Justin McCurry is a retirement success story. He didn’t have a wealthy family member who gave him a big inheritance, nor did he win the lottery.
What he did do was take an early retirement at age 33 when he was facing a layoff as an engineer.
And that was only possible because he and his wife managed to save $1.4 million while raising three children!
How did he do it? Here’s what Justin says…
He paid for college on the cheap
Justin, who writes about his experiences on his blog Root of Good, went to a local state university instead of a big name school. ‘It was a very good school for engineering, and very inexpensive ($3,000 per year back in 1998),’ he says. ‘My SAT scores could have gotten me into a more prestigious school somewhere else, but in hindsight the local state university was the best choice.’
Another smart money-saving move Justin made during his school years? He condensed college down to three years instead of four (or five) by taking extra courses during the summer.
Though law school was part of the plan for Justin after college, he made sure to work during school at ‘a series of jobs that were interesting, paid well, and/or provided useful experience for my career.’
He and his wife saved early and often
Over the next few years after college, Justin married his wife while he finished law school. Once they both had their first real jobs, they started saving big chunks of money from the get-go.
Most financial planners recommend you save 10% to 15% throughout your working lifetime to have a good solid retirement. But Justin and his wife started at a savings rate of roughly 50% of their income after school!
They stayed in the same starter home
Justin and his wife have never ‘traded up’ in terms of housing. They’re still in the same 30-year-old fixer-upper that they started out in and that’s where they’re raising three kids ranging in age from 4 to 11.
‘We bought the house thinking it would be a starter home. Ten years later, and after ample fix ups, we are still here,’ Justin says. ‘Now it is a permanent home, since it meets our needs well. It still needs work, but what house doesn’t?’
They refinanced often to get a better rate
‘We have been lucky to refinance the house more times than I can remember, pushing the mortgage rate down to 5%, 4%, 3%, 2.5%,’ Justin notes.
Their final interest rate was 1.99% before they paid the house off this year. ‘Each time we refinanced, we tended to make the loan term shorter to help pay off the house quicker.’
They sought out low-cost investments
Justin and his wife started investing with Edward Jones, a full service brokerage firm.
But after a few years, they made the switch to Vanguard and Fidelity.
‘We have saved close to $40,000 on investment expenses by switching to a low cost provider,’ he says. ‘That’s a year or two of living expenses!’
A new study from BuyUpside.com shows that just a difference of 1% in annual fees can mean an $80,000 difference in retirement.
Here’s how the math works. Let’s say you invest $100,000 today with a 5% annual return and you pay 1% in annual fees. In 30 years, you would have $319,694.
Now let’s say you invest $100,000 today with a 5% annual return and you pay 2% in annual fees. In 30 years, you would have $196,439.
Paying what seems to be a measly 1% more in fees (2% instead of 1%) eats an $80,000 hole in your retirement plan! What seems inconsequential in the here and now actually has a huge effect on your future wealth.
Final thoughts: How to apply these strategies to your own life
Justin’s story sound incredible, but it all comes down to careful saving and spending. Because it’s not about the money you earn, it’s about the money you save!
For those of you who are wondering, Justin says he and his wife had a combined household income of well below $100,000 when they first got married.
In the ensuing years, their total household incomes capped out at under $150,000 — and that’s where it was when they both retired.
Is Justin worried his money will run out and he’ll have to return to work? Not really.
He’s a firm believer in the 4% rule that is often cited by financial planner. The basic idea is that you can preserve your principal for years to come if you only withdraw up to 4% each year.
Justin and his wife plan to live on around 3% to 3.5% of their investable wealth each year. Since they have a $1 million portfolio, they can draw down roughly $30,000 to $35,000 per year and still have their wealth last for the foreseeable future.
Still, Justin stays flexible in his thinking and knows that plans may have to change down the road.
‘I would be lying if I said we have a 100% certain plan to be retired early forever and there is no chance we will ever have to work again. There is always uncertainty,’ he confesses. ‘The best you can do is plan for it, and understand that flexibility will get you a lot further in uncertain times than rigidly holding to a plan.’
You can keep up with financial life of Justin and his wife at RootofGood.com.