Retire by 40? 3 Couples Share How They Plan to Make It Happen

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Steeles“We Want to Retire in Our 30s and Live Off Rental Income”

Who: John and Melissa Steele, both 26, real estate sales associates, San Diego

Our Early Retirement ‘Aha!’ Moment: “The lightbulb moment for Melissa and me came when we were both working at a large bank in Buffalo, New York, right after college.

Many of our co-workers were older and had been working there for many years. Seeing how unhappy they were made us realize we didn’t want to be 55 and stuck in a job we hated just because we were close to retirement.

We realized it was important to take control of our lives now—and that included working for ourselves. So two and a half years ago, we moved to San Diego and started our own real estate company, Steele San Diego Homes.

Our goal is to be financially free enough to explore other interests and travel the world—hopefully by our 30s. So it’s retirement in the sense that we’re free of the rat race and able to live off passive income from real estate investments.

RELATED: Story of a Self-Made Real Estate Mogul: ‘I Quadrupled My Net Worth in Five Years’

Our Frugal Moves: We have no debt, and share the one car we own.

Our largest monthly expense is food at around $2,000. Melissa has some health issues, so we buy healthier food that costs substantially more.

But, as a result, we cook and prepare almost every meal ourselves, and rarely eat out. I bring lunch to work every day. And neither one of us drinks coffee or has any other daily spending habits.

A lot of how we save is by ensuring we’re getting the best value for our dollar. We canceled cable three years ago, opting for Netflix. When choosing an apartment, we factored in amenities like a parking spot, commuting costs and a gym—ultimately choosing the place that would save us the most in cost of living over time.

And when Melissa wanted to buy a Vitamix, she spent six months debating whether the purchase would be worth it. Now it’s an appliance she uses almost every day.

We also do a lot of selling on Craigslist and eBay to make back some money. Anything we no longer use, we put up for sale. And I do mean anything.

When we moved to San Diego, we sold everything: our house, our car, even our sheets. The only thing we threw away was a broom! And we do a purge of our apartment every few months, when Melissa sells or donates anything we no longer need.

The Impact on Our Nest Egg: Our two biggest expenditures are groceries and rent, which run about $3,500 a month. Our cost of living was much cheaper in Buffalo, but even so, we’ve managed to keep our monthly spending the same—between $4,000 and $5,000 a month total—by remaining frugal.

We just paid for our wedding out of pocket, so right now we have only about $20,000 in regular savings and another $10,000 each in our old 401(k)s. But since we’re relying on rental income to get us to retirement, we’re most focused on our net worth, which is currently over $350,000.

That includes rental properties we own in Tennessee, through which we earn more than $1,200 a month without doing a thing. Because we live frugally, we don’t touch that rental income—funneling it back into paying down the mortgages quicker.”

RELATED: Net Worth: Why You Need to Know It—and Grow It

  • Russell Howard

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    • Alicia

      I’m confused…two out of the three couples profiled here have a baby, no?

      • Eastwestcoaster

        I guess they haven’t had any medical issues yet. Which is surprising. Not to mention the overall cost of putting their kids through school and after school activiities etc. and helping them through college if their kids want to do that.

        • kgal1298

          I have to guess the last couple will home school if they want to travel. It might not be the major ideal for everyone, but there are actually quiet a few traveling families that do this.

          • Eastwestcoaster

            I guess, but home schooling isn’t cheap either and they have to adhere to whatever standards. Also, personally I wouldn’t want to have my kids grow up moving so much, it messes with their social life and development, but to each their own. Either way, the cost of just raising children is expensive.

      • kgal1298

        The last couple and first couple did have a kid, but the last couple had their’s just 3 months ago so really it’s one couple without kids and they are the youngest ones, but I get what your getting at it’s sooo pricey to have kids and that’s probably the main reason I’d hold off besides the fact that I actually enjoy life right now without having a kid I do have pets though which is another budgetary issue on it’s own.

  • Eastwestcoaster

    I’m not understanding how these couples relate to people who have student loans? My wife and I have a lot of them (as per the normal for people who went to college since the late 1990s). We both work in the same professional field at high levels, but are unable to do this stuff because we got our master’s degrees and paid lots of money in loans for them. What are these couples going to do at age 50? What is their income? How will they pay for their kid’s living expenses and college if they attend? Do they have millions in savings? It can’t just be living frugally. What kind of frugal living did they do other than scrap cell phone service to a lower rate and make meals at home? I don’t trust a cell phone service that I can only use on wi-fi. I need a reliable service in my area and same goes with internet, the more hacking that goes on, the more security you need. You get what you pay for. How did they pay for their car repairs, medical expenses, family emergencies. Medical expenses are high for me and my wife’s needs. Also, we have to drive to work where we live, we can’t just walk there. We also aren’t going to quit our jobs that we’ve worked so hard to get to with schooling and start a real estate business. That’s super risky, especially in CA. There is a housing bubble happening right now in CA. Lots of investors are buying up properties and renting them out. Meaning, less for first-time buyers and the building of more houses. It really picked up in 2012-2013, but is now leveling off and property values are bound to go down again at some point. Also, we’re in a terrible 4-year drought in CA, so it’s possible we might be out of water in a year or 2. I hope that couple realizes this.

    What is their cost of living, do they live in say CA? The couple in San Diego is going to find out that, the rental/housing market isn’t all roses in CA over the years. It’s obvious that some of these couples made a lot of money because they were able to invest a lot in stocks and save a lot of their income. “More than 1 million in my portfolio?”. Sounds like some big time investments. Not to mention that some of these couples are banking on their investments to pan out for decades, which doesn’t always happen. What happens when stocks crash, companies/industries fold, areas become desolate because of high rent or bad living conditions. This stuff can’t be assumed. I’d offer advice to these couples to not rely on this income for as long as they plan, they’re going to need another source. Selling things on Ebay and Craigslist can get you a little bit of money, but it won’t give you enough for retirement. We cook a lot of our meals at home. We even grow some of our own food. Congrats to the couples for doing this, but it doesn’t relate to my situation. I don’t make a ton of extra money beyond my monthly bills, like it seems these couples did and I was in grad. school until I was 26 and same goes for my wife, so we started late. Maybe we should move out of the US, so we don’t have to pay as much money for these types of expenses.

    • kgal1298

      A million isn’t a ton to retire on, but if you go overseas and if their blog provides extra income it’s doable. Also I don’t think any of them have cars and only two had kids, but I agree this is hard to relate to for most people. I can’t cut to the degree they did so I just get side jobs to help increase my income, which so far works.

  • Ashley

    I am confused how the first couple expects to be able to retire by 40 without millions and expenses of $2,700 per month…. If you spread that over 60 years that is $1,944,000. That is not taking in to account expenses for emergencies that will arise or inflation. So actually, you probably do need millions to retire. Max out your 401K (18,000 annually) If you and your partner can do this, in 20 years you will have almost $3,000,000 in savings @ 10% interest rate not including an employer contributions.

    • Eastwestcoaster

      Agreed. You need millions to retire and for medical expenses when you get older and family expenses. That’s why they have pensions at some places once you give them 20-30 years or more of service as an employee and 401Ks or IRAs for retirement savings. I don’t think they realize this. You can live as frugally as you want, but at some point you’re going to need some source of reliable income in the US past 40 as long as the system stays the way it is.

      • kgal1298

        That’s the other thing wouldn’t one normally need more than a million to retire? I imagine they plan on keeping side incomes, but that would mean they didn’t really fully retire.

        • Eastwestcoaster

          Yep, you might be retired from your current job, but you’re still working to make money.

    • kgal1298

      The 2nd couple got me…like what kind of health issues do you have that cause a $2000 a month grocery bill?

      • Eastwestcoaster

        Wow, that is expensive and not necessarily living frugally. We try to eat healthy and spend a little more than the average person for this, but not that much per month on food. It’s understandable that she might need to do this, but I’d be worried about relying on their “net worth” for owning houses and renting them out because you never know if that will pan out in the long run and plus you have to do maintenance on the properties. It’s very risky. We also make lunches for work and make dinner, but still don’t have enough left over to be as far ahead as these couples. Sounds like the 40 year old guy that got married late already had a ton of equity and assets that he was able to sell, we don’t have that at the moment. Maybe when I’m around that age I might have some money, but not a fortune. Our medical expenses and prescriptions is what really gets us along with just monthly bills and student loans.

      • ksh

        I have to think it’s a typo. $200/mo?

      • Rachel

        I was wondering the same thing! We’re a family of 4 in a high-cost-of-living area, and I don’t shop particularly “cheaply,” and we top out around $900/month.

  • Mike Ipsen

    Boy are they going to be pissed if they die at 39.

    • Eastwestcoaster

      Another good point. I like to live semi-frugally, but sometimes you have to have a little fun and go on vacation and what not. Also, apparently none of their friends or family are getting married. That costs a fortune to attend when you’re that far away. I know because I’ve had to make some cross country trips for these events.

      • Mike Ipsen

        Either that or their friends accept the lifestyle these people chose as well. So they do not pressure them to attend unless they can afford it.

  • Kirsten

    This all works out great on paper but in my own experience life didn’t follow that script. I have battled cancer twice, and I’m not 40 yet. (I’m free and clear now, but boy does the cost add up). So what if you don’t live to see your 40 ‘ s? Will you regret the things you didn’t do because you were waiting for retirement? I believe in saving for the future, but I’ve seen first hand that there are no guarantees.

    • Eastwestcoaster

      Exactly. That’s awesome you beat cancer. Medical expenses are very high if you have a serious condition. You should always live life to your fullest and yes try to save money, but don’t get extremely ridiculous about it unless you really need to. Live a little. A lot of my family members have only lived to their 50s, so nothing is a guarantee. Plus, my wife brought up something when I told her about this article, that she would get really bored and feel useless to society if she were to retire at 40 when she would have so much more to give to the public through her work. I personally don’t see why you’d want to fully retire at 40 because I feel as though I need to put my schooling and knowledge to use to help the world, but to each their own.

  • http://www.enchumbao.con MrEnchumbao

    Awesome moves by these couples to leave the rat race behind and focus on what brings them true happiness!

  • Ani

    Great for them! If that’s what you really want, great. Not everyone likes working. Some of us do. What does “retirement” even mean…. (this article did good summarizing at the beginning).

    Unfortunately, I’m 30, just finished college with a ton of debt (finally!) because I made really bad life decisions in my 20′s. Some of us are (extremely) late bloomers. I’ve kept an investment portfolio my parents started in my childhood, but it hasn’t been agressive and I’ve had to pull from it to live (more bad decisions in my 20′s). I’m basically just starting my life. And thank god I never had kids.

    I plan to work until old age because I love to work and I love my field. My husband said the same thing. We like vacations, but we don’t want to live in a perpetual vacation. Love the experiences our jobs give us — even working for other people (neither of us ever wanted to start a business, we’ve worked for small business owners and helped them with theirs and want nothing more to do with it). Both of our parents still work after retirement (in their 60′s), I worked at a job where most people retired from another career and started just to do something else, not because they need money. They still live completely fullfilling lives. Still traveling, still living relatively debt free, and sometimes even able to help us out as we figure things out.

    If living frugally is what makes you happy, do it. I went from making a ton of money and being well off to making minimum wage and learning to live off $100/wk out of necessity. You figure out what you don’t “need.” People do it all the time and are forced to and would rather never do it again.

    • KoukieDoh

      I feel the same way. I will probably work longer than I have to before I retire because I would be BORED if I lived in a perpetual vacation. Studies have shown that many retirees get bored after retirement and return back to work as a retired annuitant (or another part time job for example). My husband and I have a ton of students loans and other debts that just come with being young and starting out your life. It’s sort of a right-of-passage in a sense. You learn to manage your money through the mistakes you make in your 20s and you fix them. There is no RUSH to retire. I plan on living a long and healthy life. Are you wanting to retire at 40 because you are afraid you won’t have enough time to travel? Gosh I hope I live WELL past 65, let alone 40. It’s not like I can’t take vacations while I’m still working. Breaking up your work with vacations makes you appreciate them more. If you were on a perpetual vacation, you wouldn’t get the same emotional benefits as if you took punctuated vacations. Learnvest has even done articles on this!

  • windy lenart

    This is how I’m gonna make it happen (retire by 40):

    1 – Save long enough for big purchases (car, house) so that payments plus all other expenses don’t go over 50% of net monthly income. Save the other 50%
    2 – Never EVER carry a credit card balance (unless it’s an emergency)
    3 – Every time you get a raise, automatically direct the difference to a savings/investment account
    4 – Understand the difference between a want and a need and try to indulge in fewer ‘wants’
    5 – Cut back spending on monthly expenses like cable, internet, insurance, etc. (look at $25/month auto insurance from InsurancePanda, for example)
    6 – Buy healthy foods and avoid excessive eating out. Pack your own lunches
    7 – Focus on accumulating assets. A car is not an asset. Better if they generate cash flow.