Out of the mainstream
Extreme early retirement strikes a chord with people now more than in the past, says MSN personal finance columnist and author Liz Pulliam Weston. While going against the fearsome icon of the "company man" used to be part of the '60s counterculture, Weston says she's seeing a resurgence of the attitude among 20-somethings who are rejecting the consumerism that began in the 1980s.
"They want more than to be chained to their desks," she says, and they have more desire to redesign their career to have more personal meaning. Sometimes that means working until 65, but often shifting to careers that suit their changing mind-set.
Whether today's employees are enchanted with the idea of dropping out early or not, it's still a small group of people who can make it happen, says Weston.
"You have to be out of the mainstream to do this," she says, adding that in her experience, the successful extreme early retirees are "laser-like, and don't seem to care what people think."
Aside from an unwavering focus on their goal and an indifferent attitude toward amassing all the latest stuff, extreme early retirees can't be lumped into the same category. They run the gamut from young parents to singles and dual-income couples without children. Weston has talked to couples with as many as four children who are living in expensive areas of the country, as well as those who have no family ties and a cabin in the woods.
They share an excitement about their lives, a desire to spend time in pursuits that are meaningful to them, and often, an environmental conscience.
The simple life
All three traits apply to Aldridge and Lugenbehl, who retired more than a dozen years ago to an eight-acre parcel in Cottage Grove, Ore., with a starting nest egg of $135,000 each. They each contributed $50,000 to buy the land where they built their home, and the remainder is in CDs. They live on $400 a month and have a health insurance policy with a deductible of $7,500.
The money has remained conservatively invested in CDs.
"We like to sleep at night, so it's more important to us to know what's coming in, rather than to maximize the possible income," says Aldridge. "We've seen too many folks lose money rather than make money from their so-called investments."
Aldridge and Lugenbehl, who retired at ages 48 and 47, don't have a television and rarely eat out. Yet they don't feel like their life is lacking, says Aldridge.
"We are fortunate to have found what is enough for us. I feel so totally blessed with how much we have that I can't imagine wanting more. At this point, I'd have to say it's more than enough to meet our needs and our wants."
Aldridge acknowledges that the cost of living is lower where they are, but says they make an art form out of living well on less. They grow most of their own food, shop for clothes at yard sales, which Aldridge says is a form of entertainment for her, and find joy in small construction and gardening projects on their property.
The two cook their own meals from scratch and volunteer to give presentations on the environmental impact of food choices, as well as what Aldridge calls "voluntary simplicity."
"Dale and I would both rather have our time," she says, "even if we end up choosing to work hard at gardening or building. At least we're the ones determining what we're going to do with our precious life energy."
Finding passion outside of a career that had become a chore is a theme among most extreme early retirees. For the Kaderlis, that meant world travel and a chance to experience diverse cultures.
"We have our youth and spirit of adventure," the Kaderlis say. "The opportunity to travel to exotic locations and meet people from foreign lands has given us a global view that no amount of money could buy."
Aldridge and Lugenbehl enjoy their day-to-day life so much that the thought of vacationing elsewhere rarely occurs to them.
"We exercise faithfully three days a week, and usually take a long walk on the other four," says Aldridge. "My mother lives up here now and we take care of her. We do all the regular garden and orchard work."
The abundance of time and the freedom to choose how to spend it are the most satisfying aspects of retirement for Aldridge. "It's being able to get up each morning and decide for myself what I'm going to be doing that day. Honestly, I can't think of any downside; at least there hasn't been one for me."
Whether it's the green tinge of envy or an aversion to anyone who steps off life's predictable treadmill, extreme early retirees often face unexpected opposition from those around them.
"Back when we left our jobs, we got mostly shock," says Aldridge. "Dale's mother was a classic. She was sure we were going to go hungry and be out in the cold. That was about 13 years ago, and it's never been a problem."
"Some people have expressed envy, but we don't think we did anything they couldn't do if it really was a priority for them," she adds. "Most of our work history was part-time, and not all that highly paid."
Aldridge says Lugenbehl's mother couldn't imagine how they would fill their time in retirement.
"It was as if she thought we wouldn't be able to find things to do," Aldridge says. "My response was to ask her what she did with her time. Not another word was said because she realized that she'd never had any trouble in that regard."
The Kaderlis said that when they first retired, people treated them like they were on an extended vacation and would soon return to work.
"Some thought we were committing social and financial suicide, and others projected that we were selfish or lazy since we opted out of the mandatory working world," the Kaderlis say. "This included family members, friends and even strangers. Our choice of early retirement was too far out of the box for them."
Think like an entrepreneur
The Kaderlis and Aldridge say they have always been debt-free, except for the time when they had mortgages, and they avoid debt now like the plague. They also live below their means, even when their investments throw off more income.
These two actions are key to the ability to retire early, says Herb Hopwood, president of Hopwood Financial Services in Great Falls, Va.
"It really comes down to the fact that you can't control what the markets are going to do, but one thing you can control is your expenses, and that's probably the biggest thing," he says.
Hopwood likens extreme early retirement to extreme sports.
"Extreme sports are risky and you must be in great physical shape. Early retirement is risky, because what you're planning is going to be for a long period of time without income ... and you have to be in great financial shape."
After an initial financial plan is developed, whether informally penciled on the back of an envelope, like the Kaderlis, or more formally with a financial planner, it has to be monitored and changed. Setting yourself up to receive the same income no matter how the markets perform can result in financial disaster, says Hopwood. "The objective is not to tap the principal."
Once you begin doing that, he says, it's alarming how fast principal erodes, leaving you with a smaller pot from which to draw income. A portfolio should remain fairly aggressive in equities, up to 70 percent of the total. But Hopwood cautions against a blanket approach when it comes to what's considered aggressive.
"You can be aggressive in allocation, and stupid in investments," he says. For instance, he wouldn't recommend that all the equity allocation be in biotech, or growth stocks, but in a balanced blend that will return an average of 8 percent over time.
Hopwood recommends that clients seeking a long retirement train themselves to think like entrepreneurs. The portfolio, rather than a job, is providing income, and like an entrepreneur, a retiree should be constantly watching and adjusting the rate of income.
"Too many people adjust their lifestyle to their income," Hopwood says. "That's a very dangerous thing to do."