My life voyage to become Leisure Freak Tommy could easily be called the Common Mans Journey to Early Retirement. Although I have provided my post-retirement details and what has been a very positive experience living a passion-driven retire early and often lifestyle I have felt uncomfortable discussing details of how I got to my first early retirement. However I have had a change of heart.
One of the knocks that early retirement and financial independence sites/blogs get is that the only advice for the common person to reach early retirement is to adopt extreme frugality and save 50% to 75% of your income. Doing so is difficult for some to contemplate if you aren’t making a six figure income or close to one.
My thought now is that detailing my journey will show that someone with less than a six figure income, a home buyer, and a parent can set a realistic plan and still find their way to early retirement. So I pulled my Social Security Statement to dump the official wage numbers to help with this article (Numbers will be rounded up/down).
What is early retirement anyway?
I call early retirement as being before the minimum age of 62 when you can apply for early Social Security benefits here in the U.S.
As to what retirement is itself I can’t help but take another shot at the retirement traditionalists and say that the absence of needing to work defines retirement, not never working again.
I only bring any of these defining details up because many early retirement sites/blogs speak of reaching early retirement in their 30s and 40s. That can be a tall task for some on the lower end of the salary curve. It took me until age 51 for my first retirement and I still consider that a very early retirement. So does anyone who is still in their 50s wondering how they will ever retire at any age.
My Life as an independent adult begins
I grew up low-income so maybe that was an advantage. You know, having lower financial expectations and having the skill to have a fun and an enjoyable life without much money.
I graduated from high school in 1976, married my high school sweetheart in 1977, and we bought our first home (a small starter home) which was new construction in 1978 using a FHA 30 year loan. We did all the interior paint work on the home for down payment assistance. Presto-Bingo, I was a home owner at the age of 19 because my wife insisted we get out of the apartment life.
I loved the apartment low rent to income percentage but it’s a good thing she was insistent. At this time my bride was still attending Community College and working part-time which covered her school costs.
My salary working for a Bank’s operation’s center as a clerk in 1977 was $7200 a year, $600 a month. Our one bedroom apartment on the less than good side of town was $155 a month or roughly 26% my income so not bad. Although we did have our primary car stolen from the parking lot which was a total bummer.
My income in 1978 was $7800 a year, now $650 a month and we moved into the new starter home that we paid $32,800 and now had a $308 monthly payment. That equates now to 47% of my before tax income. At this time retirement saving was nowhere on our radar. My wife graduated from Community College and started working full-time also making around $650 a month.
We started making a home, putting in the landscaping, buying furniture, curtains, saving a little money and living a basic debt-free life other than the mortgage.
Our primary car (yes previously stolen, later recovered minus motor, new motor installed) was a 1965 VW Bug. We traveled all over the western US and had a blast. Imagine, no air conditioning and little if any heat in the winter. Crazy kids!
My starting a long Telecommunications Career.
I started my career in an entry-level position in late 1978 at the age of 20 as a Customer Service Rep making $167.50 a week ($8710 a year). I have a pay-stub from then framed along with my last paycheck. I took home $330 a payday.
A year later (1979) I got a raise and earned $9950 for the year with overtime. I was doing great but at that time there was never a mention of 401K or retirement saving in our world. The company did have a pension plan if you could last 30 years.
In 1980 we decided to start our family. My wife initially worked part-time after our son was born but once our daughter came in 1983 we decided it best for her to stay home with the kids.
In 1983 when I was 25 years old my income was $23,200 which is more than twice what I made when I started due to my moving to a semi-skilled technical position. That job came with a slightly higher salary because I had to work nights adding a 10% differential. There was also a lot of overtime. My house payment was still in the low $300s which shows how inflation protection is a benefit of home ownership.
In 1985 our third child was born. I was still a semi-skilled tech and working a second job to make ends meet. My income for 1985 was $29,400. I worked a second job in one way or another for 13 years.
Age 27 – Ground Zero for my 401K
In 1985 I started contributing to this 401K thingy I had heard something about. It was ground zero for my retirement saving. I was age 27. We had two fund choices, a guaranteed cash interest account or my employer’s company stock. The company matched 66% of the first 6% contributed with their company stock. I started with the 6% contribution rate and tried to increase each year with my raises.
It was 1990 when my wife started working part-time again when our youngest started kindergarten. My 1990 total income was $32,000 and I was now on my way to maxing out my 401K contributions. In 1990 the maximum was just under $8000 which was 25% of my before tax income.
Promoted to fully skilled technical technician.
In 1992 after completing my engineering course work (two-year course of study through Ma Bell) I finally made fully skilled tech and with my second job that year I made $36,700. I was now 34 years old. We had accumulated $16,000 in credit card debt over the years while my wife wasn’t working which averages to < $2500 debt a year. That total revolving debt amount figures to be 44% of my now yearly salary. In today’s dollars that percentage of credit card debt to salary would still be considered devastating.
We had always had a frugal lifestyle and budget and I was diverting every extra penny to debt pay-off but still maxing out my 401k contributions. Slow and steady wins the race. In hindsight I believe I should have dropped my 401K savings rate back to 6% and kept debt under better control but the thought was we would pay it back once my wife returned to work.
Patience pays off on Common Mans Journey to Early Retirement
Promoted to Engineer but with a catch.
In 1995 I was offered an engineer promotion but I had to relocate to Colorado from our home and the home of our extended family in Utah. My job was going there so staying in Utah meant I was facing layoff or at best getting a clerical position and huge pay cut to start over again.
We took the deal and my engineer income in 1995 was $44000. My retirement savings strategy was limited to maxing out my 401K which was about $9000 a year. That was still pretty good as it worked out to be 20% of income.
Sold our First Home and Bought Another
We sold the first and only home for $85,000 and paid off the rest of our debt. We then plopped $30,000 down on our second and still current home that we paid $157,000. There was a huge difference in home prices between Utah and Colorado. Going from selling for $85,000 to paying $157,000 was a huge financial bite. My house payment was now $1185 a month even with buying down the mortgage points to get it at 8% interest.
My wife took a part-time job as a bank teller in town. Our priority was for her to find a job where she could stay close to the kid’s schools. I was still just maxing out my 401K and living financially responsibly.
Promoted to Lead Engineer but there were cracks in the career dream.
There had been incremental raises but in 1998 I was promoted to Lead Engineer. I was 40 years old with 18, 15, and 13-year-old teenagers at home. My income ended up at $68000 which included a bonus that year. I was really loving what I was doing but I was seeing a lack of life balance and a stressful responsibility load. I was traveling the country 12 weeks a year (25%) and all of it was wearing on me. I made it to the top but it wasn’t so shiny anymore.
I decided there has to be something more to life than this.
In 1998 I decided that I wanted to retire early and sought financial advice. There was the internet but it didn’t have information yet like there is today. I settled on a CFP (Certified Financial Planner) who was totally with me on my plans and I set forth on my 10 year strategic retire early plan. In 1998 my 401k balance was sitting around $100,000.
Cutting expenses and saving more.
My plan had me doing more than maxing out my 401K which then was $10,000 a year. I kept to my plan and continued to save through the market ups and downs in my 401K and newly opened Roth IRAs. I also continued to receive salary increases and when I retired in 2009 at the age of 51, eleven years after I got serious about early retirement, I was making a bit under 6 figures in salary.
The last few years as an engineer I had saved $30000 to $35000 a year. I took a lump-sum payout of what was left of my raided and diminished pension and rolled it over into an IRA. I have details about my pension decisions on my How I Fund My Retirement page.
Pension Really Wasn’t Worth It
I am not really sure that the amount I received with the pension buy-out was worth it. Worth the 31 years of suppressed salary, suppressed opportunity, interstate relocation, and being golden-handcuffed to a company that went to hell because of a bad merger. With today’s 401K and IRA investment options and all the information available I believe people have a better chance of creating a successful early retirement plan.
My wife and I had split our budgets long ago. Since I made more than she did I paid for almost everything. The budget has her paying for groceries, anything she wants to buy for herself, and her gasoline. She didn’t retire in 2009 when I did. She was still saving to fund her own retirement expenses for her soon but later retirement. Once I retired the budget arrangement was kept. She joined me in early retirement a couple of years later.
The early retirement message here in this long article.
Hopefully I have shown how I didn’t make a blazing salary. I married, raised three kids, and still retired early. If anything I had a few things going against me.
- No four-year degree,
- Married young at age 18
- Had children young at age 22
- Took on a high amount of credit card debt to support our early family decisions.
I also want to show that even if you aren’t making good money today and can only save a small percentage of income doesn’t mean you will never get there. I didn’t start maxing out my 401k until I was 32 years old. But the early smaller investment rate on my lower salary added up to make a good start.
Patience is a skill that will help make it all happen.
I had no idea where my career would end up until I was already working over 15 years. It would have been totally unrealistic for me to think I could achieve early retirement too much earlier than I did with our decision to have a family and working through the tech-bubble burst and the great recession. Even without that bad stuff that happened my salary couldn’t support much more saving than it did. I also paid for my kid’s education and my two daughter’s weddings.
Certainly had we decided for my wife to continue working full-time and we saved her salary things may have escalated faster but I am happy with how things worked out. We lived the best life we could making the best decisions for our family.
Maybe retiring at age 51 isn’t as sexy or awe provoking as someone who pulled it off in their 30s or 40s but it is totally awesome to me and has been well worth everything it took to get here. The key is not wasting your money on stuff that doesn’t really add happiness to your life. That boring “frugal” word is key to pulling it off.
My final comments:
- Live your life
- Set a smart-frugal and balanced budget. One that is sustainable where you don’t feel like you are living a deprived life. Challenge your frugal threshold and always reassess it to find savings.
- Pay off debt and avoid debt.
- Start saving early and increase the percentage of your income saved over the years as your income increases. You just never know where your career will take you or what career you will end up in.
- Set realistic goals in measurable increments over set time-frames so that you will stay the course and you can track progress.
Do you have an early retirement plan and date set?
Is your plan realistic?