On January 21, 2023, at a regional TedX event, I discussed the simple and repeatable steps we took to enable our early retirement.
That short speech is now live on the TedX Talks YouTube channel, linked below for easy viewing.
If you enjoy it, please share and like/comment on the YouTube channel.
Thank you
Jeremy
Reimagine Retirement | Jeremy Jacobson | TedXFolsom
This speech was the result of months of planning and tuning, and based on years of thinking and living. Some of my favorite bits:
“We did nothing more than live like college students for a few years longer than is socially acceptable.”
“Retirement is what enables people to pursue their passions, completely independent of the need to earn a living and best done with the health and energy of youth.”
“If you are willing to live a slightly less affluent lifestyle for a short period of time, you can reduce your working years by 20 / 30 / 40 years.”
“This is not your grandparents’ retirement.”
Do you have a favorite part?
Thank you for reading, watching, and sharing!
View on YouTube.
Congrats! You did a great job. I’ve been looking forward to the release of this video for some time now!
I enjoyed the Tedx talk and saved in for future reference.
When I discovered E.R.E. in 2011, it was a Eureka moment. Even though my income was right at the median household income, and most of the F.I.R.E. bloggers were technically above average income, I kept the faith and used all the techniques I could to improve my own situation. Over the course of the following decade, I moved to a cheaper place, drastically reduced expenses across the board and increased my income. The portfolio hit 25x expenses in 2022.
I mention this because it is too easy to dismiss the message on the basis that a particular F.I.R.E. blogger “got lucky”, meanwhile the dismissive reader may be overlooking the opportunities that they do have to improve their own situation.
So, dear reader, take heart and know that if you keep at it you can make it if you try!
Great job! I’ve been following you & MMM for years now, only wish I would have started sooner.
Great job Jeremy! Never easy to talk in front of a large audience. I like how you converted the math of saving money on transportation and turning that $10,000 a year to $1 million in 60 years.
I’d like to bike more too, but it’s kinda dangerous here in SF. We got no culinary skills, but we do have Uber Eats!
Cheers,
Sam
Well done!
Nice job! I liked that you kept it simple.
Congrats Jeremy!!! You seemed nervous at times, which is totally understandable, but your message is crystal clear. Awesome job!!
I watched this yesterday and enjoyed it.
You did a good job!
Great job Jeremy! Well done.
Nice job, dude.
I enjoyed it a lot, thanks for the nicely boiled-down summary of your experience/knowledge – save, invest and relax!
Well done! I enjoy reading your blog and it’s fun to see you in real life! My husband doesn’t read your blog so I’m sharing this video with him.
Loved it!
Nice speech Jeremy ! Very well explained.
Didn’t even know we had a TedX chapter in Folsom! Great talk Jeremy.
Living a life for a few years that most people don’t want allows you to have freedom in the future that most people can’t have.
Love the reference to the bicycle as the single best wealth generation machine. And yes, we can cook better than any restaurant if only I had decided to quit the job already! Thanks for the reminder of the next choices we need to make in our house…
I am conflicted about this video. Overall nice summary and message. But some of the details are misleading and they bother me.
You paint the picture of your current work-free upper-middle class lifestyle, and imply that this is possible if people just optimize their big expenses. But your particular journey is boosted by two major factors: 1) Excellent market timing. Your first phase of retirement was a huge bull market. Your last working years were presumably your highest income years, and those happened to line up with the post-2008 crash, so you were able to plow cash into equities at amazing valuations. 2) Addition of decent blog income in retirement.
I don’t doubt that you could have successfully retired without these tailwinds, but I don’t think you would be living the life of cushy 4-bedroom house in California, 2 kids, and easily affording a new car.
Also, the idea of $10,000 saved turning someone into a millionaire is hokey. First, 60 years is too long to be relevant for early retirement, and second, it relies on historical stock returns not adjusted for inflation. (Doubling in 10 years is in line with historic returns of 7% after inflation, but if you carry that out to 60 years, it only gets you to $600k, not $1M.)
[Finding high-income employment (or business) can build much more wealth than riding a bike, assuming you don’t fall into the trap of spending most of it.]
Is it possible to set more honest expectations while still making a snappy TED Talk? I don’t know, I’m not a TED speaker.
“$600k, not $1M”:
= RATE(60, 0, -10000, 1000000, 0)
= 7.97752%
= 10000 * (1 +7.97752%) ^ 60
= 1,000,002
My brain doesn’t like math. This is the only formula that makes sense to me:
$10k beginning
$20k – after the first decade
$40k – after the second decade
$80k
$160k
$320k
$640k – 6th decade
The only difference I could see between my formula and yours was the percentage rate.
Why was there a switch from 7% to 8%? At first I thought maybe it is more likely to earn a 7% rate of return after inflation if you only take one decade into account. but once averaged out over six decades, is 8% used because it’s more likely to have an 8% return after inflation?
I’m not understanding why 7% was used for the first decade of doubling but 8% was used for the 6 decades of doubling.
I will be guiding my son in a few years and I wanna make sure I have this down right. Thank you so much!
FV = PV * (1+r)^n
PV = $10k; r = 8%
n / FV
10 – 21,589
30 – 100,627
60 – 1,012,571
However, this is the least important thing in the entire talk. Precision is not required.
On a personal level, I am ok with your being bothered. It’s good to feel dissatisfied from time to time.
However I think it is based on some incorrect assumptions. I could explain why, but this is your first comment of all time and you aren’t setup to receive notifications of replies so it would probably be a waste of time.
It is not a bicycle which avoids expense, it is housing near work / school that makes bicycle / walk practicable. IF nearby cheap housing is available. Electric scooters / bicycles extend the range to cheap housing for the un-athletic, as do buses and cars. Where total returns on housing are similar to ‘securities’, owning home provides tax free imputed rent. Therein, or cheap rent, provide the means to save extra.
I am a longtime lurker and silent fan of your site. I’ve been occasionally stopping by at least since before Jr was born. I didn’t realize not checking the box for notifications would be an issue. I’ll check it on this reply!
I’m fascinated by your trajectory, and I appreciate your thoughtful and original ideas. Part of why I took the time to write that comment was I thought you would understand my concerns. I’d love to hear your response to my critique.
Hi Adam. Let me go through your concerns. A good reply takes time and I didn’t want to put in the effort if it would not be read.
I disagree that anything is misleading or hokey.
60 years is a perfectly reasonable timeframe over which to view the effects of compound interest. I planned to live off our portfolio for 60+ years.
We benefitted from “amazing valuations” post-2008. We also paid record prices pre-2008 – the large sums invested in 2007 didn’t return to those values until 2013, for example. Maybe 15-20% of our portfolio was invested post-2008. 80% of the work was done prior.
But… the audience for this speech is living today, in 2023. If we “benefited” from 2008, people saving today are some of the luckiest in history because they benefitted from 2021-2023.
Which is all well and good… but let’s look at the data. The average time frame to build a retirement portfolio saving 50% of income was 15 years over the entire historical record. Less (even substantially less) if you save more and/or increase savings rate as income grows. This was the message I shared.
Now, blog income – I posted a chart awhile back showing how blog income has changed our net worth. It’s around 10%.
If 10% significant? Sure. Is it the difference between living the good life and needing to work? No. Some simple numbers – 4% budget based on $1kk and $1.1kk, $40k vs $44k.
However, we have yet to have a year where we spend 4%… so more is just more.
Lastly (I think) is our cushy life. Could we do as we do if we had retired at a different time or without post-retirement income?
The statistics say yes. We are well within 1-sigma of what a portfolio should be worth 10 years after retirement. (per cFIREsim.)
Our original goal was that we be able to support our desired lifestyle in Seattle with car and kids. Our current lifestyle costs less than what we planned for.
As explained in the speech and this post the time to inflate lifestyle is after you have achieved the base nest egg.
Simple. Repeatable.
How long to save 25 times annual spending?
Of income (net of tax) of $1 with 75% savings rate:
= NPER(8%, -75%, 0, (1 – 75%) * 25, 0)
= 6.64 y
Worth clarifying that target FutureValue is 25 times spending / y:
= FV(8%, 6.64, -75%, 0, 0)
= 6.25 * $1
NOT 25 times net income / y:
= NPER(8%, -75%, 0, 1 * 25, 0)
= 16.88 y
= FV(8%, 16.88, -75%, 0, 0)
= $24.99 * $1
This is how a lot of projection happens. Now if we can only get 8% return every year.
I was curious how it would have worked in reality based on historic returns which was the basis of this post:
Financial Independence: How Long Will It Take?
“the basis of this post: Financial Independence: How Long Will It Take?”:
Read that before, quite helpful as it helps in the estimation of the likely dispersion about the average of years to FI.
75% shares, 75% savings rate; ~ 7 +/- 1 year.
As shown in calculations, that average implies an average 8% total return which matches historic rates close enough.
However, the time to FI, is based on 25 times expenditure, NOT 25 times income. The difference, as per calculations, is ~7 years vs ~17 years respectively.
Which is fine if continuing in retirement to spend the same as when saving.
In retirement I continue to save ~80%; if I conveniently overlook inflation.
Modest inflation has a modest effect on time to FI:
= NPER((1 + 8%) / (1 + 3%) – 1, -75%, 0, (1 – 75%) * 25, 0)
= 7.17 y.
= NPER((1 + 8%) / (1 + 3%) – 1, -75%, 0, 1 * 25, 0)
= 20.30 y.
Conveniently overlooking inflation is one of my favorite hobbies.
The one thing not included in that post or the formulas you shared is income increasing over time. If you can hold expenditures “constant” such that savings increase over time, it reduces the time to FI significantly and/or enables later lifestyle inflation in the same timeframe. I did the math once somewhere, but just looking at the delta between 50% and 75% savings rates… career length is cut in half.
The delta from 25x to 33x/50x is also interesting, as it shows how many additional years of work are required to be able to inflate lifestyle by 1.3-2.0x.
“With a 75% savings rate, the time required to accumulate 25x annual spending averages only 7.5 years. An additional 2 years will get you to 3% / 33x, and 3.5 years on top of that will get you to 2% / 50x.”
“income increasing over time”:
Income increasing with time (eg 1.1 times previous year) results in longer time to savings target (eg 25 times expenditure) because the savings target in $ also increases.
Unless “hold expenditures “constant””:
Which means that the savings rate is increasing as % of the increasing income (but not as % of initial income).
No built-in spreadsheet function (that I know) provides for input of growth rate of income.
But the calculation can be performed in a table, as a formula or online calculator such as:
https://www.calculatorsoup.com/calculators/financial/future-value-annuity-calculator.php
Refinements aside, it takes longer to save 25 times income than 25 time expenditure – except where expenditure is 0%.
Yes, the latter – savings rate increases
e.g. $100k income in year 1, savings = spending = $50k (50% savings rate)
$110k income in year 2 – spending = $50k, savings = $60k (~55% savings rate)
Etc…
Savings target also remains constant – 25 * $50k
Can work/save longer to reduce future withdrawal rate or support higher cost of living
I continue to disagree about the relevance of 60 years in this context, which is early retirement. 60 years is relevant for the years deep into traditional retirement or passing on an inheritance.
“Maybe 15-20% of our portfolio was invested post-2008.”
I am surprised by that, given that I thought I read that you saved over 10 years, and I would have thought your compensation would be climbing over that time, such that the final 4 years would be the highest, combined with the lower equity prices after the 2008 crash. But I don’t think that’s too important here.
The crux is that the calculation of years-to-early-retirement for the 4% rule relies on spending in retirement being the same as during working years. But in your case your spending has ballooned in retirement. For that to be sustainable, either you had to save much more than the amounts given in that calculation, or you had to have luck. It sounds like in your case you had both. I know you also got a boost by spending less in the first years of retirement, but I believe you left that out of the talk.
Your statement is that I misled or lied.
You have a preference for how to explain the exponential growth of compound interest to a fresh audience. Whether you like my method or not is irrelevant. I like this approach, and explained why I used it.
You use the word lucky. What does that mean? That we are a statistical outlier? 3 sigma? 5 sigma? What percentage of people who do what we did would not achieve similar results? Please quantify it.
>I know you also got a boost by spending less in the first years of retirement, but I believe you left that out of the talk.
I didn’t discuss this in the talk beyond saying that we raised our cost of living later. I also didn’t mention other things.
I didn’t say anything about lying. What I said was that some of the video was misleading.
For the $10k to $1M in 60 years, there’s also the issue that that requires ~8% annual returns, whereas the $10k to $20k in 10 years only requires the historical average of 7%.
In the context of retirement and market timing, I would define lucky as above average returns after retirement. (And unlucky would be below average.) Retiring into a strong bull market means that you can likely adjust your allowed spending upward, and retiring into a hard bear market would mean that you may want to consider adjusting allowed spending downward. I’m pretty sure I’ve seen you discuss this somewhere on your blog, and it’s related to the concept of sequence-of-returns risk.
The blog income could also be classified as lucky. Or alternatively it would be classified as work, and you’re not fully retired.
There are other types of financial luck that plenty of people have, but they’re classified as luck because the average person can’t count on them. Other examples I can think of off the top of my head are an inheritance or marrying rich.
The point is, all of these kinds of financial luck mean that the person who has it can increase their spending without worrying about running out of money, and the average reader/viewer cannot count on the same happening in their life.
I understand that there are many things you didn’t have time to discuss in the talk. The misleading part to me was the implication that someone could save 50% of their income for 10 to 15 years, living like a college student, and then they would be able to replicate your current upper middle-class family lifestyle without working for the rest of their life. You don’t explicitly say that, but, by giving your personal example, it is implied. For someone to increase their spending in retirement, they would either have to have saved more than 25x their expenses during the saving period, have a huge appetite for risk, or they would have to have one of the forms of financial luck that I mentioned above.
Our disconnect may be this – you seem to have a very binary way of looking at things and a level of preferred precision that I can’t come close to matching.
I am using a more statistical basis. It isn’t lucky vs unlucky, it is standard deviations from the mean. Lying and misleading are degrees on the dishonesty spectrum. Etc…
Thanks for sharing your feedback.
For AdamP
In the comments on the TedX YouTube channel there is a person that insists we are living in poverty no matter the evidence. This is the far more typical response, and part of why I opened with highlighting the similarities with our neighbors. (Commenter: Bon Nann. I can’t link to the comment section.)
Alas, people often refuse to see the obvious.
Related, including comments: I Don’t Want to Live Like I’m Poor Forever
I replied in the YouTube comments so you can just search for your name (AdamP)
“have one of the forms of financial luck that I mentioned above”:
Another type of ‘luck’ – “Rich or Bust”.
Where will take any risk even if chance of riches is much less than chance of poverty.
For the AdamPs:
There are those who live in poverty (eg me) through daily choice. Eating more or rubbish would spoil my figure and health. More coats would not make me comfortable. A bigger home would be yet more rooms never used. More travel would be more airport travails and forever long contrails.
There was a time I could tolerate such impositions.
Now my wife is also over that and cooking, gardening, reading, needlework, puzzles, long walks, modern media and world wide chat with friends and family is much preferred. Happy wife is also a happy chappy.
Jeremy, long time reader and fan, first comment. I’m grateful that you took the time to make this presentation. Something I can easily share with friends and family members in hopes of helping them make the connection of how incredibly doable this is stuff is! I discovered you and MMM a little over a decade ago. I retired 2 years ago at age 57 (late to the party) We are a normal 2 income household, never made over 100k combined and raised 4 kids. It really amounts to not “needing” everything and giving the tiniest sh*t about where your money is going. Thanks for making my life better!!
Wow, thank you Paul! And congrats on retirement.
I did try to make it something simple and easy to digest, I hope your friends and family like it!
Awesome to listen to it, and like you said, it isn’t for everyone, some people want to retire with more and some could do with less, you are simply saying it is doable, and the fact is you’re living it.
Congrats Jeremy,
Your reference to the bicycle as the single greatest wealth creation tool is spot on. Coming from the cycling industry, this is somewhat well known and seems like second nature (after all, we work in this industry because we love to be outdoors riding bikes). However, this realization isn’t so common outside of the outdoor industry and is refreshing to hear. If more people shared that point of view, it is not hard to see that it may translate into better infrastructure for cycling, making it easier for everyone to enjoy. Thanks for making that point so clearly in your speech.
Also, FWIW, I ditched my car 8.5 years ago and haven’t looked back. I figure its saved me at least $500/month over that time.
Nice! I love not having a car.
We picked our current location because there is a respectable bike infrastructure, but it really needs to be more widespread.
Love this stealth wealth statement: “My family’s life is indistinguishable from that of our neighbors”
Of course you won’t be as stealthy now but the point is you are able to blend in your community to create genuine relationships.
Everyone just assumes we wfh
Cool. I was wondering what you tell people.
How about when making friends like school parents? Do you just tell them you are retired?
This was probably an easier question to answer while traveling but not when you are in a neighborhood.
It hasn’t really come up… I don’t think I’ve been asked “what do you do” more than a few times, mostly people just talk about what is going on with the kids.
We have discussed it at dinners with friends but not at a really deep level.
Congratulations! Early retirement was doable for me. BTW, Luck = choices in our path to FIRE.
If you have work life balance, everyday is a good semi FIRE day.
How does that work?
I want to say thank you very much, Jeremy, for all your helpful ideas. I’ve been reading your blog for years and it helped me retire at age 55 two years ago. My life is a thousand percent better now and I’ve been able to care for elderly parents and spend wonderful time with my husband. I wouldn’t trade that time for anything. Thank you, thank you!!
Thank you for sharing this. Congratulations!
Loved your talk Jeremy, and I resonate with it. You are my original inspiration to FIRE and live tax-free. I read your blog for years,
I will be 57 in a couple of weeks. I retired at 52 because I took your blog as an inspiration to retire early and relax.
Unlike you, I only started working at 40 after graduating from grad school However, because I knew that I never wanted to work, I made it a point to live like a college student all through my work life of just 12 years while earning an average take-home pay of only 52K net a year after deductions. Like you, I never bought a car while I was working, heck I don’t even have a driver’s license. Instead, I took advantage of a work perk that gave me access to an annual bus pass for free.
Today I still live on a budget of 52K a year to be able to live tax-free, but I no longer have to save and invest more than half of my net pay. It’s nice that I don’t have to work and still be able to have 52K a year which would have required me to earn at least 80 to 90K a year to be able to take home a net of 52K.
I am in Seattle, I own my own home that I bought a year before retiring, and I go on vacations all the time to Malaysia which is where my family is from. I recently decided to travel in business class as I figure it is time to enjoy the fruits of my labor because my portfolio has more than doubled since retirement.
Thanks to your example, I got out of the rat race in under 12 years.
Wonderful!
Would you be interested in sharing your story via a guest post? If so, send me an email. Thanks!