me. My grandmother had several properties and created a nice income stream that lasted for thirty years. I prefer to instead keep cost of living low and save (invest) a huge pile of money.

    • You’re right about rental property. It’s tough in our area because the property price is so high. It also depends on the location and your tenants.

  18. Joe,

    Thanks so much for the inclusion. Much appreciated!

    I definitely agree with you. I take it even further and don’t just set goals – I actually envision myself as already financially independent. In my mind, there’s already this 40-year-old version of me out there in the future that’s financially independent. And so I imagine what this version of me looks like, what he’s doing, and what life is like. When I see the possibilities, it makes passing up useless and expensive trinkets pretty easy.

    But you don’t need some crazy income to get there. I worked at a car dealership. Not exactly the kind of job dreams (or huge paychecks) are made of. And I don’t even have a degree (it’s not necessary for the job). You really just need to have the desire and the drive. You have to be willing to to what it takes. Once you want it – you really have to want it – nothing can stand in your way.

    Best regards!

    • I struggled a bit with this article. Setting the goal doesn’t the impact I wanted. I need to find a better way to say it. Something with more commitment.
      Envisioning is a good idea too.
      Thanks for your input.

  19. My first response is always to increase their 401k or 403b contributions. I also tell them when they get a raise to push it all towards savings.

    Dividend Mantra is a good example. His income was never much higher than the US median wage (and probably only in the last few years of his career), but his savings rate was light years ahed of the 5% average!

  20. For me and my family, the best investment we made was our first home. We made the decision to buy multi-family instead of a single family home. We thought we would buy a duplex, live in one half and rent out the other, hoping to cover most of the expenses with rental income. We live in a very small town and there were only a couple of duplexes for sale, and they were in very bad condition. I expanded my search a little and found a 4 plex of 2 bedroom, 1 bath units for only $225k. We bought it and moved into the only unit with a fireplace (using it cut down on our heating bill significantly). The rent form the other 3 units covered all our expenses – mortgage, property taxes, insurance, water/sewer/garbage. Since we no longer had to pay rent or a mortgage payment we were able to save a lot more money, and three years later we had enough for a down payment on another 4 plex. We also bought a single family home so we could be comfortable and have more space. The rents from our 4 plexes cover all of their expenses, plus our mortgage/taxes/insurance and give us about $500/month extra. We did all of this on our law enforcement salaries, my husband makes about $36,000 a year. While I was working I made about $32,000 a year, but I quit after we moved into the first 4 plex. Now that my kids are a few years older I am going back to work at the same job, and we plan on saving my entire income so we can buy another property, with just one more 4 plex we will be set for retirement.

  21. I personally have started implementing some of these types of things and hope to get started with investing here soon. I definitely recommend starting the journey of tracking your earnings and start adjusting your spending to allow for investments to be made.

  22. Easily one of your best, most thought provoking posts. Your line, “If you want to retire early, you need to break out of that box.”, is right on the money and could have been the title. And all the links you included are great too.
    I would also add, read up on investing everyday, or at least week. Completely understand each investment you enter. Get comfortable with it. Know where that next chunk of savings is going to be invested or moved to. Fidelity Investments calls these savings goals “buckets”.
    And when that retirement goal arrives, cut back, cut way back w/o being cheap. Enjoy the time you have to take care of yourself and your life.

  23. Keep in mind Jason made much more money than the average person and got into investing at the right time in the market. Most folks don’t make middle class money let alone the insane wages made by most of the bloggers in the early retirement sphere who seem to be asian/white engineers and or software developers.

    About 60% of the American workforce makes less than 30k a year gross. When you account for the entire population, this includes working and non working folks, about half either live in poverty or just above it in what is known as the low income/working poor category.

    The savings rates, goals, and philosophy espoused by you and others is laudable, but utterly impractical for most. Why? Because we can’t all work in nice cushy gentrificating engineering and software development jobs. 90% of all new jobs made poat 2008 are part time slave wage jobs.

    What I would love to know is, how do regular poor working people like me even make that kinda cash to then save. I already live bare bones out of necessity, what I lack, as most do, is income to begin with. I am already 30 and am no better off than I was at 18. I would love to have the “burden” of a nice 9-5, are you kidding me?

    • I agree with this article, especially create a life you don’t have to retire from. Everyone’s plan and timeline will be different to get there just like everyone’s vision of the early retirement life they save for and want to create is different. For those who are lower income or unable to find 1 good full time job it will take more time. Priority one is making enough money to pay for a smart frugal and balanced lifestyle and have enough income left over to get rid of all debt and start saving as early as possible. That may mean moving where there are more opportunities and/or gaining additional skills (school, volunteer, intern, part time, etc). My first retirement was as an engineer at age 51 but it took me until age 37 to become an engineer. I set my early retirement plan in motion at age 40. Before making engineer I worked 2 jobs so we could live the best life we could and save what we could. Having a plan and vision of what you realistically want to accomplish is key to gaining anything. Having patience to see the plan through to its end is also a necessary skill.

    • 60% of the workforce make less thank 30k/year? How is that possible when 50% of Americans are middle class? 30k/year is lower income. I will need to do a little more research. I think Jason made around $40k/year when he was working.
      In your case, you need to figure out how to make more money. If you can’t make enough money at your regular job, then you should try starting some kind of business. Forget early retirement for now while you are struggling to pay the bills. Focus to making more money first.
      Thanks for your thought provoking comment.

  24. Thanks Joe!

    This year we’re on track to save $95K in tax advantaged accounts! out of 160K salary.
    For the younger folks I can’t say enough about cutting the reoccurring expenses – not having a car payment/ cutting cable /shopping for best deal on insurance/ republic wireless cell phones. Those little things add up to ~ $300-500/ month that can go to savings. Also automating the savings really helps because by using payroll deductions and automated withdrawals from our savings account- keeps our savings account small. We would be more likely to spend if we had higher balance in our savings account.

    Keep up the great blog posts!

    • That’s an amazing saving rate. Is your goal to reach financial independence soon or just retiring early?

      • I am 35 and for right now the jury is still out on what I want to do longer term. My dream is to keep our saving rate up another 5-10 years and then join you as SAHD while my wife works another 5-10 years after that. We have built up a good nest egg already so I am already nearing FI now- our assets are 20X above our current spending rate. I think when we get closer to 40X I will be much more willing to try SAHD life. Since I do plan on having blog income like you I feel better having a higher savings nest egg to avoid having to return to work after cutting the corporate cord.

        On an engineering salary, I have found that moving to a low cost of living area (TX) really helped to boost the savings rate. We went from saving 20-30K/year in CA to 70K-80K our first years in TX- I think it helped us by moving from a high COL because we kept the saving habits after we moved without the succumbing to lifestyle creep- I think if we had started in a low cost of living area our spending habits would not be as good.

        We are keeping the costs low now by buying an affordable house <$250K- driving older cars and paying cash for them/ automating our savings and being diligent about limiting the restaurants to < 5X/month- Its the little things that add up that really make a difference.
        Thanks for all the great blog posts Joe and I look foreword to reading more soon!

  25. I also had that same experience of really cranking up our frugality after we set our goal of retiring by age 33. Once we had a specific end date in sight, it became a lot easier and more natural for us to ramp our savings up to over 70%. I think the motivating power of specific dates and dollar goals is integral to the process of retiring early–it really doesn’t take tricks or gimmicks. It’s all about earning and then investing most of that money and not spending it!

    • It’s amazing how a serious goal can boost your productivity. I was saving a lot before I set my goal, but it was just for the sake of saving. Once I had the goal to quit my job by 40, it became much more real. Good luck on your journey.

  26. Joe it was because of you and your blog that I decided to retire by 40. I am 28 years old today. Working the past 3 years as a Pharmacist. I have my bachelors and doctorate and paid off my $85,000 student loans in less than 2 years. Now my net worth with my fiance has grown past 300k and should hit 400k by the end of the year. I even started my own blog to document my growth. Thank you for motivating me! I got 12 years to go, goal to hit 2 million net worth by 40.

    • Wow, you are doing really well. I’m sure you’ll hit 2 million way before 40. How do you like being a pharmacist? The pay is really good, but you’re busy all the time, right? Good luck on your journey.

      • The pay is pretty good, but I work 2 jobs to increase my savings rate. Overall being a pharmacist is okay but definitely not my passion. This is one of the reasons I want to retire by 40 and have more free time to do other things.

        I created a Blog and YouTube channel to try and build more online income (as you have suggested in your other blog posts!) but it is very difficult to find time and energy into these income streams.

    • Why retire if you have your masters and doctorate? At 40 you will be hitting your stride. Quitting would be silly after all that investment in your education and career


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