For six years, Kristy Shen and Bryce Leung had been laser-focused on saving up for a home. “We wanted to be like everyone else–buy a house, work until you’re 65, and go the normal route,” Shen says. But after cobbling together C$500,000 in savings, the couple felt disillusioned by the housing market in Toronto. “Every time we went to an open house, it would just turn into a bidding war,” she says. “I started to think, ‘Is this really a good idea?’ People seemed to have gone nuts and were throwing everything they had at a mortgage.” When a coworker collapsed at his desk due to a grueling work schedule, Shen and Leung decided it was time to carve out a new path. “It took that to open my eyes,” Shen says. “I was like, this is not worth it. I don’t want to be dying at my desk just to pay off a mortgage.”
So the couple took the C$500,000 they had saved for a house and decided to put it towards an early retirement instead. “We discovered, by looking at the numbers, that instead of working another decade, two decades, three decades to pay off a mortgage,” Shen says, “we could actually be retired within the next three to five years if we invested and continued saving at the same rate.”
They aren’t the only ones drawn to the idea of early retirement, which many acolytes have dubbed the FIRE movement–short for “financial independence, retire early.” It’s an approach that has grown in popularity, in part through blogs like the one run by Shen and Leung. For some professionals, it’s a salve for burnout; for others, simply a means to gaining financial security. Often, the goal isn’t to stop working altogether, but to work on their own terms.
Opting for a nomadic lifestyle
By the age of 31, Shen and Leung had saved C$1 million. (At that point, their combined income after taxes was about C$160,000.) “We decided we were going to do a victory lap,” she says. “We were going to quit our jobs, travel around the world for a year, and then maybe come back to Canada and find a place to rent in a low-cost city. But then we discovered traveling was less expensive than living in Toronto.”
Now, they have no permanent address, more or less live out of two backpacks, and travel year-round on just C$40,000 a year. At the moment, they’re in Taiwan. “We have a P.O. box back in Toronto to receive mail, but that’s pretty much it,” Leung says. “In a few weeks we’re going to be in Thailand, after that we’re going to be in U.K., then Portugal.” And after that? “Who the fuck knows?” he quips. “This is our life now.”
Of course, their path to retired bliss may be harder to replicate for other aspiring early retirees (and their version of retirement may not be everyone’s cup of tea). Shen and Leung worked in tech, and even early into their working life were bringing in a combined C$100,000 in take-home pay. Both of them prioritized building up their savings in part because they felt intense cultural pressure to buy a home. (When Shen told her mother she was a millionaire, she said, “Who cares? You don’t even have a house.”) And Shen, who grew up in poverty in China, was particularly well-versed in how to live well below her means.
But the couple insists that even people who earn less can strive for financial independence. If you make quite a bit of money but spend most of it, you’re further from retirement than someone who makes less money but only spends 50% of their earnings. “When your cost of living is lower, the amount of money you need to be able to sustain that perpetually drops as well,” Leung says. Some people also move to a cheaper area, where their money goes further, while others “retire” with the intent of supplementing their retirement savings with a steady stream of income from a less lucrative, more meaningful job.
Shen and Leung, too, have not given up work altogether. Like other early retirees, Shen and Leung have documented their financial journey on their blog, which is aptly titled “Millennial Revolution.” In addition to blogging, Shen and Leung are now publishing a book with Penguin that will make its debut later this year. Since retiring in 2015, these ventures have earned the couple about C$84,000. It’s almost like a second career for Shen in particular, who opted to be an engineer because it was more practical but had long wanted to be a writer.
“One of the things we’ve had time to do after we retired is volunteering,” Shen says. “We volunteer for a nonprofit, but on top of that we’re helping people with their finances on our blog. Being able to stop and think about–what is the bigger picture? How can you give back? How can you help other people? That’s been a huge game-changer in retirement. I never had time to think about that while I was working.”
Mini retirements punctuated by work
For Jeff Maddux, waiting until his sixties to retire was out of the question. But he also recognized that retiring as early as say, Shen and Leung, wasn’t in the cards for him. “I initially wanted to do early retirement but I didn’t see a path toward reaching that goal,” he says. What did seem feasible, on the other hand, were “mini” retirements.
“After three and a half years of working full-time, I finally pulled the trigger and quit my job,” he says. “I didn’t have another one lined up, so I took some time off. I ended up traveling to Thailand for a few weeks and kind of reassessing what I wanted to do with my next job.” Maddux admits he got bored eventually and was ready to return to work–but the pattern stuck. He started taking breaks every time he left a job and has now gone on five mini retirements, which were anywhere from two to eight months long. Before leaving a job, Maddux would put away three to six months of savings, along with a $10,000 buffer, and he made sure his rent expenses were never more than a third of his earnings, which amount to $50,000 a year on average.
His longterm goal is not unlike what many people want out of early retirement–to quit his corporate job in lieu of more meaningful work. “I’m working part time at a corporate accounting job, and that’s paying the bills,” he says. “But on the side, I’m building my own business. That’s slow to grow, so it’s going to take a while to replace even my part-time income. Ultimately I want to retire from corporate America and pursue my entrepreneurial endeavors.”
More about financial independence than not working
Ahna Holloran, a financial coach, says that pursuing early retirement isn’t her ticket to never working again. “For us, it’s about having freedom,” she says. “[My husband and I] both have jobs right now that we love and that we’re passionate about. I can’t see us ever not working towards something.” Instead, she says, the goal is to achieve financial independence–the “FI” part of the FIRE movement—in about 15 years, by her late forties. That means setting aside about $2 million for retirement, with an annual spending estimate of $80,000. (Holloran’s savings goal is in keeping with the 4% rule–withdrawing and spending no more than 4% of your retirement savings each year–which many early retirees use as a guideline.)
Living in Los Angeles, saving for retirement takes concerted effort. Holloran says she and her husband save about 30% to 40% of their take-home pay and invest in index funds, along with maxing out on their employer retirement plans. “Part of that is just working to make as much money as we can–working towards success in our careers,” she says. “But part of that is also cutting spending where we can.” That includes living in a rent-controlled unit, not investing in new cars, and “travel hacking” by opening cash-back credit cards or collecting miles where they can. Holloran also hasn’t committed to a strict retirement date, in part because she wants to have children and know that could shift her goalposts. “We’re not putting our feet to the fire,” she says. “And we don’t completely deprive ourselves because we also believe in enjoying our lives.”
And like Shen and Leung, Holloran isn’t wedded to the milestone of becoming a homeowner. “It’s one of those things that’s always been seen as a mark of success–and that if you own a home it’s going to be your best investment,” she says. “We’re more knowledgeable in other areas of investing. We feel like we can get to our goals by investing in other ways faster than by investing in real estate.” In other words, she would rather have her financial independence. “I feel like people think I’ve been less responsible or successful with my money because I haven’t purchased a home,” she says. “I feel no guilt renting, and I don’t feel like I’m throwing away that check every month. I’m paying for my freedom and to live where I want to live.”