According to some people I’m a little nuts for trying to retire at 45. Apparently these people have never read the blog, Early Retirement Extreme which features the story of how one man saved over 75% of his salary for five years and is now financially independent in his early 30’s.
Granted the author, Jacob Fisker, has a very low cost lifestyle to pull this off, but the story is interesting which is why I was looking forward to reviewing Jacob’s book also called Early Retirement Extreme. The book did delivery as I expected it to as I was sucked into it and barely put it down since I received my review copy.
Now this book is significantly different than most other personal finance books you have ever read since the book is more designed like a textbook and also contains significantly more material than what the blog contained. This means it deals heavily with social theory, some math and other concepts that require the reader to actually use their brain a little bit while reading it. The good news is that this very fact makes it a good book to buy since you can read it more than once and pick up different concepts on each read and challenge you to ask: why do we do things this way(on just about everything)?
Perhaps for me the most interesting thing about the book was to realize how very similar Jacob and myself view the world. I didn’t find much new in the book based on my our research, but what was new was how he took several existing pieces of theory and strung them together to his own particular view of the world. Which by the way sort of goes like this: if you accept the idea that we don’t actually ‘need’ the vast majority of crap we buy in life it is then possible to redirect a considerable amount of your income into savings rather than spending. This then allows you the freedom to retire early. The higher the post tax savings rate the early you can leave.
In practical terms the main difference between Jacob and myself is our savings rate. He did a 75%+ savings rate and retired in just five years. I’m doing closer to 50% and chose kids which has strung out my goal by a few more years. Yet in either case it is entirely possible to live well on a faction of the atypically spending levels of our peers.
What the book has done for me is to help me questions some of my assumptions like should I consider a downsized house sooner than I previously planned. Up until now I’ve been reluctant to suggest that concept to my wife since our house is ideally setup for her daycare business. This results in some additional costs to the house, but she is generating a cash flow from that investment. If we move when we are ready to retire to a smaller home we can reduce our monthly costs on housing and also likely free up some capital that has been tied up in the house. (As an aside my wife is actually ok with this idea but reminded me that we likely would like our youngest son to finish grade 8 at our local school which occurs in about 10 more years).
Overall I’m personally going to buy a copy of this book as I do feel it makes an excellent reference book for things to think about with a retirement plan. You may not use all the ideas since you prefer parts of your more expensive lifestyle, but the concepts are helpful to consider.
So if you have read the book or the blog, would you consider an extreme early retirement? Why?