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Early Retirement, Accountant Style

IMAG0032Extraordinary claims require extraordinary proof or at minimum a darn good explanation. The Internet Retirement Police have attacked my peers over the years so my effort in this post is to provide a short definition of what “retirement” means.

For many people retirement is a beer in one hand, remote in the other. To a Wealthy Accountant (WA) this is not retirement, this is death. If your idea of retirement contains only a beer and remote you are dead, your body only forgot to stop breathing.

I am sure you have heard an older retired person say, “I am busier now that I am retired than when I was working.” I hear the same thing in my office. The retired people telling me this are alive, smiling and bouncy. These are happy people. The others, the ones that check out when the pension kicks in, age a decade in only a year or two. They have no reason to live. Retirement is akin to a nursing home or prison. At least in prison they let you out an hour a day. Some people barricade themselves in their home and quarantine themselves to a small area with a TV for days, weeks, even months at a time. And we wonder why their mental faculties decline.

As I outline my definition of retirement below it will become clear you can be retired at one point in your life and not retired at a later point. This is intentionally built into the definition. Most financial advisors and retirement gurus focus on how much money you have when helping you plan for retirement. And why not? Commissions are based upon getting your money in-house. WA’s know this is 100% wrong! To a WA retirement is based on spending.
It is not how much you have that makes you wealthy, it is what you spend. Think of it this way: suppose I tell you I make 1 million dollars per year. Am I rich? Without further information it is impossible to tell. If the world I am describing has $500 loaves of bread and rent of $100,000 per month you are actually in bad shape. If I tell you I only make $20,000 per year. Then what? Well, if my cost of living is only $15,000 per year I am saving 25% of my income. My nest egg will grow well into the six figures in short order.

The formula for calculating retirement is easy:

If Liquid Net Worth => Spending x 25

you are retired. Liquid net worth excludes primary residence equity only. This formula allows you to retire and live forever without running out of money or being forced to sell the home you live in. The formula assumes a 4% rate of return on your investments. More on the 4% rule in a future post.

519J967xLOL._SX258_BO1,204,203,200_When I say I retired at age 22 I am referring to this formula. I worked in high school on the family farm and saved 90% plus. I lived in the middle of nowhere. Where was I going to spend the money anyway?

By the time I was 22 I owned my own home (a very small one (I was single and not dating)) with a small loan. I was spending less than $6,000 per year. I was happy. I went to the library and read a lot of books.

Life was lonely and I knew I wanted to have a family. (Okay! I wanted a wife. A man has needs, you know.) At 23 I met Sue, my lovely bride of 27 years now. We were married a year and six days later. Expenses went up, but not crazy up. Sue is as frugal as I am, maybe more so. (I still do stupid shit from time to time.)

Here I was, 24, married and no longer retired. Two hundred thousand no longer met the “spending x 25” part of the equation. My hyper frugal, single life, ways were tested. Sue saved, too, but only added about $4,000 to the nest egg when we married; she had no debt. Sue also made less money than me as she ran a daycare from her parent’s home.
For the only time in my life I worked a real job (not for family or self-employed). For one year I worked as a custodian. Someday I’ll tell y’all how it all went down. For now, pity me. I worked for one year of my life. Yikes!

Normally I watch my money close. Early marriage caused me to make many changes. First, I ramped up my tax accounting work — I worked out of the home. My earned income rose to cover all bills and save 50% or more of my profits. Sue worked around three years before settling into retired life. I was not watching my net worth as close as I had in the past. Sometime around age 32 I added it all up and realized I crossed the seven figure mark. I guess you can say I re-retired. (Gawd, this is exhausting.)

There have been ups and downs over the decades. Now in my young 50s I finally call myself retired. In the past I silently did my thing while BSing people who asked what I did. (“Well, ya see, I work 20 hours a week for two months and then take a 10 month vacation…”)

An office in the home is a cheap way to run many businesses. By the early 1990s I had too many clients (hard to say no to good people) and employees, all run from a remodeled basement. In 1995 I moved the practice to an office building.

I am retired. Really! Don’t believe me? Well, look at my lifestyle. I bike to work three, maybe four times a week. At the office I read news, books, etc. If work comes in I delegate to my team. I am always available for advice and I am eager to use my experience to help people. But am I really working when I talk and not much else? In the middle of the day I leave my office for a mid-day job in the park adjacent to my office. I come and go as I please, love the work I do. My nest egg more than covers my lifestyle. So what say you? Am I retired?

In this blog we will use my definition of retirement. If your idea of retirement is a beer in one hand and a remote in the other, get out. NOW!

Would you hand me another cold one? Thanks.


Tuesday 23rd of February 2016

This is a very good way of looking at the conditions necessary for retirement. You're right that it's not set in stone, and not dependent on wealth.

I will be touching on similar concepts over at my blog, D.I.Y. Money Mastery.


Tuesday 16th of February 2016

Ha, I like this story a lot too. It really cuts out a lot of the unwanted details in life. All that one really needs to focus on for retirement is spending less and having fun doing it. Usually I'm not compelled to comment but I'm glad I got to read this!


Sunday 14th of February 2016

I love this story! This is what I am picturing as my life and trying to figure out how to get there as fast as I can. I work in a corporate setting. I love working and love living my full life outside of work. However, it is very mentally draining to work in a corporate environment where most people have inverted values and are driven only by $$$ and consumerism, generating enormous waste every day (kills me). I find my peace and happiness outside of work when I do my favorite activities and read blogs like WA's, MMM's, and some other amazing ones. Thank you so so much Keith! I wish I knew about you when I lived in Wisconsin. :) Beer would be on me.

Fervent Finance

Friday 12th of February 2016

Very inspiring Keith. I too grew up right next to the family farm and am now an accountant! I'm 27 and am currently an employee in corporate land USA. I've always toiled with the idea of going out on my own. Now I really need to dig down deep and see if it's something I want (need) to do! Take care.