How I Retired Early
“The man is richest whose pleasures are the cheapest.” —Henry David Thoreau
How did I retire from my corporate job, financially independent, at age 50? I’d like to say it was all hard work, skill, and perfect timing. It’s true that I worked many long hours at the start of my career. And I also managed to find professional situations where I could profit from my organizational and writing skills. My timing, however, was lousy on some notable occasions! But, ultimately, “I” am not the whole story. When I reflect on my life so far, it is clear that the kindness, generosity, and wisdom of others, figures large. Here then, is the complete story….
NOTE: The following article is long and autobiographical.
For a short version with just the action items, see How to Retire Early.
I was raised in a military family — my father was a Navy Captain, my mother the daughter of an Admiral. Church, country, family, and a sense of duty permeated my childhood. I joined the Boy Scouts, and progressed to Eagle. Though these values were constraining to me at times, there was no hypocrisy in how we lived them, and I felt no need to reject them. I have since integrated those early principles with others equally important to me, but they remain my starting point.
Military salaries were modest and my mother stayed at home in the early years. Though we were comfortable, luxuries were few. We ate fast food after church on Sundays. We didn’t accumulate possessions, because there would be orders to relocate every year or two. My recreation was simple and cheap: exploring the outdoors, in our neighborhood on foot or bike in early years, and in the mountains near our home with a backpack later on. I was fortunate to enjoy school, and did well. I liked all subjects, but leaned technical. I graduated college with a degree in Civil Engineering.
My wife’s beginnings were similar to mine, her father also a government employee in a defense agency. She was the second youngest in a large family, with little room for luxuries. There were few college options and she chose the same state university I transferred into. I’ve loved her since my first glimpse across a crowded room at a potluck dinner, though it was another year before we started dating, and years more before we married.
She has been fully behind me at each stage of my life. Whether I have been taking a job, leaving a job, starting a business, or exiting a business, her way has been to look forthrightly into my eyes and say: “We’ll make it work.” I’ve never felt I had to prove anything to her, or maintain anything for her. When times were good, we splurged. When times were hard, we economized. As long as we were together, and enjoying life, that was enough. She has been the most trusting and trustworthy partner in all my endeavors.
A decade ago, when it appeared my career might be in jeopardy, she went back to school, got certified to teach in our new home state, and restarted her teaching career. In recent years, more often than not, she has had the most difficult job — long hours and ever-expanding workload — all for a salary less than half the starting salary in my profession.
Even now, she will work a little longer and hedge our bets on health care. She can retire with that rarest of benefits in today’s world: a group health plan. It won’t be free, but is likely to cost us far less than other options, thereby protecting our long-term spending power.
Thanks to our upbringing and dispositions, we have always naturally lived below our means. After 25 years of marriage, we could number on one hand the times we didn’t pay off credit card balances in the same month. It’s been two decades since we had a car loan, and we always paid those off early. We paid off our house early too, thanks to some good fortune explained below. Even when it might have made economic sense to carry a loan, we paid it off, favoring the simplicity and security of living debt-free.
Our lifestyle has been a curious mixture of frugality and focused indulgence. Onlookers must have scratched their heads at what we do, and don’t, spend money on. In our system, food, gear, and cheap travel are important, houses and vehicles not so much. The details are irrelevant: what matters is that we’ve done it our way, pampering ourselves in the few areas that matter to us, and ignoring the rest, especially what others might be thinking, doing, or buying.
I’ve tracked all of our expenses in Quicken for 20 years and kept a detailed budget for more than 10, but, other than groceries and dining out, it rarely constrains us. We have been blessed, I think, to simply not want very much. And that lack of desire might be our greatest asset over time.
Even in retirement, though the probability is we can live comfortably off our assets, we don’t have such a margin of safety that it completely eliminates any money worries. If the economy goes bad for an extended period, we will have to cut back, to ensure we continue living below our means. And in the event that is necessary, it will be familiar terrain, not so much a hardship, as a change of pace for us.
In the early spring of 1986, I spotted a small advertisement in the back of Civil Engineering magazine. It was for a tiny software company in a nearby state that I surmised might use the services of a freelance writer and programmer like me. I mailed off a query, and a few days later received a telephone call that changed the course of my life.
Soon, I met the caller — the brash, brilliant, and driven entrepreneur whose unconventional wisdom, and generosity, would ultimately shape my life and career. I became his first head of R&D and guided the startup company through a difficult technical and personnel transition from the free-wheeling DOS days to professional software development in the Windows environment. I trained the early team, set an example, held the bar, and managed progress. But our ultimate success — which extended far beyond my own vision and capabilities — was due to the efforts of the many creative and committed individuals who followed me.
Ever cautious, I cashed out my ownership and left the company several years before what would have been the big payoff. Yet I did well enough: maxing out my retirement contributions with generous matching, investing bonuses in the stock market, paying off our house with the buy-out, and moving that much closer to financial independence.
The years immediately following my departure were some of our most difficult. I re-started my own business, but found the world had changed. Income was scarce; self-doubt was overwhelming. Our net worth stalled, and went backwards for two years. Yet our family grew stronger. At my wife’s suggestion, I began meditating, and studied Buddhist philosophy. In time, profitable work returned. And the practical and spiritual lessons learned through those tribulations created who I am today. Whenever I find myself lacking in compassion or gratitude, I need only think of those times.
I was raised with discipline, but my fascination with solving abstract problems is a matter of personality. I am blessed to prefer active learning and problem solving, to passive entertainment. It’s never felt like “work.” For at least the first ten years of my career, 60-plus hour workweeks were the norm. I remember one sultry August, circa 1990, excited about developing my first software product — a hypertext reference system — when I worked from rising until 3:00 or 4:00 am in the morning, for 30 days in a row. (A pathological sort of optimism is required for software development: the same quality that causes me to underestimate driving times, exasperating my dear wife!)
I don’t consider myself particularly gifted technically, especially compared to the true software geniuses I’ve had the privilege to work alongside. I was fortunate to have a technical bent, and to become fascinated by computers at the dawn of the PC age. It was the gold rush era, when anybody with a few tools could stake a claim and make off with riches. The bar, and the competition — now worldwide in scope — are far higher these days.
But I was given a few gifts that have gone far. First, I could write a cogent sentence or two, and enjoyed doing it. Working remotely for much of my career, my writing — mostly in e-mail — has been my public persona. Our small company was one of the very earliest adopters of e-mail, and we soon learned when, and when not, to use it. The written word has been my most important tool for presenting myself and interacting with others. The related skills of speaking in public, making presentations, running meetings, and training others, have also been vital.
I’ve always felt that good writing was just “clear thinking,” and valued that. But who knows if my writing would have developed, had it not been for a few very special AP English teachers in high school, and one standout Humanities professor in the engineering school at college. The respect for clear communication that I learned from those teachers proved far more valuable in my career than all the math, science, and engineering problems I ever worked….
The second gift was a love for organizing. What is arduous for others, is joyful to me. I thrive on planning, analyzing, evaluating, scheduling, listing, and designing. I was valuable to my employers at key junctures for laying out the physical architecture of what would become very large, complex, and long-lived software systems. Though organizing and managing other people is not my first love, I do it when required. I can run a meeting efficiently, herd the cats in the same direction, and keep their eyes on the ball. Then I can write a lucid summary for them, and upper management. If you can do those things for a company that has good leadership and a sound business model, success is not far off.
To a fault, I put a premium on good relations with others. Civility is important to me: friction, anger, and overt competition just drag everybody down and make the days hard. I was told early in my career: “Be good to people on your way up, and they’ll be good to you on your way down.” It proved true in my life, as people I had helped to hire and mentor, surpassed me in the organization and grew into positions of power.
How does an engineer from a modest family learn to make and manage significant investments? The seeds were in place thanks to my upbringing and personality. But for those seeds to reach maturity, I needed the tutelage of a master investor. Fortunately, one walked into my life, virtually, about 15 years ago — just the time I started accumulating significant savings. He, plus some mistakes, have been my primary teachers.
In the spring of 1996 my father sent me a package of reading material. It included, among other items, a sample copy of Dick Young’s Intelligence Report — a monthly investing newsletter. I had little idea at the time that such publications existed, that there were probably hundreds of them preaching all manner of investing strategies and styles, or what an optimal strategy might be. But I liked Dick’s talk about low expenses, diversification, patience, compound interest, and an “armadillo” strategy — never losing your money. So I subscribed….
Thus began my investing education. Dick packaged the latest research on low-cost investing with a conservative, contrarian outlook, and a lifetime of real-world money experience. From him I learned to buy and hold quality investments, control expenses, avoid trading, separate from the crowd, diversify, simplify, choose value and income over growth, and let compound interest work its magic. All principles that contribute to long-term investing success. He also pointed me to Vanguard, where the majority of my investments remain today.
Dick’s greatest service has been the monthly reminder of core investing values. I don’t share all of his views, or follow all of his strategies. There comes a time for the student to chart his own course alongside the master. But Dick Young’s philosophy remains my investing foundation. Thanks to him, I avoided blunders that would have sunk my chances at early retirement, and survived two major market downturns in the last decade with net worth intact and growing. Over the last seven years, including the Great Recession, my conservative portfolio of stocks and bonds has averaged more than enough growth to support our retirement living expenses.
A natural outgrowth of Dick’s philosophies, and my own penchant for organization, has been my relentless focus on simplicity and accountability in my portfolio. Over the years, I resisted the urge to invest small amounts of money in the latest hot idea. Our entire portfolio now consists of just 9 holdings (all low-cost mutual funds or ETFs) in just 2 accounts. I’ve tracked the growth in our net worth accurately for many years, and calculated our overall portfolio returns each year, so I would understand if we were going in the right direction, and why, or why not.
I can’t do justice to the riches of my life, even my financial life, without touching on parenting, and my wonderful son. At the time he was born, fatherhood weighed heavily on me. I was running my own, successful software company. Thanks to a marketing agreement with one of the first, and largest, direct-mail marketers of PC software, we had shipped more than 100,000 copies of our product line of online references. But the Windows revolution was on the horizon, and my DOS-based products would have to be rewritten. Should I gamble that I could make the transition on my own, or accept the generous merger offer from my entrepreneurial mentor? I looked at my infant son, and chose the safer, surer course.
I knew I was giving up the opportunity to captain my own ship. In the years that followed, I wondered if I had also given up untold wealth, not trying to bring my successful product line into Windows. But, with the wisdom of hindsight, I now see that the surest road to riches was the one I took: joining a successful startup with the resources to endure — a strong leader, great business model, creative marketing, and brilliant development team. In later years, being part of a thriving larger company gave me, not only a steadily increasing salary, but freedom to be a better father which I might never have enjoyed had I been tied to my own small boat.
The hard, and joyful, lessons of parenting proved the most profound in my life. In sacrificing self to family and work, I ultimately found a truer identity, and, unexpectedly, financial success. I now see that I enjoy, not only spiritual wealth, but material as well, thanks to the influence of my young son.
His contributions don’t stop there. Among his many talents, he proved a strong student — insightful and creative in a range of subjects. In his last year of high school he was selected as a National Merit Scholar, and his hard work paid off in a large college scholarship. Taking responsibility for his own college education has been his most recent gift to us, freeing me of another milestone on the way to financial independence.
I’m incredibly grateful for the few key gifts described above. But one quality that I do not have in abundance, which I’ve had to cultivate, but which proved ultimately so important, is patience. I once thought patience was simply the ability to wait. But it is more than that. Its first definition is to “bear pain or difficulty with calmness.” Both aspects — waiting, and enduring difficulty — are critical to lifetime success.
Many years ago, after a big promotion, I began dropping a check in the mail to savings, every week on my way to work. Later, I would walk around the corner at lunchtime to deposit my paycheck in a branch bank, quietly celebrating each step towards financial independence. I sat in business meetings, day after day, week after week, month after month, year after year, mustering all the commitment and concentration I could. Each year, planning and taking family vacations, feeling a week or two of pure freedom, reminded me of my goal….
If somebody had told me in the early years how long I would wait, it would have been too much to bear, had I not mostly enjoyed my work. In the later years, I knew enough about financial planning to calculate that it wasn’t time yet. I did what I needed to make it through, day by day. My mother, retired from a lengthy teaching career, advised: “Relax and let it happen, stop pushing on it.” I reminded myself to experience all of life that I could, while still working.
I did not make a habit of deferring happiness, especially with my family. Beginning with my move to a remote office, and continuing with careful management of my work schedule as my son reached the teenage years, I gave family priority over work. This almost surely hurt my career, even delayed my retirement, but I don’t regret a minute of it! The only sadness that remains from all that time is when I postponed one special family vacation “until next year.” That particular opportunity never came again….
When I think back over the strategic business and employment negotiations that I’ve been involved in over the years, the lesson is clear: patience is a virtue. When I didn’t have it, I suffered, often financially. And when I did exercise patience, I usually prospered. Rejoining the company at one point, I took a cut in salary in exchange for additional annual vacation. I had a sense at the time that there were many more years of work ahead, and anything I could do to pace myself — such as allowing extra time off — would be more important than a small boost in salary. I was right.
So those are the ingredients of my modest success. It is not a story of razor-sharp business acumen, split-second timing, strokes of genius, or hair-raising risk taking. Rather my tale is one of good fortune, providence, and patience. It is both personal and universal. The details — my own strengths, foibles, and fate — are specific to me. But there are lessons others might draw….
- Do what you love. You simply can’t be successful without passion and hard work. And that comes naturally when you enjoy what you’re doing. If you don’t enjoy it at the start of your career, then try something else. If you don’t enjoy it later in your career, then weigh carefully the costs and benefits of leaving versus staying, for a while.
- When you are the recipient of great generosity, make the most of it. Say “thank you” and move ahead. Do not turn away good fortune out of misdirected humility or independence. Life will surely deal you other obstacles down the road. And you will need all the good fortune and fortitude you have accumulated to overcome them.
- Follow a simple formula for building wealth: live on less than you make, and invest the balance wisely. That is the path most of us need to pursue. How much you make begins with your education, but over time will be more a function of your work ethic, communication and people skills. How much it costs you to live, is largely a function of personality: what do you truly need to be happy? The basics of wise investing can be learned in a few days, and refined in a few years. Do it yourself and keep it simple: buy only what you understand. Keep costs low. Diversify.
- Lastly and perhaps most importantly: Don’t sacrifice today for tomorrow. As worthy and important as your financial or career goals may be, don’t sacrifice your quality of life for them, especially when it involves other people. The future may never come, and certainly won’t come in the way you imagine. But the present will surely become the past, soon. Don’t forgo opportunities, such as being with your loved ones as they grow, that will never come again.