The Number One Rule For Retiring Early While You Are Young.

By Corey Philip // May 23, 2023

I caught this twitter thread about retiring early when you are young.

The author basically makes the case that if you want to retired early you need to follow the 4% rule… that’s a theoretical safe withdrawal rate from a diversified portfolio.

In other words, if you need $100,000/year to live on, your portfolio should be $2,500,000.

I don’t agree with that.  Here’s my take as someone who sold a business at 28 and was effectively ‘as retired as they want to be’.  At that time, I could’ve said ‘F IT’ and lived my lifestyle on 4% of my portfolio.

Retiring early at say age 30 means you need at least 60 years of income.  That’s a long time frame with a lot of stock market volatility.  No I don’t believe the stock market will crash but with that much future cash flow needed, a lost decade like the 2000s where the stock market basically went no where for 10 years would give you some sleepless nights.  And what if that kind of market came up when you were about 40 after 10 years of effectively ‘working on nothing’.

Then there’s lifestyle creep.  You’re going to want nicer things as you adjust to your current income.  Or maybe your family grows.  It happens.  Some may be able to shake it, but I think 99% of people won’t be able to stave it off for 40 years.  Suddenly that 4% amount you budgeted for isn’t going to look so juicy.

This is something people retiring at retirement age don’t have to worry about as much.  For the obvious reason that they physically can’t get out there as much and their family isn’t growing — and they probably will have lost interest in keeping up with the jones.

And then there’s the reality that you will eventually burn out on your passions.  Even if you have enough money to fruitlessly pursue passion projects, you will burn out it.

So here is the the real ‘Number One Rule’ to retiring early…

Own some type of business that affords you the independence you want, provides you mental stimulation, return on your sweat equity, and at least partially funds your lifestyle.

Corey Philip

Corey Philip is a small business owner / investor with a focus on home service businesses.

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