There are plenty of feel good stories online about how a couple decided to scrap it all and retire early. They all have a different flavor, but one thing they have in common are comments from people who think that it was luck. In some ways, I suppose that’s true. We were lucky enough to be able to go to college. We’ve been lucky enough to have reasonable work stability (aside from some short lived layoffs). We were lucky enough to choose partners who generally share the same goals in life. We are lucky to be healthy.
If you can get past that luck (and I think many are lucky in those same ways), then I think the rest is fairly achievable. We chose majors and careers that pay decently. We chose to live in a lower cost of living area. We choose to spend much less than we earn. We don’t love our jobs – we work because working pays money. Money provides options and options equal independence. In other words, Financial Independence and the option to Exit Young.
So how did we get from broke leaving college to ~$1.5 million now? Below is a table showing every contribution to savings from 2002 to 2015 as closely as I’ve been able to recreate them. I have tracked these closely recently, but not as well in the early years. I hope to demonstrate that anyone making a salary that is sufficient to maximize their 401k contributions for each partner, can achieve Financial Independence at a very reasonable age.
As a comparison, I created a table for the same period using S&P500 rates of return and contributions equal to the max 401k for both partners and a company match of 3% of $50k salaries.
I know some will say that making that level of contribution isn’t possible. I think it is depending on your choices and how well you’re able to contain your cost of living. My first year out of college on a total salary of $37,000 I was able to save over $10k. This while paying my student loans and having too much fun going out with my friends. Its possible, not easy.
Clearly there is a difference. We’ve been able to push more into retirement savings than the 401k maxes. What this reinforces for me though, is that 401k contributions and maximizing your company matches, compounded over time, equals financial independence. At the rate they are going the 401k max couple will be over $1 million in a few years.
To see my thoughts on getting started out of college read: Start Early to Exit Young
Leave me your thoughts in the comments section below.