[This post is written and copyrighted by FIRE Finance (http://firefinance.blogspot.com).]
Today we present a spectacular case study of early retirement in response to one of our reader's specific question.
You've shown excellent examples of retiring early via wealth through entrepreneurship, wealth gained by working for a fortunate dot.com company, wealth saved by not having kids and leading a vagabond lifestyle, wealth from a generous military or union-job pension.
What I am looking for are examples of folks who retired early but worked at a typical 9-5 private industry, white-collar job, with no company pension. Folks also managed to buy a home, and helped (or plan to help) put a couple kids through college, yet still saved enough extra to "retire early".
You know, people who live lives typical of most white-collar (or even non-pension benefit, non-government job blue-collar) working Americans.Madison DuPaix from MyDollarPlan retired at the ripe young age of 29! This is a fantastic early retirement story which will serve as an inspiration for many.
Synopsis: Madison has a background in finance. She had a career with a white collar job and a great annual income (six figure compensation and benefits package) in the finance industry. She started investing 13 years ago at the age of 16, is an avid saver and retired at the age of 29. Currently she is married to Scott with two young kids at home.
Career Details
Madison holds an undergrad and a graduate degree with majors in Finance and Insurance from a "Big Ten" business school. She has also held industry designations and positions in pensions, employee benefits, and insurance. However, she is not a financial planner. Most of her tax knowledge has come from volunteering for the Department of Revenue’s income tax assistance program.
Best Financial Move
The most effective factor in Madison's early retirement is the fact that she started investing when she was only 16 years old, thanks to a financially savvy family and her own interest in personal finance. Along with intelligent investing with her disciplined savings (to the tune of 50% of her salary in the early years) and the power of compounding she has attained FIRE after 13 years at the age of 29. She walked the course with a plan, measurable goals and periodic tracking and analysis of her portfolio's performance.
So we see that young fellas have a major trump card up their sleeves. Age is on their side :). If they save and invest intelligently they are well set on the road to FIRE. Also, we note that in Madison's case a college degree played a great role in launching a traditional well paying career.
Investing Strategy
Madison has used low cost, indexed investments to build her portfolio. Instead of going for hot speculative or ultra risky investments she has used a reasonably safe total market asset allocation with low-cost index funds. And akin to our philosophy, she has maintained a really low expense ratio of 0.148% for her portfolio. We've not yet reached such a low expense ratio for our portfolio, which means there is room for improvement.
Here is her portfolio's target allocation:
» Total Bond Market Index Fund: 10%
» Total International Index Fund: 18%
» Total Stock Market Index Fund: 62%
» REIT Index Fund: 5%
» Small Cap Value Index Fund: 5%
Sustenance Plan During Retirement
Kids
Madison took advantage of financial strategies like funding 529 plans for infants and young children before they were born. This step has freed up money in her current budget. Also, she has set up high yield savings accounts for her children to save their cash gifts along with several other savvy strategies to save money for her children. It is to be noted that they’ve already saved for their childrens' college educations. Amazing!
Health Insurance
At present, Madison is going to use her husband's health insurance plan till he quits the workforce. Then they plan to go on a group health insurance policy. This is a smart way to lower health insurance costs and invest the savings into one's nest egg leveraging the power of compounding. In this aspect, we can say that Madison is semi-retired.
Living Expenses
Madison can afford to withdraw at the annual rate of 4% from her portfolio to sustain her living expenses during retirement. Since she has quit her job, her living expenses has gone down because she no longer needs to pay for child care, job expenses (commute costs, clothes, car insurance, dining), and retirement contributions. In addition, since her income has gone down there will be a remarkable reduction in her annual taxes to Uncle Sam. This will be a great breather for her.
Activities In Retirement
Kids
Madison plans to spend as much quality time as she wishes with her kids and watch them grow up. Also, Scott and she plans to have more kids :).
Passion
She wishes to pursue her passion of sharing her knowledge of personal finance with everyone especially kids to help them become financially free at an early age like herself. She has already started writing at About.com in the column "Kids and Money Guide." In addition, she has become a professional blogger. At present she plans to withdraw about $23,000 from her business towards her living expenses. That will give her nest egg extra mileage in case of unforeseen events tend to usurp it in future.
Other
There are other personal interests which were shelved due to paucity of time that she now desires to pursue wholeheartedly.
Back Up Plan
Madison says that if things go wrong which God forbid should never happen, she will go back to work. She has kept channels open with her former employer so that she can hop back in. Also, she will have her own business to count on. Another option is that since her husband Scott is still in the work force, he might delay his retirement by a few more years till they stabilize.
Lessons or Take Aways
1. Start investing intelligently at an early age.
2. Save aggressively while we are young to reap the power of compounding. We can take it easy once the nest egg reaches a certain threshold.
3. Create a plan with SMART goals and follow it in a disciplined manner with periodic tracking, review and analysis.
4. Learn from our mistakes and never repeat them. Work hard to get over setbacks in an optimistic manner.
5. Invest in a college degree to get started on a well paying career.
6. Minimize expense ratio of our portfolio and stop trying to time the market or get rich quickly. It's better to follow the time tested strategy of going with the market with index funds or ETFs and a good asset allocation.
7. Start saving for kids before they are born.
8. Have a plan to fall back upon in case things go wrong. It's a good idea to create one's own business passionately.
9. Give back to our community from our repertoire of knowledge, experiences and wealth.
It's very inspiring to read about Madison's life and the way she has achieved FIRE. More so, since she is going to live in US during her retirement and is not planning to relocate to a cheaper country to keep her living cost down during retirement. The best part is that now she is financially free to follow her passions and interests at her own sweet will. Heartiest congratulations Madison! We all aspire to be financially free like you at the earliest :).
We are looking forward towards your thoughts on this case study. Please feel free to voice your opinions.
Image Source(s): iStockPhoto
You've shown excellent examples of retiring early via wealth through entrepreneurship, wealth gained by working for a fortunate dot.com company, wealth saved by not having kids and leading a vagabond lifestyle, wealth from a generous military or union-job pension.What I am looking for are examples of folks who retired early but worked at a typical 9-5 private industry, white-collar job, with no company pension. Folks also managed to buy a home, and helped (or plan to help) put a couple kids through college, yet still saved enough extra to "retire early".
You know, people who live lives typical of most white-collar (or even non-pension benefit, non-government job blue-collar) working Americans.
Synopsis: Madison has a background in finance. She had a career with a white collar job and a great annual income (six figure compensation and benefits package) in the finance industry. She started investing 13 years ago at the age of 16, is an avid saver and retired at the age of 29. Currently she is married to Scott with two young kids at home.
Career Details
Madison holds an undergrad and a graduate degree with majors in Finance and Insurance from a "Big Ten" business school. She has also held industry designations and positions in pensions, employee benefits, and insurance. However, she is not a financial planner. Most of her tax knowledge has come from volunteering for the Department of Revenue’s income tax assistance program.
Best Financial Move
The most effective factor in Madison's early retirement is the fact that she started investing when she was only 16 years old, thanks to a financially savvy family and her own interest in personal finance. Along with intelligent investing with her disciplined savings (to the tune of 50% of her salary in the early years) and the power of compounding she has attained FIRE after 13 years at the age of 29. She walked the course with a plan, measurable goals and periodic tracking and analysis of her portfolio's performance.So we see that young fellas have a major trump card up their sleeves. Age is on their side :). If they save and invest intelligently they are well set on the road to FIRE. Also, we note that in Madison's case a college degree played a great role in launching a traditional well paying career.
Investing Strategy
Madison has used low cost, indexed investments to build her portfolio. Instead of going for hot speculative or ultra risky investments she has used a reasonably safe total market asset allocation with low-cost index funds. And akin to our philosophy, she has maintained a really low expense ratio of 0.148% for her portfolio. We've not yet reached such a low expense ratio for our portfolio, which means there is room for improvement.
Here is her portfolio's target allocation:
» Total Bond Market Index Fund: 10%
» Total International Index Fund: 18%
» Total Stock Market Index Fund: 62%
» REIT Index Fund: 5%
» Small Cap Value Index Fund: 5%
Sustenance Plan During Retirement
KidsMadison took advantage of financial strategies like funding 529 plans for infants and young children before they were born. This step has freed up money in her current budget. Also, she has set up high yield savings accounts for her children to save their cash gifts along with several other savvy strategies to save money for her children. It is to be noted that they’ve already saved for their childrens' college educations. Amazing!
Health Insurance
At present, Madison is going to use her husband's health insurance plan till he quits the workforce. Then they plan to go on a group health insurance policy. This is a smart way to lower health insurance costs and invest the savings into one's nest egg leveraging the power of compounding. In this aspect, we can say that Madison is semi-retired.
Living Expenses
Madison can afford to withdraw at the annual rate of 4% from her portfolio to sustain her living expenses during retirement. Since she has quit her job, her living expenses has gone down because she no longer needs to pay for child care, job expenses (commute costs, clothes, car insurance, dining), and retirement contributions. In addition, since her income has gone down there will be a remarkable reduction in her annual taxes to Uncle Sam. This will be a great breather for her.
Activities In Retirement
KidsMadison plans to spend as much quality time as she wishes with her kids and watch them grow up. Also, Scott and she plans to have more kids :).
Passion
She wishes to pursue her passion of sharing her knowledge of personal finance with everyone especially kids to help them become financially free at an early age like herself. She has already started writing at About.com in the column "Kids and Money Guide." In addition, she has become a professional blogger. At present she plans to withdraw about $23,000 from her business towards her living expenses. That will give her nest egg extra mileage in case of unforeseen events tend to usurp it in future.
Other
There are other personal interests which were shelved due to paucity of time that she now desires to pursue wholeheartedly.
Back Up Plan
Madison says that if things go wrong which God forbid should never happen, she will go back to work. She has kept channels open with her former employer so that she can hop back in. Also, she will have her own business to count on. Another option is that since her husband Scott is still in the work force, he might delay his retirement by a few more years till they stabilize.
Lessons or Take Aways1. Start investing intelligently at an early age.
2. Save aggressively while we are young to reap the power of compounding. We can take it easy once the nest egg reaches a certain threshold.
3. Create a plan with SMART goals and follow it in a disciplined manner with periodic tracking, review and analysis.
4. Learn from our mistakes and never repeat them. Work hard to get over setbacks in an optimistic manner.
5. Invest in a college degree to get started on a well paying career.
6. Minimize expense ratio of our portfolio and stop trying to time the market or get rich quickly. It's better to follow the time tested strategy of going with the market with index funds or ETFs and a good asset allocation.
7. Start saving for kids before they are born.
8. Have a plan to fall back upon in case things go wrong. It's a good idea to create one's own business passionately.
9. Give back to our community from our repertoire of knowledge, experiences and wealth.
It's very inspiring to read about Madison's life and the way she has achieved FIRE. More so, since she is going to live in US during her retirement and is not planning to relocate to a cheaper country to keep her living cost down during retirement. The best part is that now she is financially free to follow her passions and interests at her own sweet will. Heartiest congratulations Madison! We all aspire to be financially free like you at the earliest :).
We are looking forward towards your thoughts on this case study. Please feel free to voice your opinions.
Chat with Madison
FIRE Finance: We've have a question:
- If you had to purchase your own health insurance instead of using Scott's would you have been able to retire at 29? Or in other words is your portfolio capable of bearing the load of health insurance for your entire retirement period?
Madison: To answer your health insurance question, yes, we got a quote for a family HMO policy. And it wouldn't have been a problem. Luckily we're in an area with great health insurance options :).
- If you had to purchase your own health insurance instead of using Scott's would you have been able to retire at 29? Or in other words is your portfolio capable of bearing the load of health insurance for your entire retirement period?
Madison: To answer your health insurance question, yes, we got a quote for a family HMO policy. And it wouldn't have been a problem. Luckily we're in an area with great health insurance options :).
Image Source(s): iStockPhoto
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