Over the last few days my early retirement story has been published in some large Australian media outlets, namely the ABC.

This has lead to a huge number of people reading through my website, seeing what an awesome idea this is and giving me a virtual high five. It has also lead to an even larger number of people being terribly confused about how this is even possible, with some making all sorts of crazy assumptions.

I’d like to take this opportunity to welcome my new readers! A lot of you may be new to the FI/RE (Financial Independence/Retire Early) scene. Never fear, I will help to clarify some of the finer points of scrutiny to help anyone who is genuinely interested in finding out more.

Do you have a rich family?

No. I was raised by migrant parents who, like so many others, started a life in Australia from the ground up 50 years ago. No intergenerational wealth at play here. Read more here about my years growing up.

Are you still living at home, mooching off Mum and Dad?

Nope, that’s not me. However I wouldn’t begrudge any young adult who chooses to stay living with their parents for a few years longer whilst saving and investing to reach their goals.

I moved out of home when I was 23 years old, which was the first year I entered the full-time work force. You can read more about this time of my life here, and my living arrangements here.

Do you realise how privileged you are?

Yes. I am very privileged, I never hide the fact. Even having this option available to me puts me in one of the most privileged classes of people to ever exist. Chances are, you too are privileged. I write more about that here.

What happened to your HECs debt?

I paid that off too! I left university with roughly $50K in HECs debt and paid it all down on my own while working.

Have you even taken into account inflation?

Of course! I write extensively about inflation here. I also write about my investment strategy and explicitly mention having my investments keep ahead of inflation here.

$40K per year, are you kidding?!

No I am not kidding. Here is a breakdown of my spending in 2017. Well under my $40K per year target.

How about a wife and kids?

My girlfriend Steph is also onboard! She has her own savings rate and investment goals. We haven’t got to the stage where we share our finances/bank accounts just yet.

Together we are aiming for investments of a touch more than $1 million. Probably $1.25-$1.5 million, but we are still figuring this out. This will give us a combined income of closer to $50K-$60K per year.

This is a personal blog about me and my numbers because I am comfortable sharing them here. Unless explicitly stated otherwise, this blog does not include Steph’s personal finances.

As for children, checkout some discussion on a minimum wage budget here or skip straight to the Cost of Kids Report by Australia’s National Centre for Social & Economic Modelling (NATSEM) to read more about the wildly varying cost of raising children depending on the budget of Australian parents.

What if the share market crashes during your retirement?

Fair point to bring up. Being conservative people, we FI/RE seekers have done extensive research and calculations to come to the 4% safe withdrawal rate – which basically refers to the percentage of your diversified share portfolio that you can safely withdraw from on a yearly basis, without diminishing the initial capital.

The 4% safe withdrawal limit is already quite conservative in of itself to account for the possibility of a severe market downturn in the future. In fact, for the majority of historical scenarios, using a 4% or lower withdrawal rate still leads to a growing capital in real terms!

I plan to write extensively about the safe withdrawal rate, but haven’t got around to it just yet. In the meantime, click here for a fantastic 23 blog post series on the subject. It is an American blog so the numbers need to be adapted, but it is a good place to start.

All in all, I am always flexible to modify my plan if I need to. I am more than prepared to work a few more years full-time, if a share market downturn occurs before I retire, or to take up a part-time employment to supplement my retirement income should a market downturn occur after I’ve stopped working full-time.

Really, $40k what kind of life is that?

Living the good life is simple and doesn’t actually cost all that much money. You just need to spend it on the right things. I spend some time writing about happiness here. I also spend a bit of time writing about the effect of short term spending on happiness here.

I don’t think that excessive consumption leads to happiness.

You must be a lazy no good !@#$%^

Well that is one way to look at it.

You could also say that I am an unbelievably ambitious, hard-working adult who is determined to self fund his retirement and be a burden to no one. In a day and age where 80% of Australians are headed toward needing to rely on at least a part pension, you would think my saving and investing for the future would be commended.

I also maintain that we can contribute so much more to society than just our taxes. Retiring early for me isn’t all about drinking beer and playing Xbox. It is also about creating for myself a fulfilling, balanced lifestyle that includes things like volunteering, raising a family and contributing to society in a personally sustainable way, rather than a self-depleting way.

Why haven’t I heard of the concept of an early retirement before?

We are all brought up in society with prevailing social norms that are so ingrained, that they are rarely challenged. I believe that the 40 year full-time career is one of these norms. It never even occurs to most that it can be challenged. I have a related musing about work here.

But there are some people who have started to dream of something different. People who start writing about it and a plethora of people who have actually already achieved it. I will try to include writing from people who have achieved financial independence on my website to push us all along when we see just how possible it all is.

You must make $280k per year

I wish!

I earn a high salary compared to the average Australian, but nowhere near that high! Salary is definitely a factor for how easy this is, however that’s only because your salary helps to determine your savings rate, which is the most important factor to determining your financial freedom.

Where does Superannuation come into this?

By the time I am 35, I should have roughly $125K in my superannuation account. If I assume a modest after inflation return of 5% per year, that will grow to about $420K in real terms by the time I am 60. If I maintain my $1,000,000 capital of non-super investments, that leaves me with $1.42 million in real terms at 60. Far too much to be able to qualify for any aged pension.

I do not include superannuation in my Financial Independence Progress Tracker, nor am I depending on it. I just can’t predict how the government will mess with that cash cow over the next 25 years! Read some of my ramblings about superannuation here.

So super will be a bonus when I finally get to that age if the rules don’t change drastically before I get there.

What share market returns are you anticipating, which you are using in your calculations?

I generally use 9% before inflation and 6% after inflation for calculating purposes. Looking at the latest Russell Investments Long-term Investing Report and looking at the 20 year graphs and numbers, these may be slightly off. With my before inflation rate 0.3% too high but my inflation is also 0.5% too high! Much of a muchness really.

These are slightly different to the 2016 Report numbers, 2015 Report numbers and so on. Once we get the 2018 Long-term Investment Report the numbers will change again. The numbers don’t seem to change too much though.

I am comfortable working with these numbers for planning purposes. If the numbers end up being drastically different, then I will adjust at the time. No big deal.

My view is that just because plans may change and the unexpected may happen, doesn’t mean you shouldn’t have a plan at all.

That is everything I can think of right now. If after reading the above and the linked content you still feel there is something I have answered inadequately, or haven’t covered at all then I am happy to entertain some further questions in the comments which I will extend this list with.

Shuffling through questions

Pat the Shuffler

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