My Plan for Early Retirement in 2021

In this article, I will give you my plans for 2021 to retire early and reach financial independence.

Around 4 years ago my coworker who had just graduated college asked me what my 5 year plan was. I told them my goal was to not have to work for money. This had been a plan that I had been setting up around 3 months after I started my first job in 2015 at 22 years old. It wasn’t because my job was so terrible, but it was more because of the lack of true freedom.

Why I started my journey to financial independence

When I was around 9, my mother opened a bank account with me, and I was introduced to interest rates. Back then, advertisements for 5% interest rates were common, and I was told that they were even higher in years past. Only a child could interpret interest earned as free money. Right away I asked how much money I needed to make a million dollars a year from interest. After being taught how to calculate that it would take $20,000,000 at a 5% interest rate, I was immediately hooked.

Today, interest rates are so low, and you will be lucky to get anything close to 1% even in a savings account with tons of restrictions. Instead, I resorted to using the equity markets to generate a similar return. Most people who participate in FIRE, aka Financial Independence Retire Early, like to use index funds. Personally, I invest directly in publicly traded companies, and I’ll explain in a later post why I do not like index funds and most other investment vehicles. On average, most equity markets return somewhere around 5%. While past performance does not predict future results, the United States in particular has returned 7-9% historically. To be conservative, I would have to estimate my rate of return to be 7% for the US.

My goal was to retire and be financially independent before I was 30, which gives me 8 working years. While my retired lifestyle would not be as glamorous as I imagined when growing up, I’ve learned and made a couple of adjustments to hopefully make this work.

Where I currently stand

The basic premise of FIRE is to generate income that is larger than your expenses. When using an investment portfolio to generate income, most people use what is called the 4% rule from the Trinity Study. This study suggests that you can use 4% of your investment portfolio on expenses indefinitely and have a high survival rate. The median household income in America is $68,703. In order to generate this much income from an investment portfolio, you would need around $1.7 million. Since most jobs out of college do not pay well enough to earn $1.7 million in 8 years at a 7% rate (around $165,000 per year), I would have to find a way to reduce my expenses and not live like the average American. Turns out, this is pretty easy since the average American wastes a ton of money. I live very cheaply. Since I’m in the 5th most expensive city in the US, I do take pride in the fact that I am able to keep my non housing expenses to around $6,000 per year. Of course, I need to take housing into account when I retire, and as of today, I am around 80% of the way to my FIRE nest egg target, which means I have less than 1 year before I retire. This is way ahead of schedule, since I will be 28 when I retire if my projections are correct.

Plan for 2021

With my YouTube income from a gaming channel, I can retire today from the side hustle income without any sort of nest egg. However, I always want the safety of the nest egg, and I do not want to require any sort of income to sustain the rest of my life. Therefore, I will not retire until I reach my target–even if my YouTube or website revenues skyrocket before then. If you are curious about how to start a successful YouTube channel in gaming, I will write an article in the future addressing this.

As of writing, I can retire in October of 2021. However, I get a 401k match and HSA money from my employer if I stay until January 1st. This gives me 3 options:

  • Retire today and live off of my YouTube income
  • Retire in October
  • Retire on January 1, 2022

I already went over why I don’t want to retire today, but it is still an option. If I retire in October, I am missing out on ‘free’ money for staying the whole calendar year at my company. This totals out to around $8,000.

If I retire on January 1, it may be easier to take care of my own health insurance through a private insurer, or I can just forgo this and self insure. I am also working from home, which is a huge quality of life boost compared to my usual commute which is across the country every week and staying in a hotel. Working form home greatly decreases my hours devoted to work since I avoid a 12-15 hour commute every week. I also got a great promotion at the start of 2020, so the more I work now, the more efficient it is in terms of dollars per hour. Also since November and December have a lot of holidays, working them isn’t so bad, and having extra cash as a cushion never hurt.

During this timeframe, I will also have to consider what the best time to move is and where I will move. Right now I’m thinking of Miami, other cities in Florida, Austin, and New York. I’ll have to coordinate a move which involves either hours of driving or $1000-2000 by hiring a mover. While these are not the cheapest areas, they are either tax havens or near family. They are also good cities to meet someone to get married since they are densely populated and fit a demographic that I am attracted to.

That’s it for now, again, I am 80% of the way to my financial independence goal. It took me 5 years to get to this point, so hopefully I can get it done ahead of schedule. I’ll continue to update you guys on my progress, but in the meantime I will cover many more techniques that I have used personally that can maybe apply to others.

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