Thoughts of a 28 Year Old Quarter-Millionaire

When pursuing a long-term goal, what keeps me focused is tracking and celebrating the little milestones along the way. It’s about acknowledging and rewarding your efforts, and putting the rest of the journey in perspective. Last month, I finally hit what I’ve been eyeing as a huge milestone in my path to financial independence and early retirement. We were on vacation for about half of August, and when we got back I realized my net worth had finally ticked over $250k USD. At 28 years old, I am officially a “quarter-millionare.”

I started this journey 6 years ago with a net worth of approximately negative $15,000. I had spent most of my college years reading blogs like Mr. Money Mustache. I knew I wanted to retire early someday, and I had the knowledge that I needed to hit the ground running and start saving and investing as much of my income as I could. When I first started diving into FIRE about a decade ago, I think I had $650k in mind as my early retirement portfolio to support me indefinitely.

Over the following few years, I realized I wanted both a more conservative withdrawal rate to decrease the risk of portfolio failure, as well as a larger budget with more discretionary spending. The relatively spartan lifestyle that I’ve lived in my 20’s probably wasn’t something I wanted to set in stone for the rest of my life. Two years ago, one of my first articles on this blog codified that new plan and helped me arrive at my number of $1M USD. Due to a combination of low spending and high savings during my working years, I postulated that I should be able to quit the workforce forever and live off my portfolio indefinitely once I hit that $1M mark, which I estimated to occur slightly before I turn 40.

When I wrote that article, I realized that 14 years is a long time out to try and plan for. But now we’re two years closer, and my FIRE plan is looking even better. Of course, inflation being what it is, a million bucks two years ago buys less than a million bucks today. Online calculators have informed me that I’ll need $1.068M today to maintain the same purchasing power that I want at retirement. But, it’s clear that I’m now ahead of my projected FIRE target from two years ago:

I used the same assumptions as last time, the main one being a 5% annual real return. Portfolio contributions were pulled from my most recent budget review, where I managed to save about $4k per month on average. These numbers were then plugged into a compound interest calculator, starting with my current portfolio value. I’m well ahead of where I predicted, despite my income being about the same as it was back in 2019 in real terms. This new projection has me hitting my inflation-adjusted $1.068M FIRE target before I turn 39. A year ahead of schedule!

I attribute this to two main factors:

  1. Over the past two years, my money has grown much faster than expected. Recent stock market returns have been much higher than the historical average, which in turn is higher than the 5% real return that I use for a conservative estimate.
  2. I have gotten better at spending less, which in turn means I am saving more despite making about the same salary. In 2019 when I started this blog, I was spending close to $3,200 per month on average. My current budget is around $2,400 per month, so that $800 difference is all savings. Frugality is a powerful tool.

Of course, stock market volatility is a double-edged sword. We could just as easily suffer a major stock market crash in the next couple years which wipes out half of my investments and has my projections looking like I won’t retire until I’m 45. I’ve only ever really invested in a bull market, so I’m not going to confidently declare that I actually get to retire at 39 instead of 40. Rather, every year that I manage to slip this earlier by outperforming my assumptions, I will simply assume is a cushion to be absorbed in some future, inevitable eventual recession and keep me on track for my goal of retiring at 40.

Other than the numbers though, how do I actually feel about this?

I never worry about retirement, because I don’t need to save another dime to get there.

It’s estimated that about 2/3 of Americans are financially unprepared for retirement. And we’re talking about a traditional retirement here, where people roll right from the workforce into collecting Social Security at age 62. Many of my millennial peers facetiously joke about never being able to retire, or having to work until they die. And most of my friends are people who earn good money, $80k per year or more. In most cases they’re perfectly capable of saving, but they make the choice to blow all of their money on consumerist items like luxury cars, frequent extravagant vacations, and ridiculously large homes. Sure, many are saddled with large student loan debts. The issue is that they don’t just start somewhere, anywhere, on the process of buckling down, delaying gratification, and reining in their spending to dig out of the pit of debt and bad decisions.

It’s a self-reinforcing, destructive cycle. I think people almost take solace in how many other people are in the same boat as themselves, and figure something must have to happen to bail them out at the last second. Personally, I don’t trust that politicians will come to my rescue in 4 decades. Don’t get me wrong, there’s some systemic issues in our economy and a decent contingent of low-wage workers that need to spend everything they earn on necessities to get by. In my opinion though, the number of people that do have the capability to save and just don’t is far larger.

I don’t worry about retirement at all though. Thanks to the past work I’ve put in saving and investing, even in the worst case event, I’m still fine to retire at a standard age even if I never save another dime. Taking my current net worth of $253,925 and projecting that forward at 5% annual real returns, by age 62 I would end up with a balance of $1.33 million in today’s dollars. That allows for $53k in annual spending at a 4% withdrawal rate. Probably more than I need, so I don’t need to factor in Social Security since that’s just a bonus.

The above concept is known as “Coast FIRE.” You’ve saved enough that as long as you get a job that cover your living expenses, your investments will compound and grow to support you for a traditional retirement with no additional contributions.

Financial stability breeds flexibility

Six years into a journey of attempting to save and invest at least half of my income, I have options. I could quit my job and go back to school. I could risk some of my capital to try and start a business without going into debt. I could switch to a job that pays less, but is more personally satisfying.

When you have enough money to cover many years of living expenses, that opens doors. I’ve mentioned before that financial independence is not black and white — it’s a spectrum. And somewhere between living paycheck to paycheck, and early retirement, lies an increasing amount of life flexibility simply afforded by having a chunk of money available.

I’ll probably just keep grinding it out in my current career, shooting for my goal to retire by 40. But it’s nice to know there’s options available which are afforded to me due to the financial situation I’ve created for myself.

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