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Writer's pictureTyler

Our Early Retirement Plan | How We Did It

Updated: Feb 7, 2022


Let’s Get One Thing Straight: To Retire Early, You Need a Plan


Friends and colleagues who have somehow learned what I’m up to will often approach me asking how the heck I plan to retire from Corporate America in 10 years (3 years left now). To most, it sounds a little crazy (okay, let’s be real, they think I’m totally batshit). I’m here to persuade you that it’s not crazy, and it’s within reach, even on a modest income. However, anyone who wants to retire in 10 years or less needs to have a plan and commit to it for the long haul, no exceptions. It simply will not happen by accident. I hear some of the same questions, concerns, and rebuttals almost every time this conversation comes up. It makes sense, they are some of the same worries I had before starting. Later, I’ll link to a discussion of those, and how our system addresses them here.


The very first steps to escape from Corporate America are: design and implement a financial plan, decide your acceptable criteria for attaining the plan, then take concrete, consistent action over a period of several years using a system that suits your specific desires to manifest that plan into reality. I typed up a financial plan back in 2014 with a goal of reaching $1M net worth in 10 years with some very basic assumptions baked in, which is more than enough for me and my wife to retire on, based on the 4% rule. I won’t go into great detail about the 4% rule because it has been discussed at length in plenty of other places by smarter people than me, but here is a link to a great conversation of the rule and the assumptions behind it by Mr. Money Mustache. This is the one simple rule that most of our financial plan is built around.


The short version: Save up and invest 20 times your yearly expenses, and you can survive indefinitely on those investments (with a safe withdrawal rate of 4% per year) under most economic circumstances. Yeah, it really is that simple.


Our sustained yearly spending is about $35k per year. That means we need to accumulate investments with a value of $700k (20 x $35k yearly spending) in order to live indefinitely off our investments according to the 4% rule. We have already achieved that goal in under 7 years - Eventually, we’ll share a breakdown of our investment portfolio to show exactly how we got here. However, we wanted a little more wiggle room, and we’d like to save about 1.5 - 2x this amount for even more assurance (which should actually cause our buying power to snowball, increasing each year into retirement, rather than remaining steady, giving us more options and flexibility). Here is the plan I designed back in 2014:





The plan starts out with surprisingly small savings goals and quickly snowballs (with the exception of the year I took off to attend a software development bootcamp, which increased my earning potential, but actually slowed our financial progress - soon, we will link to a future post about the Time Value of Money here). This is the power of compounding returns at work. A high earned income is not necessary to generate a substantial net worth, as long as you create a realistic plan and commit to the marathon effort of its sustained execution.


To wrap things up on how to set some number goals for an early retirement plan, lets recap:

  • Find out how much you currently spend, and set a realistic expected yearly spending amount

  • Multiply that number by 20 to get the total investment target for retirement, based on the 4% rule

  • Work backward from that total investment target using typical expected returns (based on your investment strategy and the number of years you want to work) to determine a yearly savings goal


Decide What’s Important: The Criteria We Used


If you followed along with the first exercise, now you’re armed with some numbers. Great! You’re one step closer to retiring early. After targeting a total investment value for retirement, an attainable savings rate, and a goal date, the next step is to decide what action you’re willing to take to get there. There are many ways to build wealth, but you’ll need to set some criteria to decide which is right for you. We have laid out our initial requirements for the system we later designed. If the criteria we used seems relatable, our system could be a fit. Hot dog!


The main thing I want to illustrate by sharing all this is that our criteria was actually pretty narrow. We had a lot of nitpicky requirements like - fast time to completion through high returns, immediate reward, low effort, low risk, and very little up front capital. In the investing world, most financial planners will say that’s kind of like asking to have your cake and eat it too while getting paid for it. One cannot achieve these kinds of results with society’s game plan; that’s the point. Look outside the box, and deviate from the traditional wisdom that most financial planners sell. There are ways to achieve things that most would never dream of, even with no special skills.


Let’s begin. These are the requirements we set up before deciding what action we would take to reach financial freedom in less than 10 years of work:


NOPE - Tradeoffs we were NOT willing to make under any circumstances

  • High Risk - We were not willing to lose everything we’ve worked to save and build on a moonshot that could leave us insolvent at the worst possible time.

  • High Effort - We refuse to spend more than a couple hours of extra work each week to reach our goal. We already work full-time jobs in Corporate America, and that’s more than enough for us.

  • Extreme Frugality - We won’t sacrifice reasonable spending on things that actually matter to us, like social events, occasional trips, shows, concerts, or meaningful time with friends and family in order to meet our financial goals.


YEP - Small sacrifices we were happy to accept in exchange for a relatively short sprint to financial freedom

  • Very limited risk - Investing involves some risk. Risk is something people fear, but not investing represents a near-certainty of failure. Some fear is healthy, and it helps prevent stupid, dangerous decisions. However, in excess, fear can prevent people from taking good calculated risks even with tremendous upside. We worked very hard to minimize the risks in our system, making sure that even if every imaginable thing went wrong at the same exact time, we would still be able to cover our expenses, remain solvent, and ride out the storm.

  • A little bit of extra work - A couple extra hours a week here and there is no big deal, especially when it pays an hourly wage much better than a day job. When it comes to working outside of my nine-to-five, I am very lazy and protective of my free time. Believe me, if I can put up with this little bit of extra effort for its comparatively outstanding reward, you got this.

  • Fewer luxuries - Fancy cars, expensive vacations, and small wasteful recurring expenses like cable television or new clothes every year don’t actually contribute to our happiness. These weren’t truly sacrifices, they were small adjustments that helped us live more intentionally. This list will be unique for everyone. If you’re a sports car enthusiast who loves driving a nice car, that’s not necessarily something I’d advise you to sacrifice. If you absolutely love traveling the world in style, and can afford it, don’t stop! Do what makes you happy. Live your plentiful life, not someone else’s. Identify the things that truly matter, and ruthlessly prioritize the rest out of your life. Even with limited resources, you can do almost anything, but nobody can do everything. Prioritize. With a little reflection, we realized that owning more physical possessions than we need and regularly use was an unnecessary burden. This created a negative impact even before accounting for the financial cost. This truth is laid completely bare by our peregrine lifestyle, but it applies equally to people who do not move every year or two. It’s just easier to overlook.

  • Fewer expensive nights out, more delicious meals in - We don’t like to binge drink much anyway, and it’s in direct opposition to our health goals. Still, we give ourselves some grace here and occasionally overindulge. We’re not saints. Surprise! Plus, we find cooking fun, and it’s usually better tasting and healthier than dining out. It’s also a valuable life skill and a great time to bond with your partner (alternatively invite some friends to share a home cooked meal or just put on some jams/a podcast/audio book and enjoy the time to yourself).

  • Shared living space - There are ways around this tradeoff, but this is the path that we chose. Quick pause: If sharing personal space turns you off, please don’t stop reading just yet. There are alternate approaches that involve some degree of tradeoff but also have some unique advantages. One method is to find a multi-unit property (duplex, triplex), or a home that already has or can easily be converted to add an accessory dwelling unit or a lock-off (AKA carriage house, guest house, garden unit, etc). We will explore the strengths and challenges of both methods in a later post!

In case anybody's wondering what I meant by "peregrine lifestyle" - I mean we move around a lot, almost every single year. Here's a timeline of our past 8 years.


Pulling Back the Curtain: Our System


Still with us? Then, presumably, this all sounds interesting. Maybe you’re starting to get a little excited, maybe skeptical, wondering how on earth any system can check all those boxes while still enabling an early retirement in 10 “short” years. Well, here’s the “secret” you’ve been waiting for:


  1. Save up enough for a down payment on an entry level home by leveraging an active income. For most of us, that’s a day job of some sort. The amount of income you earn is not very important here, but saving a substantial percentage of it is.

  2. Identify and purchase a home with 3 bedrooms, and at least 2 bathrooms.

  3. Live in one of the three rooms, and rent the additional rooms that you don’t occupy, paying for your entire housing cost each month. Often, it's even possible to earn positive cash flow while living rent free.

  4. Move out of the house in two years, turn it into a full-time rental property, and cycle up this process with increasingly valuable properties one to two more times until you have enough capital to purchase additional units without moving into them (2 - 4 years after starting)

  5. Split any excess savings between a 401k and a Roth IRA for tax diversification - purchase low cost index funds.


That really is the whole system, but let’s expand upon these five steps for just a bit more detail.


Save enough for a down payment on an entry level home


The amount for this will vary wildly depending on geography. For example, buying a home in San Francisco or NYC is obviously much more expensive than a comparable house in Indianapolis (where I started out). Fortunately, both rent and earned income tend to scale with home values. This system can be applied in all major cities, even the expensive ones. It just requires more up front work to find the right deals. A down payment can be as little as $10-$20k for an entry level home in most major cities, obviously excluding some ridiculously overpriced metros. First time home buyers with decent credit can typically access mortgage options requiring as little as 5% down on their first home purchase. This means a $15k down payment grants control over a $300k asset. This is one powerful advantage to our strategy and real estate in general: Leverage.


Identify and purchase a home


This is the step in the process that all the others revolve around. It’s a big commitment, and it’s important to get right. To make this system work, purchase a home that aligns with your financial plan and gives you a place to live for a couple years. There are many criteria that make a home more attractive as an investment. Start with the basic idea of investing in or near a desirable neighborhood with growth potential, where renters will not be difficult to find. We’ll share our methodology for identifying properties as investment opportunities in a future post.


Live in the home, and rent the extra space


This is an absolutely critical detail for a few reasons, and it creates some of the most impactful advantages that our system has over traditional methods. It’s probably already clear why renting the additional space leads to savings. You’ll be giving up space to offer people a place to live, so you should expect to generate some revenue as a result. However, it may be less clear why you would choose to live there instead of just buying a pure rental property. Living rent free is the most obvious reason to take this hybrid approach, but living in the home will also lead to 4 key financial benefits that will significantly accelerate your early path to financial independence. Stay tuned for a post about these!


Move out, rent the entire property, rinse and repeat


This step is mostly self-explanatory. By moving out, you can hand the house over to a property manager and stop doing the work yourself. Sit back, relax, and collect monthly rent while the house continues to appreciate and generate wealth. Renting an entire property is less profitable than renting individual rooms, but it’s also a lot less work. When it comes to time vs money, we will almost always choose to save our time. Once the house has been generating cash flow reliably for a few months, purchase another home and start the whole process over again with a more valuable property. After doing this a couple times, you will have generated enough cash flow and savings in addition to your active income to slowly purchase more properties without moving into them.


Split additional savings between a Roth IRA and employer 401k


This is the more traditional leg of our system. The stock market has a time-proven track record and is a reliable way to generate modest returns. I admit, this is not very exciting, and it certainly won’t produce thousands of dollars of earnings each month when first starting out, unlike house-hacking. However, investing additional savings into these tax advantaged vehicles diversifies and hedges your income against market fluctuations that impact real estate. When it comes to investing in the stock market, boring is usually best. Continuously invest a small amount of each paycheck across a few low-cost index funds with proven track records, rebalance yearly, and don’t panic. We’ll get to this topic eventually. Much ink has already been spilled on this subject, and we will mostly defer to the existing advice - there is plenty.



That’s it. PHEW! I know there’s a lot to unpack, but we have time. In the future, we’ll be diving deep into tons of exciting subjects, like: how to identify properties as investment opportunities, get the best rates, find housemates, use leverage to multiply profits, and more. See you there!

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