Early Retirement, Accountant Style

Extraordinary 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 your Liquid Net Worth is => 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.

When I say I retired at age 22 I am referring to this formula. I worked on the family farm while in high school, saving 90% plus of my income. 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 36 years now (updated September 19, 2024). We were married a year and six days from the day we met. Expenses went up, but not crazy up. Sue is as frugal as I am, maybe more so. (I still do stupid stuff 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. I was not interested in a daycare in my home. I prepared tax returns as a side hustle. I was going to have to go tax accountant full-time.

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 our 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.

There have been ups and downs over the decades. Now at age 60 I am finally considering something akin to a traditional retirement. I still kept working my business back then and still work a similar schedule to that of the past four decades today. I always loved the work I did so never worked a day of my life. The only change is a transition to more writing and publishing versus prepping tax returns.

Spending increased to accommodate married life and two children.

An office in the home is a cheap way to run many businesses. By the early 1990s I had too many clients and by the early 2000s had 18 employees. What started in a remodeled basement no longer was adequate. 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? Is sharing experience and knowledge work?

In the middle of the day I leave my chair for a mid-day walk in the park adjacent to my office. I come and go as I please, loving 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, we need to talk. Retire to something, not from something. It makes a difference. Retirement is more than just money. It is filling your life with things that matter to you. It is okay to grow and evolve. It is okay to try new things. It is never okay to check out. Your life needs meaning. We will explore that in this blog.

Now, would you hand me another cold one? Thanks. (We will also have fun (and some snark) in this blog. Money is great. Having a fun life worth living, even better.)