30 Years Ago They Retired at 35: An Update
nextavenue.org
nextavenue.org
The author retired from his CPA job at KPMG to live the life of world travel and financial freedom. When he retired in 1984 he was making in excess of $125,000 a year. The concept works best where you have a high priced personal residence in a hot real estate market. The premise is that you sell your high priced house and your status car. Then you take the proceeds and invest it in a SAFE, CONSERVATIVE investment living off the interest and never touch the principle. You move to a lower priced area, either in the US or outside.
(from http://www.amazon.com/Cashing-American-Dream-Paul-Terhorst/d...)
Although that leaves it unclear how you got the high-priced house in the first place, much less the status car (why buy one if you're going to sell it anyway?). And the "safe, conservative" investment was cash deposits at a bank paying 8%/year, but good luck finding that these days...
“We had to change our investment strategy. Instead of living off our interest, we switched to buying stocks,” says Paul. “We cash in from time to time just before our next trip.”"
Get lucky and sell at the peak of the housing bubble. Let's say ten year ago you bought a house with a mortgage in Vancouver or Toronto for 300k, you can sell it now for 1mil if not more.
1984, man. Prices were half or a third then what they are now. That probably means they originally bought the house in the 70s, when things were yet cheaper.
I think back to my grandparents, that paid around 20k for a house around 1960. If I were to buy an identical house today, I'd be looking at 200k minimum, probably more like 250k, and it would be on a one acre lot, not 20.
The 10x headline multiple seems shocking, but when you unpack it, it's not that shocking.
A single inflation rate paints an inaccurate picture when the difference between income and living expenses increases are that dissimilar.
According to [1], that works out to ~$285,000/year in 2015 dollars.
Correct. But inflation was higher too.
The real trick is living way below your means. The main cost factors for most people are shelter, transportation and food. If you manage to lower these three recurring expenses considerably, you can retire within 5-10 years (even if you don`t make a six figure income).
Early retirement means that you are financially independent, which is defined as the state of having sufficient personal wealth to live, without having to work actively for basic necessities.
Retires at 35, explores the world for 30 years
Claims Social Security at 62.
http://weknowmemes.com/2015/05/25-ways-the-baby-boomers-had-...
"Druckemiller’s latest cause is to foment generational warfare. He’s going to college campuses and telling students that things suck (which they know full well) and they need to go after Boomers who are gonna get too much in entitlements if things don’t change. Now from what I can infer, the presentation is sophisticated, since Druckenmiller throws other big Federal spending items into the mix, like defense. But the fact that he depicts tax rates as a problem is a major tell."
Guess who planted those memes?
In Canada, e.g., the Canada Pension Plan (our version of social security) pays on a schedule based on how many years you worked. You must work for 39 years to get the maximum benefit.
If you work fewer than 39 years, no consideration is afforded to whether you worked those years at the start of your life or the end of your life. i.e., the time value of money is completely ignored.
Thus, I think the subjects of this article are likely being shortchanged by SS in some ways: they contributed, say, $200K to the coffers of SS. SS then had 30 years to grow that money, but will pay out ignoring the 30 years of growth.
It's not linear, but there's a hefty penalty to do it this way.
However, many statements assume that he's making no income and paying no social security taxes in the interim. He wrote a book, presumably received royalties, and has done other "side jobs".
He may very well have continued paying social security taxes in his "retirement."
>Plus our benefits are grandfathered in if Congress screws around with Social Security.
>"But at least now, when we go to the United States, we have coverage and if we get sick, we won’t be devastated financially.”
Not sure how I feel about people taking advantage of safety net, while doing whatever they can to avoid contributing.
They presumably worked the required number of quarters for their SS benefits, and played by the rules at the time.
This article from the Washington Post can help: http://www.washingtonpost.com/blogs/fact-checker/wp/2014/01/...
Your level of benefit is based on the average of how much you made (adjusted for inflation) during your best 35 years.
http://www.accuracy.org/release/social-security-has-a-large-...
When the boomers were in their prime earning years, supporting a smaller, aged cohort.
What article did you read this in?
>giving diminishing returns as time passes by
You mean that we're choosing to pay less to SS beneficiaries? SS is not an investment vehicle.
>It's unsustainable
It's entirely sustainable. What article are you referring to here?
Problem is that it pretty much depends on getting in the door with the rentier economy, and not everyone can be there (unless you fancy trying to run the world on an eternal Ponzi scheme)...
Unfortunately, you can never really settle down in Thailand, unless you marry a Thai person. Foreigners aren't allowed to own land, although you can buy an apartment. But even so, it must get tiring to go on visa runs every 90 days for over 30 years.
Also, it's not that cheap to live in Thailand. You can live cheap if you like. But if you want a car, TV, bottle of wine, a decent steak, etc. you pay far more in Thailand than in the U.S.
I've been living in the Khao Yai area for more than 10 years.
Added: Something is wrong with the story of that couple in the article re: their visa. Because the only one year visas are retirement, spouse and business visas. They could have retirements visas at their age but no visa run is required - you never have the leave the country at all, just renew it once a year. If they are in the country on tourist visas, well, there is no such thing as a one year tourist visa. There is a 60 day multi-entry tourist visa, valid for one year, extendable by 30 days one time after which you have to leave the country and re-enter getting another 60 days, rinse and repeat. (Added: maybe this is what they are referring to). And you used to be able to get 30 days visa exempt on arrival and do visa runs every 30 days indefinitely, but they put a stop to that recently.
That's an interesting perspective. My own perspective might be slightly skewed, since we moved from San Francisco, where we were splitting $4,400 per month for a 2 bedroom apartment.
I see what you mean about luxury items costing more, so it definitely depends on your lifestyle. We're renting a house for $200 per month, and we've found great meals for under a dollar at local restaurants. Going out to eat at western restaurants rarely costs more than $5 per person.
About the visa details, I met someone in Chiang Mai who was here on a retirement visa. He said he had to leave the country every 90 days, but I think he mentioned that they had recently changed the rules.
But a basic car is hardly a luxury item yet costs 2X to 3X the same car in the U.S. does due to high import tariffs. I eat at the local places for $2 (used to be $1) but when you want a pizza you pay $10 for a small one that is no bigger than one of those giant slices of Costco pizza in the U.S. Try a steak of local beef and break a tooth it's so tough, so if you want a decent steak you pay $30 at a restaurant for import. I suppose that is a bit of a luxury. The list goes on. Some things are cheaper, others more expensive. It's just not uniformly cheaper as many people think.
Parents often push kids to be competitive and achieve, when actually there are plenty of other ways to a fulfilling life!
On topic - If you can save up some 25x your living income, it's absolutely possible to retire from a normal job early and live off the interest of your investments. However, it's not a trivial amount of money to manage (it takes a savings of around 1 million to provide an "average" American household income), and your job can quickly become managing that money to ensure you get your interest on a regular basis.