Christy and her husband, Bryce, retired in 2014 at age 31; they had about $1.16 million saved, which includes about 4 years of living expenses ($160 thousand–my estimate). Can two people make the money last in Toronto, Canada, where they live? What if they have kids?
She and Bryce enrolled in a co-op program in college, which allowed them to work while going to school. College took 5 years, but they had no debt. Their co-op employer hired them after college at a good salary, and they saved over half of their incomes, maybe $70k per year between them. Like many young people before them, they were saving to buy a house. Then they discovered an inflated Toronto housing market, with people buying run-down homes, painting them and flipping them for maybe 30% profit. That seemed “crazy” to them; they let go of their home ownership goal and adopted instead a plan for early retirement.
Their investments grew quickly because after the 2008 recession, annual gains in stocks and bonds were fairly high. The traditional 4%-rule sounded pretty good to them. They could live well on $40 thousand per year, so they figured they’d need $1 million, plus a reserve for a few years of living expenses in case of another recession.
Living on 4% of a portfolio is consistent with recommendations made by many financial analysts. In most cases, people who follow such a plan will experience gradually increasing portfolios, slowly adding to their financial security. When linked to a willingness to cut expenses when investments decline and a four-year cash cushion, there is every expectation that people can live for long periods without needing to work.
By the end of 2014 they were ready. In a recent interview and in the transcript, Christy defines retirement as independence from the need to work. She admits she may return to work someday, or she may take up other work such as writing. She and Bryce live simply, though not miserly, and they are willing to leave expensive Toronto living for cheaper locations if they have too. They like to travel, and they have found inexpensive travel options. They’re thinking about having children, and they believe the cost of raising children is overblown in much of the popular press. Besides, they are willing to return to work if needed.
One advantage Christy and Bryce have is that they are Canadians and have national health care. If they were in the U.S., they would need to consider health insurance. That’s not to say people in the U.S. can’t imitate them; it just means the calculus of early retirement is different.
Few people in their thirties in Canada or the U.S. imitate Christy and Bryce. Instead, young people are often reported to be spenders, not savers, living near or beyond their incomes. After gaining independence from parents, most want to celebrate a little and buy the established markers of adult life—late-model cars, houses, pricey vacations. Soon, and especially if they have children, they feel wedded to a conventional lifestyle.
Christy and Bryce are choosing a different path. They have trained themselves to live on much less than they’ve earned, and in so doing, they needed a smaller than usual endowment for retirement. If they had instead spent $100 thousand per year instead of about $40 thousand, they would have needed to save $2.5 million to continue that standard of living in retirement ($100 thousand divided by 0.04). With a joint income of about $120 thousand, they could have saved only $20 thousand per year (about 17%), and it would have taken them about 30 to 35 years to accumulate that larger nest egg. That’s a more conventional plan. In reality, few couples save (or have saved) 17% of their annual incomes, which now, as institutional pension commitments fade, is unfolding into a retirement crisis.
All this shows the double edge of saving for retirement. People who save large shares of their incomes will reach any portfolio goal faster. Also, they are simultaneously learning to live on (spend) less, which lowers that portfolio goal, shrinking even more the years they need to work. Christy and Bryce are living that example, showing that others could too.