we’re super excited for today’s post. we have been dreaming of early retirement for years, but didn’t really know how to plan out what we conceptually knew we wanted. so we vaguely “saved money” and daydreamed about how great it would be not to work until we’re old. but that was the extent of our “early retirement planning.” until, that is, we found this fantastic book:
we didn’t discover all the bits of gospel that so many of us in the fire community cling to — like the four percent rule, or the wisdom of index investing — via the mustachioed maestro or through any blogs at all. we discovered every single bit of wisdom through this absolute gem of a book, How to Retire Early: Your Guide to Getting Rich Slowly and Retiring on Less.
in it, robert and robin charlton talk about their journey to early retirement, and along the way cover absolutely everything: savings rates, timelines, living below your means, investing, automation, tax-advantaged accounts, paying off debt, taxes, health care, travel, expat options, you name it. what was most incredible to us, out of everything, is that they share their breakdown of income and savings for every single year that they worked, and show how they built up a net worth of nearly $1 million in about 15 years without ever making six figures. seriously. ever.
we refer back to our copy of their book pretty regularly, and we often find ourselves saying, “we’d love to hear more from the charltons! they’d have so much to share with all of us, now that they’re almost 10 years into early retirement. and because they literally wrote the book on it.” turns out, while they do sometimes post thoughts on their site, they keep themselves busy in early retirement traveling around the world and living the dream. but we decided to reach out to them to get their thoughts on some things we’ve been wanting to ask them — lucky for all of us, they agreed! so here they are, friends — robert and robin charlton!
you guys got on the early retirement path long before most of us did, and before there was a mr. money mustache providing a road map on how to do it. what helped you believe that early retirement was really possible?
We had our own mentors: people like Billy & Akaisha Kaderli and Paul & Vicki Terhorst, who blazed a trail that we gladly followed. Their accomplishments encouraged us immensely. Books like Your Money or Your Life by Joe Dominguez & Vicki Robin inspired us to live more simply. Magazines like Kiplingers provided us with a basic education in investing before FIRE blogs existed.
Early retirement happened in stages for us. First it was about retiring at 55, then 50 but with Robin still working since she didn’t think she wanted to retire that early (ha!). Then, as the dream started to take shape and become a reality, it was about both of us retiring at 45. We finally ended up retiring at 43. Each time I crunched the numbers to figure out how much of a nest egg we’d need to save up, and each time we made changes in our lives to make it a reality.
For me it all started with a basic dissatisfaction at the thought of working 30+ years at a job I didn’t like all that much at the time. That led to pondering ways to get around it. I considered ideas that now would be in line with extreme early retirement – living in a van down by the river sort of ideas – but Robin had her (understandable) limits! Eventually I realized if we put enough money away, we could live off the interest and never have to work again. I got very excited about this idea and started thinking and writing about it to myself in my journal.
This was in the early 1990s and the internet as we know it was only just getting underway, so I didn’t have a lot of guidance, but it seemed doable financially so we just did it. We began with my 401(k) plan at work, then opened up a Roth IRA when they were still considered newfangled. The first five years were tough: our investments were so small and grew so slowly it was hard to believe we’d ever reach our goal. But then our money started making money and with each passing year it became more apparent we really were going to get there. And here we are!
one of the things we find most inspiring about your story is that you never earned big bucks while you were saving to retire. you prove that it’s entirely possible to save up enough without ever cracking six figures. can you tell us what your average earnings were while you were saving and what your timeline was like?
Thanks, we like this aspect of our story too! We think it gives people hope about what is achievable. They don’t have to become Wall Street stockbrokers or do something risky to score big in order to retire early. They just need to work at a decent job that pays a decent wage and put in some solid effort on their own behalf. Ten or fifteen years could be enough to retire early: it was for us.
Our timeline stretched 15 years from 1992 to 2006. At the start we had just $16.88 to our name. We owned no home, had college and car loans to pay off, and had one job between the two of us paying a measly $14,000 per year. Our book, How to Retire Early, provides all the specifics on our average earnings and yearly investments but here’s a quick breakdown. For the first 8 years we earned an average combined salary of $55,000 gross. Our after-tax income averaged only $40,000. Out of this amount we had to pay a home mortgage, finish paying off car and college loans, and cover all the other typical bills and expenses that come with daily living. Investing on top of all this wasn’t easy but we at least made a beginning, saving an average of $8,900 per year during this period. Beginning in 2000 our income jumped dramatically due to Robin’s retraining as a nurse – demonstrating the power of two good salaries working for you instead of just one. In the end, helped by Robin’s new career and a strong finish in my own, our combined gross salaries averaged $89,000 for the 15 years from 1992 to 2006. During this period we invested on average $22,800 per year.
We think our main contribution to the early retirement movement is that our book provides concrete details and actual numbers about our journey towards financial independence, something that had been missing before, at least as far as we were aware. We showed that it’s possible for normal, everyday people to retire early and that a slow and steady investing approach can get you there. This speaks to the many who work 40- to 50-hour work weeks at regular jobs. We offer them an approach that can turn what seems like an endless treadmill into a path towards financial freedom in a reasonable number of years.
you guys are devoted index investors. what convinced you that index investing was the way to go?
We’re devoted index investors now, but we weren’t when we first started. Like many beginning investors we chased the big returns of whatever fund was listed as #1 in the glossy magazine ads, not realizing that those funds probably took sizable risks to achieve their #1 status and usually paid for it with suboptimal performance afterwards. The more we invested and the more we read, the more we became convinced that trying to beat the market was not the way to go. Rather, the key was simply to keep up with the market while keeping our expenses as low as possible so a smaller chunk was being taken out for management purposes.
We think the best way to achieve this is with index funds. With no active manager to pay, the fees for index funds are dramatically lower. And here’s the kicker: the overall results for index funds significantly outpace those for actively managed funds. Why? Because of those same lower expense ratios that don’t drag down a fund’s performance. Once we hit upon this approach we never looked back. Since then we’ve kept to the same four basic index funds, all with Vanguard (but other firms like Fidelity offer similar funds). Our webpage details the specific funds we use for those who are interested.
since you’ve been retired, have you had any hiccups in your investing strategy that have made you wish you could reconsider your approach?
No, we’re happy with our investing strategy and like the simplicity of our approach. It helped us save close to $1 million by the time we retired in 2006. Now we withdraw $10,000 on a quarterly basis from whichever fund is performing best. That’s $40,000 per year, or about 4% of our nest egg. Since the money we withdraw is in a taxable account, there are no headaches or regulatory hoops to jump through when it comes to accessing this money before age 59½. Meanwhile, our Roth and rollover IRA money continues to grow untouched.
Making big moves in a taxable account can be challenging due to tax consequences. If you wanted to transfer $100,000 from a stock fund to a bond fund, say, that would generate significant capital gains for the year. We’ve recently been hearing about Roth conversion ladders that may offer a solid approach to doing more of your investing in tax-advantaged accounts while still giving you access to your money before turning 59½. That might be worth considering if you’re just starting out.
what financial advice would you give aspiring early retirees?
Our main advice is this: believe that it really is possible to retire early and act on that belief. We’ve been retired for 9 years now, having left our jobs in December 2006 at the age of 43, and here we are in 2016 with a nest egg bigger than when we first retired – despite taking $40,000 off the table each year. Our overall investments have continued to grow as planned. People worry about running out of money, and that’s natural of course, but that hasn’t been our experience. As long as you use wisdom and keep your withdrawals to 4% or less, there’s no reason your nest egg can’t last for the rest of your lives.
Our advice for newbies is, don’t wait! Get started now, even if you can only invest a small amount per month. Get in the habit of investing regularly, then increase that amount as your salary increases. Definitely take advantage of a 401(k) with a match if it’s available to you. And don’t make it any harder than it has to be: pick a reliable company like Vanguard, call their 800 number, and let them help you get started. It’s surprisingly easy but can seem intimidating at first. They can help you open both a taxable and a Roth IRA account. That, combined with your 401(k) at work (if available) should be all you need. Populate these accounts with basic index funds. You could do nothing but invest in an Index 500 fund for your first five years and that would be a solid start.
what was the transition into retirement life like? was anything about it challenging?
Do you remember the last day of school just before summer vacation? That’s how it felt for us when we retired early! We launched straight off into a big 5-month trip to New Zealand and Fiji so we didn’t have much time to think about anything other than the immediacy of our trip.
Our only challenges were logistical in nature as we approached the big date. Automating bill paying, figuring out mail pickup, filing for an extension on taxes since we wouldn’t be in country, selecting a catastrophic health care plan, determining how we would access our money overseas, deciding what we would need on such a long trip, that sort of thing.
Taking the plunge was easy for us, although we’ve seen others struggle over it. Our feeling was, we could always go back to work for a time if need be. (And in fact I did take on a consulting assignment for several months during the Great Recession to avoid drawing down our finances during the worst of that financial crisis; it ended up being my favorite work experience, as discussed in the book.) For those who are less sure about making the transition, we would suggest semi-retirement as an attractive option.
how did retiring early change how you see yourselves? has it been hard to redefine yourselves without careers or job titles?
Our lives came into better focus as soon as we decided to retire early. Before that we felt like we were drifting: working and paying our bills but with no clear sense of direction. As soon as we hit on the idea of retiring early it was like we were on a mission. Now we were working and saving with a purpose, and we felt like we finally knew who we were and what we were about. We were that unconventional couple who thought they could be done with work in ten or fifteen years!
Now we’re that early retired couple who travels the world, and we like that definition too. Much better than a job title in our opinion. You might say we’re career travelers now – and if your goal is to see the world, that really is a career you can pursue over a lifetime, because the world is a big place.
you guys downsized into a small condo for your early retirement, since you planned to spend a lot of your time traveling. several years in, are you happy with that decision?
Yes! Actually when we first retired, we sold our home and lived as nomads for two years. That was fun for a time, but we found we missed having a home base where we could take a break between trips and just be still for awhile. At the depths of the Great Recession, we found a condo for sale in Boulder, Colorado, and bought it with cash for $95,000. That’s unheard-of cheap by Boulder standards. We renovated it, so now we think of it as this perfect little nest for two. It’s only 380 square feet but it has a separate living room and bedroom with a small but functional kitchen. One of the things we love best about it is that it’s turnkey, so we can leave at a moment’s notice. All we have to do is turn down the furnace, lock the door, and we’re gone. It’s also inexpensive to heat and air condition since it’s so small. The HOA fee is reasonable too – another important consideration.
Just this past year we decided to rent the condo out for the first time since we expect to be on the road so much. This is working out very well. It provides us with another income stream of $1,500 per month, letting us live a little larger in our travels than we would be able to otherwise.
when you tell people that you retired early, what’s their reaction usually like?
We get two types of reactions. When we’re traveling, the people we meet are usually like, “Wow, that’s so cool! How’d you do it?” These are folks who absolutely love the idea of leaving the rat race behind to travel more. They tend to pepper us with questions.
When we’re not traveling we get a more mixed response. The people we meet tend to be more tied to conventional ways of living and thinking, and they don’t always understand why we’d want to leave the comfort of the known and the security of our jobs “just to travel.” Their questions tend to be: “Isn’t that risky? Don’t you worry you’ll run out of money? Don’t you get bored?” Of course we answer no to each of these questions and try to help them see that retiring early is actually a financially safe way to live and not boring at all. Part of the problem is that “retired early” connotes lazy or unproductive or risky in some people’s minds. If we frame the discussion in terms of financial independence then we tend to get more nods of understanding, since those words connote security and well-being and productivity.
where all have you traveled since you’ve retired? we know we’re about to feel some major envy. :-)
Well, let’s see, more or less in order it would be: New Zealand, Fiji, Argentina, Uruguay, Falkland Islands, Chile, India, Nepal, Italy, Greece, Monaco, Turkey, Croatia, Switzerland, Ecuador, the Galapagos, Jordan, Israel, Palestine, Cambodia, Laos, Vietnam, Thailand, Japan, Brazil, Paraguay. Just before retiring we visited Costa Rica, Panama, Peru, Kenya, Tanzania, Egypt, and China. Closer to home we’ve made multiple trips to Canada, Mexico, and the Caribbean, and we’ve been to 49 of the 50 U.S. states (somehow Oregon keeps eluding us). Our webpage provides photos and descriptions of each of our trips.
They say travel is intensified living and we believe it. You can pack more into a few days in a foreign country than you can in several years’ worth of being at home doing the same-old same-old. New experiences and adventures, unusual tastes and sounds, exotic wildlife and plants, strange cultures and behaviors, all of which can make you go “wow” on a daily basis. When we hit the road we feel more alive, and we think recapturing that zest for life is what a lot of early retirees are seeking.
what has been the most unexpected thing about early retirement?
How quickly your days fill up and you feel like you have too much to do! Then you remember you don’t even have a job and you wonder how everybody else is doing it. I guess we relax more than we used to, but life still feels plenty full. It’s surprising how quickly early retirement seems normal and the way things should be.
Another unexpected discovery is that travel is best in moderation even if you love it. This is especially true of intensive travel in which you’re changing locations every few days, as we tend to do. We’re learning to pace ourselves by building in rest days and quiet spells during longer journeys. We’re also exploring extended sojourns overseas where we’re not moving all the time – things like house sits and long-term rentals. We talk a lot about balance as we try to make room in our lives not only for travel but also for family and friends and other activities and pursuits that are important to us.
what’s an average day like when you’re at home?
We’d love to say our lives are constantly fascinating but they’re not! In travel mode it seems like we’re always going, doing, seeing, and experiencing in a very intense way, so in non-travel mode we tend to take things a lot slower. We do basic stuff like hang out with friends and family, work out at the gym, cook meals in, catch up on emails and Facebook, work on photos and webpages, watch movies and read books, talk about our next big trip, and just sort of relax and let ourselves breathe. Of course there are all the usual chores like grocery shopping and laundry – those don’t go away even when you’re retired, more’s the pity. We go for long walks when the weather’s good, and we especially like being able to take advantage of sunny days midweek when the trails are quieter.
We both find we’re happiest during quiet periods when we create an unofficial schedule for ourselves and incorporate some form of productivity into our days. I might write from 8 to 11 am, for instance, with any additional writing being optional in the afternoon if I’m on a roll or having a good time with it. Sometimes we have to remind ourselves to take a weekend off (even if it’s midweek) to avoid falling into the trap of always being productive. Being retired early means your days and weeks are your own, so you have to bring your own structure to them. We continue to fine-tune our lives to get the balance right between work, play, travel, and relaxation.
any downsides to early retirement that you hadn’t anticipated?
Surprisingly, we miss investing, especially during big downturns in the market. It’s hard to see a good opportunity for investing go by and not have new earnings to put in. It’s also good to be aware that your existing investments will probably grow more slowly once you’re retired. This isn’t a surprise, exactly, but it can take some getting used to. During our work years we got conditioned to seeing our investments go up, up, up, even in bad years, because of all the new money we were adding. Now we see the dips in a bad year, and the upswings in a good year tend to be less dramatic since we’re withdrawing money instead of putting more in. Thankfully our investments continue to outpace our withdrawals, but it’s wise to moderate your expectations of future growth heading in to retirement.
be honest – do you ever miss working? :-)
No! Not in the 9-to-5 job sense. We love the freedom each day brings to do what we like when we like. Being retired early hopefully means the end of drudgery, but not the end of work. The difference is that we get to choose the work and integrate it into our lives in a way that makes us feel happy and fulfilled.
You can follow along with the Charltons’ continuing adventures at wherewebe.com, and read more about their early retirement story. And we can’t recommend their book highly enough! Any great nuggets in here that surprised you, or made you think differently? Share your thoughts in the comments!