{"id":236007,"date":"2018-08-09T14:55:21","date_gmt":"2018-08-09T21:55:21","guid":{"rendered":"http:\/\/getrichslowly.org\/?p=236007"},"modified":"2023-12-05T14:22:01","modified_gmt":"2023-12-05T21:22:01","slug":"retire-young","status":"publish","type":"post","link":"https:\/\/www.getrichslowly.org\/retire-young\/","title":{"rendered":"How to retire young"},"content":{"rendered":"
<\/a>I am both a money nerd and a book nerd. Naturally, I get a little giddy when I find old books about money I’ve never heard of before.<\/p>\n While browsing Oregon’s best used bookstore<\/a> earlier this year, I stumbled on a 1989 book called How to Retire Young<\/em><\/a> by Edward M. Tauber. Tauber retired at the age of 43 from a tenured full professorship as Professor of Marketing at the University of Southern California. He’s written a number of marketing textbooks, but this was his first (and only?) foray into the realm of personal finance.<\/p>\n How to Retire Young<\/em> is one of the oldest books I’ve found on the subject of early retirement.<\/strong> It’s fun to see how much of the modern financial independence movement is foreshadowed in the book’s pages.<\/p>\n It’s also fun to see how closely How to Retire Young<\/em> adheres to my own “get rich slowly” philosophy. “Much [financial advice] is oriented toward the quick buck,” writes Tauber, “taking paths that often have a low probability. In short, you might as well play the lottery.”<\/p>\n Tauber has a different philosophy. He urges readers to “take the high road”. He wants them to follow the path with the greatest odds of success, even if that path might not lead to quick wins. He also cautions that “there’s no best way for everyone”, just as I say “do what works for you<\/a>“. There are certainly best practices and mathematically optimal options, but there aren’t any right<\/em> options.<\/p>\n Tauber’s premise is that many people can retire early<\/a> — if they plan and<\/em> remain dedicated to the plan. He writes:<\/p>\n “If you want to retire early, there are no magic formulas. It requires hard work to make money and requires smart work to learn how to invest on a pretax basis. If you invested 15 to 20 years in school to learn how to make money, why not spend a little effort to plan how to capitalize on your earning power to be able to enjoy it for a third of your life on your terms in early retirement?”<\/p><\/blockquote>\n “Think of life has having three periods: schooling, working, and savoring,” he says. Most folks spend the first 20 to 25 years of life in school, work for 40 to 50 years, then leave what’s left for “savoring”. He suggests shifting our perspective. “Why not plan life in three equal installments?” he asks. Spend 25 years in school, work for 25 years, then savor another 25 years — or more.<\/p>\n The issue, as you know, is that there are trade-offs. The opportunity cost<\/a> of retiring young is the stuff you could have had (and the things you could have done) during your working years. “Early retirement is like anything else that you can purchase<\/strong>,” Tauber writes. You probably won’t have as much discretionary income while you’re saving or when you retire, but you will have the time to enjoy what you do<\/em> have.”<\/p>\n Tauber says the reason most people don’t retire early is they don’t think it’s possible. More than that, they’re not willing to wait to spend their money. They want to spend it now<\/em>. They’re working hard, earning money, and they feel like they deserve to indulge themselves.<\/p>\n What’s more, the average person “cannot visualize the possibility that [work] might slow or stop”. People fall victim to the forever fallacy<\/a>. As a result, they get trapped in what Tauber calls the work-spend cycle.<\/p>\n When you want everything now, you get<\/em> it now — but that means exactly what it implies: having it now, not later. “It’s a prescription for a lifetime of work and spend,” Tauber warns. It’s also a prescription for living on less when you’re older. If you want money now and<\/em> later, you have to plan for it. You have to want it badly or it won’t happen. And “if you want to retire early, you have to do it yourself<\/em><\/strong>, using the system to your best advantage.”<\/p>\n Tauber believes there are four steps to early retirement planning. Each of these requires both action and dreaming. The dreams give you the motivation, and the action makes it happen. You can’t retire young without both. (Well, I suppose you can, but without the dreaming aspect, what’s the point?)<\/p>\n Tauber’s four steps are actually a little confusing. My more organized version looks like this:<\/p>\n Most of How to Retire Young<\/em> details strategies for closing the gap between future needs and current means. A lot of what Tauber suggests has become outdated in the past thirty years, but some of his advice is still spot-on.<\/p>\n He is a huge<\/em> proponent, for instance, of managing your career for greater income. He’s very blunt in this regard: If you don’t earn it, you can’t save it.<\/strong> You won’t retire young by making minimum wage.<\/p>\n “If you make more income,” he writes, “you can retire that much younger and, therefore, that much more quickly.” He continues:<\/p>\n “Most people make a critical mistake in career planning. They do not try to maximize their lifetime income. They may say that they want to get ahead or make more money, but they don’t look at their working life to see how that can happen.”<\/p><\/blockquote>\n Tauber says that you should never take a job unless it increases your value and marketability to others. Other points of advice include:<\/p>\n In other words, take the long view with your career. Most people only look at the short term. As a result, they might take a position that pays more today but has no future. Tauber wants readers to have a plan<\/em> for their career, and to pursue that systematically so they can earn as much money as possible.<\/p>\n As you earn money, save it. “The key to early retirement is nothing magical,” Tauber writes. “It involves the three saves<\/em>: save early, save more, save smart.”<\/p>\n Tauber formally recommends something that I’ve done accidentally. He says that many early retirees can benefit from saving two<\/em> pools of money, one for the short term and one for the long term. The long-term money include tax-advantaged retirement accounts that you don’t want to touch until you turn 59-1\/2. The short-term accounts contain the money you’ll need until then.<\/p>\n I’ve only recently realized that I inadvertently set myself up with two pools of money. I have my IRAs and my 401(k) that I’ll access once I turn sixty. These currently have a balance of about $500,000. For the next ten years, I need to live off my regular taxable investment accounts. These currently contain $300,000. When you consider that I have to pay capital gains taxes whenever I draw from my taxable accounts, that’s not really enough to last the next ten years!<\/p><\/blockquote>\n One of my money nerd specializations is the history of retirement. Sad but true, I read about the topic in my spare time. I’m gradually building a library of books and articles about retirement — especially early retirement. I think a lot about the evolution of retirement<\/a>, the types of retirement<\/a>, and even the definition<\/em> of retirement<\/a>. (I told you I’m a money nerd!)<\/p>\n What makes How to Retire Young<\/em><\/a> special is that it’s one of the oldest books I’ve been able to find on the subject of early retirement and financial independence. (For those who are new around here, these two terms are essentially the same thing. We often say “financial independence”, though, to keep people from arguing about what retirement is and is not.)<\/p>\n Today, financial independence and early retirement (sometimes abbreviated FI\/RE<\/a>) are the<\/em> hot topic in the world of personal finance. There are scores of FI\/RE blogs. There are FI\/RE podcasts. There’s even a film about FI\/RE scheduled to come out later this year. But in 1989, this was a new topic.<\/p>\n When How to Retire Young<\/em> was published:<\/p>\n In fact, the only FI\/RE book I know of that predates How to Retire Young<\/em> is Paul Terhorst’s 1988 classic, Cashing In on the American Dream<\/em><\/a> [my review<\/a>].<\/p>\n I wish I could say that How to Retire Young<\/em> is a great book. Sadly, it’s not. It’s good<\/em> (don’t get me wrong), but it suffers from being first. Nowadays we have robust theories and systems to support early retirement. In 1989, Tauber was inventing things as he went along. As a result, some of his number-crunching is needlessly convoluted. Worse (to me), the book itself sometimes seems sloppy and poorly edited.<\/p>\n Because of this — and because it was written thirty years ago — I don’t recommend How to Retire Young<\/em> for the average person. (I’ve done my best to summarize the best bits here so you don’t have to track it down.) If you’re a money nerd, fine. Read it. It’s only going to cost you a couple of bucks, and you’ll get a fun glimpse at the early days of early retirement theory.<\/p>\n","protected":false},"excerpt":{"rendered":" <\/a>I am both a money nerd and a book nerd. Naturally, I get a little giddy when I find old books about money I’ve never heard of before.<\/p>\n While browsing Oregon’s best used bookstore<\/a> earlier this year, I stumbled on a 1989 book called How to Retire Young<\/em><\/a> by Edward M. Tauber. Tauber retired at the age of 43 from a tenured full professorship as Professor of Marketing at the University of Southern California. He’s written a number of marketing textbooks, but this was his first (and only?) foray into the realm of personal finance.<\/p>\n How to Retire Young<\/em> is one of the oldest books I’ve found on the subject of early retirement.<\/strong> It’s fun to see how much of the modern financial independence movement is foreshadowed in the book’s pages.<\/p>\n","protected":false},"author":3287,"featured_media":237067,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[493,501],"acf":[],"_links":{"self":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/posts\/236007"}],"collection":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/users\/3287"}],"replies":[{"embeddable":true,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/comments?post=236007"}],"version-history":[{"count":0,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/posts\/236007\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/media\/237067"}],"wp:attachment":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/media?parent=236007"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/categories?post=236007"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}<\/span>You Can Retire Young<\/span><\/h2>\n
<\/span>How to Retire Young<\/span><\/h2>\n
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<\/span>The Bottom Line<\/span><\/h2>\n
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