|Specifically, we recommend Vanguard 500 Index Fund (VFINX),|
|Vanguard Extended Market Index Fund (VEXMX), and |
Vanguard Total International Stock Market Index Fund
(VGTSX). We put 1/3 of our investments into each of the three
stock funds -- simple as that. This provides incredible
|We also own Vanguard Total Bond Market Index Fund|
|(VBMFX). When we sold our home, the equity went into this |
bond fund, not into stocks.
|Don't get discouraged if (I mean when!) the stock market goes|
|down. We did our best investing during the bear market of |
2000-2002. We bought stocks "on sale" and reaped the
|Get buy-in from your spouse (if you're married). There's no|
|way to accomplish these goals if the two of you aren't on the |
|Balance "living for tomorrow" with "living for today." You|
|HAVE to be an optimist to plan 15 years into the future for an |
early retirement! But you also have to enjoy life along the way.
Both are important.
|Read Your Money or Your Life by Vicki Robin and Joe|
|Dominguez. It gives good advice on achieving financial |
independence. We also recommend retireearlylifestyle.com if
you like the idea of retiring early in order to do lots of
|In Egypt just before retiring at age 43
|In New Zealand after rolling downhill in a Zorb -- just after retiring early
|First, get out of debt. Obvious but essential. Pay off credit|
|cards, car loans, etc. so the only debt you have left is for your |
|Start saving early. We started saving in earnest at age 31. The|
|earlier the better, since it gives your investments more time |
|Try to do a 15-year home mortgage instead of a 30-year. You'll|
|save a lot on interest, and the 15 years matches up nicely with |
an early retirement goal. You'll want to pay off your home
before you retire.
|Pay an extra $100 towards the principal on your home each|
|Consider renting out part of your home to help offset|
|mortgage costs. We owned a bi-level home and rented out |
the bottom half.
|Don't try to keep up with the Joneses. Until retirement, we|
|drove the same cars and remained in the same starter home |
we started in. Keep your biggest costs (home and cars) as low
as reasonably possible.
|Figure out what you care about most in life and spend more|
|freely in that area. For us, that means spending more on |
travel and less on material possessions (other than camping
equipment!). If you feel you're depriving yourself of
something you really love, you'll never be able to stick to your
plan over the long term.
|Settle on an amount you can invest every month and make|
|sure you invest regularly, regardless of how the market is |
|Try to put at least 10% of your paycheck into a 401(k) or|
|equivalent. This is a no-brainer -- usually there's a company |
match; it comes out of your paycheck automatically; it's pre-tax
money so you hardly notice it's missing from your paycheck;
AND you save on taxes each year.
|Open a Roth IRA and begin socking away as much as you can|
|each year. You invest already-taxed income but never pay |
taxes on the money you take out, including the earnings.
Great for the long term!
|If you plan to retire before age 60, you also need a TAXABLE|
|account that you can draw from without penalty. In a sense, |
you need to save for two retirements -- the near-term one and
the post-age-60 one. Half of what we have invested is in
taxable Vanguard Index Funds for use over the next 15 years.
The other half is in 401K and Roth IRA accounts and will
remain untapped (continuing to grow) until age 60.
|Put together a 15-year plan of how to get where you're going.|
|We use an Excel spreadsheet (see below) that tracks our |
taxable, 401(k), and Roth IRA investments, with a "Grand
Total" column at the end.
|Assume an 8% to 9% annual return if you are investing in the|
|stock market. This represents the long-term annualized return |
of the stock market as a whole (6% to 7% adjusted for inflation).
|At the end of each year, assess how you are doing against|
|your plan. We plug in actual results at the end of each year so |
we can plan for future years using actual results rather than
|Forget about timing the markets. We recommend picking a|
|handful of Vanguard Index Funds and investing regularly in |
those. Vanguard expenses are the lowest in the industry, the
funds are tax-friendly, and your investments are spread over
a wide range of asset classes.
|Retirement at age 43...
|Available on Amazon.com