Ask HN: Decade-long plan to FIRE starting just under age 40?

27 points by ccajas 5 years ago | 35 comments

I'm trying to get some idea at how old is usually the target for financial independence and how much does it actually depend on your current age if you haven't started your investments yet.

Currently I'm 38yo, out of work and my net worth is just under $1k. So I know the first step is simply to get employed for stable income- I don't have the mindset to run a business. I also don't know many people in high or low places- I like to keep to myself whatever chance I get.

But regardless, is a 10 year plan from zero to FIRE feasible? Can people still FIRE under 50 if they started their financial plan just before 40?

firedating 5 years ago |

FIRE is a lifestyle and in my view the main goal of it is effectivity. Retiring for the sake of retiring does not make one automatically happy. Instead you should understand what makes you happier and optimize for it. As a result, FIRE does not mean "don't spend money", instead it is "don't spend money on stuff you don't care about". Thus, I disagree with commenters framing FIRE as "living in poverty to live in poverty without a job". One can be FIRE (or on track to) and still live a great life spending enough money to be happy.

That's why I think your question is a bit backward. Instead of wanting to reach FIRE in 10 years, try to understand why you want it. FIRE is just a tool giving you ~40 additional hours per week. Why do you want this time? If one is unhappy with their life before FIRE, they will just have 40 more hours to be unhappy.

BartekG 5 years ago |

Start by considering why you want to retire - is there something you want to do that you can't do while working? If not then you condemn yourself to 10 years of hard work and living in poverty in order to be bored and live in poverty for the next 50 years. A good job can be a source of joy, achievements, self worth, contacts with people and money. I'm a programmer with a relatively low paying but stress-free job and I plan not to retire for as long as my health permits.

tomatocracy 5 years ago | |

I'd add to this as well - if it is something you can't do while working, is it also something you can't do while working say 6 or 9 months out of 12 or even 2 years out of 3? There are probably a lot more options than you think to structure a career in this way.

tudelo 5 years ago | | |

Do you think most people could really do a 2 year on - 1 year off thing? To me that sounds great -- I can definitely save a year of expenses every 2 years... but I wonder what job prospects would be, or other adverse affects.

biznerd 5 years ago |

If you want to retire in 10 years, you'll need to save 65% of your income.

https://www.mrmoneymustache.com/2012/01/13/the-shockingly-si...

It's going to take a huge change in habits.

If you're determined, I would say don't listen to the haters. I've been a member of FIRE since college, downshifted and it's amazing. I never really enjoyed working (actually, hated it) so I get to spend my time on this earth doing what I want to do (read classic books right now.)

GoldenMonkey 5 years ago |

Okay, you need to get yourself over to the reddit FIRE group.

Here’s some resources:

Reddit FIRE: https://www.reddit.com/r/financialindependence/

Practical FIRE blog: https://www.mrmoneymustache.com/blog/

Poor Richard’s Retirement: https://www.amazon.com/gp/aw/d/B0725GG5LK/ref=tmm_kin_title_...

What you need to save: https://fourpillarfreedom.com/the-financial-independence-gri...

killtimeatwork 5 years ago |

Read everything on http://earlyretirementextreme.com. It's basically a recipe on how to retire in 5 years on an sub $100k salary. You may not be open to some of the ideas (the "extreme" in the name suggests that it's not for everyone) but nevertheless it will expand your horizons.

keiferski 5 years ago |

FIRE is really only a good idea if you're twenty-something, don't mind being ultrafrugal, and pull $100K+ plus benefits from an industry with low entry requirements (i.e. programming and not law.)

In virtually all other situations, it's a fool's errand. Instead, figure out why you want to retire early.

Imagine you're retiring tomorrow. What are you going to do with your time now? For most people, the answer is either unclear or it's something that you can do at 50-90% while doing a regular job.

Gunax 5 years ago |

The rule of thumb is that you can safely withdraw about 3% of you saving annually (same say 4%, some say 2.5%, depends on how risky you want to be).

So estimate what you can save over 10 years and determine if you're willing (or capable) of living on 3% of that.

stouset 5 years ago | |

This is pretty much it. Let’s say at 50 you’re comfortable living off of 4% of your assets, which should have a reasonably high chance of providing income throughout your retirement without depleting your principal. This 4% is assuming 7% market returns before 3% inflation.

How much are you willing to live off as income? If you need $40,000/yr (before taxes) you’ll require $1m in savings. $60,000 requires $1.5m. Tax-advantaged savings like a Roth IRA improve things here a bit but we can ignore it for a general ballpark idea.

Let’s say you’re frugal and only need $40,000. You’ll have to save up $1,000,000 in invested assets over a decade. Given expected 4% inflation-adjusted returns, this works out to around $85,000 in savings each year (adjusted upward 3% each year for inflation).

In order to afford those savings, after tax and $40,000 in annual expenses, I’d guesstimate you’ll likely need somewhere in the ballpark of $150,000/yr of income. Again, adjusted upward 3% every year for inflation.

By the same math, if you want to live off $80,000 a year, you’ll probably need to earn $350,000 or more annually over that decade. The number more than doubles because of the increased taxes at those kinds of incomes.

blackrock 5 years ago | | |

This is easy. Just find a job that pays you $350,000 a year.

koolba 5 years ago |

Only if you learn to permanently live as a miser. You might have acquired the skill by necessity, but it takes a strong will to keep it up once you have income flowing.

The basic math of it would be to earn X, and live off of X/5 (both after taxes). After 10 years you’ll have 40+ years of income accumulated. There’s some additional complexities with health care, but the core plan is to earn, not spend a dime, and get used to it.

napolux 5 years ago | |

This comment should be on top. Most of the FIRE people I know have most of their basic necessities paid by the company they work for (house, car, phone, etc...)

That's the easy way to do it.

ApolloRising 5 years ago | | |

What type of company pays for the house other than the military?

troydavis 5 years ago |

If you’d consider living somewhere else, geographic arbitrage completely changes the math: https://www.youtube.com/watch?v=-CIOG69D4Gk

Work remotely for a western tech salary and save 90% of it. That person’s $500/month example is pretty extreme, but one can live well in most of Mexico, a lot of SE Asia, and a lot of South America for under $1000/month.

If you’re planning to move for a long period or potentially forever, be aware that Spanish is much easier to learn than, say, Thai, and some countries (Mexico!) are much more flexible about visa extensions and permanent residency than others.

(Doing this with kids is much, much harder because most “international schools” charge very high tuition. The math probably doesn’t work out, especially compared to moving to a low cost of living town in your existing first-world country.)

runawaybottle 5 years ago |

I think you will succeed in getting close to being financial secure simply because you have no choice. Thirty eight is late to the party, but the pressure is on.

Ten year plan sounds aggressive (again, what choice do you have), and will probably require aggressive investing.

One thing I think you can do is eliminate the notion of age. Having a home asset should be a good enough goal. If you can drop a big down payment on a home or outright buy a condo after 10 years of saving, then you can reasonably expect to not have large mortgage/rent to worry about later in life. If that stops being a worry, the need for a job starts to become less of a worry. By that time, you should hit retirement and ride the social security checks until the end.

The goal should be to remove the dependency on the economy for your livelihood.

superbcarrot 5 years ago |

I wouldn't do it if I were you. I would rather live the rest of my life comfortably doing a job that I enjoy than go through relative deprivation and poverty for a while just so I can live the rest of my life in the same state of deprivation and poverty but without a job.

pdevr 5 years ago |

Your constraints:

1) You cannot run a business.

2) You have practically no net worth.

3) You do not have a network of good contacts.

4) You are 38.

5) You are jobless now.

Considering all your constraints, here is a path to consider:

1) Have an open mindset. This is the MOST important tip. Do not let your past determine your future.

2) Be consistent. Have an accountability partner to make sure you are working towards your goal every single day.

2) Master one or two specialized skills which are in-demand the most, pay the most, and are likely to be there for the next ten years. Do not learn them, master them.

3) Build projects in those areas.

4) Whenever you have questions, ask. Ask the top people working in those areas. Make a note of the helpful ones.

5) Interact with, and help people who are working in those areas, whenever you get a chance. Attend every webinar, conference and meetup. Nowadays, it is easier because you are not constrained by geography.

6) Once you have achieved near-mastery, start applying for jobs in those areas. At the same time, keep building projects. Do not slack off on either one.

7) Once you get a job, make sure to save as much as you can. Do not end up with a low net worth ever again. Learn more and more at the same time.

8) Get better jobs. Your only criteria for switching jobs should be more salary.

Not stock options. Do not gamble, your life is passing you by.

Not titles, unless you have a clear plan to leverage your title into a better paying job.

Not "job safety" - it is never safe. You being in an in-demand area is your job safety.

9) Put your money in low risk investments. Google "best low-risk investments" - there are many sites with lists. Invest in near-zero risk investments and park your money there. Do not touch it.

If you really, really decide to invest in stock market:

Look at the general trend of stock market. Invest only when it is going up. Never bet against market. If you invest, buy only stocks or indices you plan to hold for ten years. Never sell. Make sure to have stop losses added to do that for you. When those stop losses get executed frequently, get out of the market. Do not try to do value plays. You may not live enough to see the market reversal.

Stay away from cryptocurrencies, GME, BB, .... They are not for you. If you want to join the fun, buy ONE stock or one cheap cryptocurrency. Just one. That will give you the same thrill, without the associated risk.

10) Retire at the age of 48 or 49 and make a "Thank you HN" post here.

savorypiano 5 years ago |

I personally don't expect to retire by living off my investments, because asset prices have blown up so much due to low interest rates. Basically it's a possibility that future returns have been pulled forward, and markets can go nowhere for long periods while having low dividends

That being said, in the near term some are bullish that this uptrend process isn't done yet. It'll just be too late for me to amass enough to benefit from that and retire.

luddite99 5 years ago |

The others have given you some good advice on techniques (Live Cheaply + Earn Well + Boring Stock Index Investments) but I'll throw some maths at you that you might find helpful.

There's a handy little formula that you can play around with in order to work out a suitable target and savings timeline. Although it ignores the stochastic nature of stock markets by assuming a constant return, it's a good ballpark figure, especially if you use conservative estimates for things.

X = The amount you will need to save and invest each year until retirement

T = Your target amount (Between 25 to 30 times your desired living expenses in retirement - See the Trinity Study and the 4% rule)

R = The expected rate of return after inflation

N = Number of years until you want to retire

X = T * R / ((1 + R)^N - 1)

Assuming a relatively conservative rate of return like 0.04, and a modest but liveable target of $500,000 in 10 years:

X = 500,000 * 0.04 / (1.04^10 - 1)) = $41,645

If you can keep your living expenses low, that could potentially be done on an $80,000 or $90,000 salary. Notice that your current age does not factor in this formula, only the number of years until you'd like to retire. Now obviously, if you'd started at say 28, you could retire at your current age with the same savings amount, or take the full 20 years but only have to save $16,791 each year, but overall, you'll be fine getting started right now.

You can also flip the formula around to work out how long it would take on a particular savings target:

N = log(base 1 + R) ((T * R) / X + 1)

Your calculator might only have ln, so you can just divide by ln(1 + R) in order to get the same thing:

N = ln((T * R) / X + 1) / ln(1 + R)

Like before:

N = ln((500,000 * 0.04) / 41,645 + 1) / ln(1.04) = 10 years

Play around with those numbers and you should be able to find a plan that feels attainable, even on a relatively modest income compared to some thrown around here. In all likelihood, you'll end up exceeding your savings target as you pick up a few salary increases along the way. And if you can save especially hard in the first couple of years, those early investments will put you ahead of schedule which gives you flexibility later on.

One more thing... On decade or shorter timescales, the rate of return doesn't really matter that much. That said, you'll need to invest your savings by the time you retire, so may as well get comfortable with it now - just keep it nice and boring.

Fingers crossed I've written those formulas correctly and that they are clear enough. Hope that it all helps!

blackrock 5 years ago |

Don’t get a girlfriend. Don’t get a wife. Don’t have a child.

Minimize social contact with friends and relatives. That’ll end up costing you money.

Save everything.

Try to aim for $30,000 in savings a year. In 10 years, you will have $300,000. You can do this.

Life will suck. You may feel like an empty shell, going through life, as you get older. And you may question what it is you’re doing, and why. But keep your eye on the prize.

Open a stock trading account. Put your money into SPY. Keep buying it. This is the S&P 500 market. Your goal is to get that 2-3% dividend. Reinvest that back into more shares of SPY.

After a while, it will start to compound.

In 5 years, learn how to write cash secured puts. This will allow you to make a little more money than just investing in SPY. There are more risks involved here, so keep your strategy conservative. Or if this is too complicated, then skip it, and just stick to investing in SPY.

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