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Chapter 4. Your Roadmap to Early Retirement
Take the Highway
Sometimes it just makes sense to take the highway and avoid all the stoplights and traffic on local
roads. In similar fashion, you want to make sure you get onto the financial highway as early as
possible and stay there until you reach your exit. That means investing primarily in stocks and stock
mutual funds, not cash or bonds, during most of your investing years. Why? Because stocks are the
highway: they offer the fastest, most direct, and most reliable way to get to your goal.
You also want to make sure your vehicle – which is to say your career – is up to the task of
getting you there. Don’t get onto the highway in a clunker and find you can’t keep up – or worse yet,
break down by the side of the road. Instead, purchase a reliable car (a practical career) first and save
yourself a whole lot of trouble on the road ahead.
Short cuts make for long delays, as the saying goes. Trying to take too many shortcuts on the road
to early retirement can end up backfiring on you. By shortcuts we mean any high-risk investment
aimed at getting rich quick rather than getting rich slowly. Day trading, currency trading, options
trading, investing in hedge funds, investing in risky stocks, going all-in on the next big thing, investing
in financial products you don’t really understand, and investing in anything that seems too good to be
true all fall under the category of shortcuts to be avoided if you’re following a get rich slowly
We don’t mean to imply there’s anything wrong with getting rich quick if you can do it reliably,
but it’s not what this book is about. Plenty of other books cover that topic. Getting rich quick is a bit
like bobbing and weaving through traffic to get to your destination just as fast as you can, whereas
getting rich slowly is more like driving on the highway but staying in the middle lane. It may not be
wind-in-your-hair exhilarating, but it offers a relatively safe and predictable way of getting you to
Milestones Along Your Route
Here is a preview of what’s coming down the pike. The first milestone on your route is entitled
“Invest in Yourself First” (Chapter 5), and it comes first for a reason. Without a reliable career,
everything else about your journey becomes more difficult.
The next milestone is “Get Out of Debt” (Chapter 6), and it comes second for a reason too. We’ll
explain why we recommend you pay off all credit cards, car loans, and college loans first before
beginning to invest in earnest for retirement.
The next six milestones are all dedicated to the specifics of how to invest successfully for early
– How to use compounding to your advantage (Chapter 7)
– How to calculate your likely income needs in retirement (Chapter 8)
– How to determine the size of the nest egg you’ll need (Chapter 9)
– How to put together a personalized investment plan (Chapter 10)
– How to put your index fund investments on auto-pilot (Chapter 11)
– How to allocate between 401(k), IRA, and taxable accounts (Chapter 12)
Are we there yet? Not quite. There are two more milestones along your route, both of them having
to do with how to keep your expenses low so you can retire sooner and stay retired on less. It’s
frankly hard to find a retirement book out there that doesn’t have a chapter devoted to the subject of
living below your means (Chapter 13). Why? Because it’s probably the single most important thing
you can do to reach early retirement and stay retired. “Live below your means” might seem like
overly obvious advice, but obvious doesn’t always equate with easy to implement in real life. We
provide practical guidance on how to put this advice into practice. The last roadmap chapter (Chapter
14) provides further details on how to keep two of your biggest expenses in life –home and cars – as
low as reasonably possible.
After that it’s about time for a rest stop. “Keep Your Life Portfolio Balanced” (Chapter 15)
reminds you to balance living for today with living for tomorrow lest you run out of energy along the
The final two chapters in the book cover subjects of particular interest to those who have already
reached their destination. How to pay for health care has always been a concern for just about anyone
who has ever considered retiring early. In “Health Care in Retirement” (Chapter 16), we share good
news about the Affordable Care Act in America and medical tourism overseas, both of which bode
well for early retirees on a budget.
We finish up with a chapter on extended travel in retirement (Chapter 17). Here we offer
suggestions on how to keep your travel costs down as you head off on journeys the likes of which you
could only dream about during your working years. Since long-term travel is both the motivation and
the reward for many early retirees, we think this makes for a fitting and fun final chapter.
Invest in Yourself First
By the age of 31 Robin and I only had a total of about $6,500 invested for retirement, and that was
primarily in my 401(k) at work. It was a start but we wanted to do more – a lot more. We wanted to
accelerate our savings. But how? We had very little fat left to trim out of our budget. What we needed
wasn’t a way to cut expenses more but a way to make more money.
“I should probably find out what I'm worth in the business marketplace now that I've got three
years of experience under my belt,” I wrote in my journal around that same time. “Increasing my
salary would be the quickest way to speed us along on our financial highway.”
Yes! Now you’re talking, younger me.
It took me longer than most people, but I was finally waking up to the fact that I had to make
strides in my career if I ever wanted my early retirement dreams to be more than just dreams. It would
take us another five years before we realized that Robin, too, needed to switch careers and retrain as
a nurse. Call us slow learners, but eventually we came to the conclusion that we are our own best
investments. Hopefully you can learn this lesson sooner than we did and profit from it.
Why Minimum Wage Won’t Work
If you find you’re barely able to make ends meet with the salary you’re currently making, we
advise you to invest in yourself first before doing any other investing. Working a low-wage job won’t
get you where you want to go fast enough. To retire early you have to live below your means so you
can invest any extra money and start building up a capital base. How can you do that if it takes every
cent you have just to get by?
The federal minimum wage is currently $7.25 per hour. Assuming a forty-hour work week, that’s
$15,000 per year. That’s barely enough for most people to survive on in the U.S. these days. It
doesn’t give you the wherewithal to put sufficient money aside to allow for an early retirement. You
may be the hardest worker in the world, but if you’re in a field that pays low wages, you’re going to
find it hard going at best. So instead we suggest you put your hard work ethic to work on yourself