How to Retire in Your 30's

8 Lessons to Learn From Two Millennials Who Retired With $1 Million

young couple

When would you like to retire?

Sixty-five? Fifty?

You don’t have to wait that long, you know.

A California couple recently retired in their mid-30’s with $1 million in the bank, according to Forbes magazine.

OK, true, that remarkable feat of personal finance would be nearly impossible for most of us because we have, you know, lives. And kids. I could never pull off something like this with four boys to raise.

The couple —  Travis and Amanda — has no children. They earned good money as tech professionals and had already socked away $350,000 when they decided to chuck their jobs forever. They also have iron willpower as you’ll see. Still, there’s a lot to learn from these two Millennials about the fundamentals of building a retirement nest egg.

1. Know Your Objective 

When Travis got laid-off from an IT job in 2012 he discovered a new passion — the freedom that came with not working. He and Amanda decided to retire as soon as possible. They figured they needed $1 million to make that happen. The couple planned to live on 3 percent — 4 percent of their portfolio’s value every year and expected a 7 percent annual growth rate.

How do you envision your retirement? Will you travel the world? Start a small business? Own a beach house? Knowing what you want post-career is the first step towards making those dreams come true.

2. Get It Together 

Organizing your finances allows you to know where you are and how to move ahead. Travis and Amanda gathered all their money-related accounts into the free budgeting site Mint.com and did a thorough review of their assets and expenses. This lead to spending cuts and the (easy) decision to combine several 401ks from former employers.

3. Savings First

The couple saved as much as 65 percent of their pay during the three years it took to amass $1 million. They lived in a rent controlled $2,200 Oakland house (a bargain by the Bay, for sure) and aggressively cut costs by doing stuff like driving less, and hanging the laundry out to dry in the free wind.   

Here’s a tip for boosting your savings rate: Pay yourself first. Have your savings auto-deducted from your paycheck, whether going into the company 401k or another retirement fund. You can’t spend what you never see.

4. Beware of Fees and Taxes  

Fees are the great return-killer. You should review and question every fee you pay, even on funds inside your 401k. Amanda and Travis put much of their retirement money in low-cost ETFs and index funds.  These paid off nicely, as the couple rode a more than 60 percent increase in the S&P 500 from 2012 until 2015.

The couple planned ahead and was able to avoid the 10 percent IRA early withdrawal penalty by using a Roth IRA conversion ladder. In this forward-looking strategy, they transferred a certain amount of money each year from their traditional IRA to their Roth. Once 5 years had passed from the initial IRA to Roth conversion, they were able to tap their Roth contributions in an annual laddered sequence and avoid the early withdraw penalty.

5. Your Job Is Your Real Moneymaker

 Easy to forget, your paycheck is the centerpiece of your investment plan. Anything you can do to hike your salary or add other income (a second job or rental property, for example), will dramatically advance your objectives.

Much as he hated work, Travis returned to a cubicle purely to make the couple’s retirement dream come true. He switched jobs three times in three years to obtain salary increases. Amanda stuck it out in her job as a chemical engineer. At their earnings peak, the couple was making a combined $200,000.

6. Move and Save 

It’s considerably easier to save when your cost of living is low. When Amanda and Travis retired, they left the psycho-expensive Bay Area for a $270,000 house in Asheville, NC. The couple chose the mountain town because the cost of living is relatively low.

They also believe their house will be easy to rent to tourists while the couple continues to globe trot.

7. Simplify and Declutter

As they approached their retirement goal, Amanda and Travis sold much of the stuff in their two-story house. They headed into retirement with only what they used on a daily basis.

8. Plan Your Retirement Spending

We tend to focus on saving when we discuss retirement planning. But you need to think carefully about your post-work spending if you want your nest egg to see you through two or three decades. We’re living longer these days, remember from previous my previous AJC columns.

Travis and Amanda are very disciplined. They refuse to spend more than 4 percent of their portfolio’s current value per year. As a result, they sometimes have to cut spending when their portfolio value dips. They stuck to this rule even during their retirement dream driving trip from San Francisco to Costa Rica. 

They made that journey on the cheap, driving (and sleeping in) an old Toyota 4runner. In Costa Rica, they leased a house for $1,000 a month — equal to $30 a night. They ate at home and skipped the touristy stuff.

Travis and Amanda told Forbes they will never work again. But they left the door open to having children. It’s tough to raise kids these days on a household income of just $30,000 or $40,000. But if anyone can do it, I’m betting on Travis and Amanda.

Their extreme example is inspiring. If these two thirty-somethings can save about $650,000 in three years, surely we can reach our retirement goals in 20 or 30 years.

All it takes is a goal, a plan, and commitment. Especially commitment.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.