Retirement isn’t an age. It’s an income number. While many people reach a sufficient net income in their 60s or 70s to retire, some people can walk away much sooner.
One Redditor finds himself in that position and can realistically retire before he turns 50. He recently posted about it in the Fat FIRE subreddit. He’s a little under 40 years old and receives $200k per year from a tax-free trust fund. This amount fluctuates a bit each year, but it’s an excellent starting point for an early retirement.
However, the Redditor also earns $500k per year at his job. He’s also married, and his wife earns $160k per year. The couple’s annual burn rate in a VHCOL area is $300k per year.
Finally, he has more than $3 million in assets between stocks and real estate. When is the best time for the Redditor to retire? I’ll share my thoughts, but it is good to speak with a financial advisor if you can.
Diving More into the Trusts
$200k per year is a great setup, but it gets even better. In a little less than four years, the Redditor will be granted a second trust that is valued at $10 million. It’s invested in the stock market and comes with a 5% tax-free draw each year. That comes to $500k per year in tax-free money on top of the $200k/yr that the Redditor is already receiving.
That’s $700k per year in total, and it doesn’t include the couple’s salaries and net worth. The Redditor mentioned that he enjoys his job on some days and doesn’t enjoy it on other days. While most people in their 40s still have to work, the Redditor can comfortably live off this fortune.
Cost Reducing Moves Make It Even Better
Some people can burn through millions of dollars if you give it to them. Many professional athletes become broke after their careers because of lifestyle creep and living beyond their means. However, that doesn’t seem to be an issue for the Redditor.
While he hinted at some lifestyle creep with the second trust, he said it wouldn’t be anything crazy. Furthermore, he wants to reinvest any trust money that he doesn’t use back into the stock market. That’s a good sign that he is being financially disciplined. However, it gets better.
He currently lives in a VHCOL area but intends to relocate to an MCOL area after retiring. This move will help him get more mileage out of his nest egg. Although $700k per year is plenty, it’s still good to see that he’s taking smart measures to preserve his wealth.
He Has Good Reasons to Retire Early
He and his wife want to spend more time with the kids and travel more often. They also want to spend more time with their family. Those are good reasons to retire, given the significant cash flow the trusts will provide.
He doesn’t have any children yet, although one is on the way. He can continue to work at his job for a little longer, but he is set up to be a present father. He can also help his wife retire early with the funds he is receiving.
Not everyone does well in retirement, as some people end up missing the hustle and structure of work. The Redditor can compensate by finding part-time work or pursuing hobbies in his community. This latter option can help him build friendships and remain social during retirement.
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