Recently a reader name J reached out to me to share his early retirement story. What’s neat is the fact that he’s also located in Vancouver. Because his story is so cool, I asked him if he was willing to share his story with my readers via an interview format. Fortunately he said yes. Take it away J!
Thanks Tawcan. Here is a bit of background for my story. I am a 37 year old husband and father of a 1 year old daughter. Recently, I retired from my career in the financial sector in Vancouver.
Q 1. It’s amazing to hear that you retired last year at the age of 36. Could you describe what you did prior to retirement and speak about your path of how you got to this point? What did you do prior to retirement?
A 1. I retired on my own terms. My path to getting to this point is quite common in a sense, in that I moved away and went to university after high school, then I got a job working in an office. I worked in the financial sector, first at a consulting firm for around 10 years and then doing similar work for a large financial firm for about 5 years after that.
Q 2. How did you realize early on that you want to be unconventional and retire before the age of 65? Was there a single event that got you started on the “early retirement” path?
A 2. A couple of stories come to mind. First, I spent a summer backpacking around Europe when I was 21 and close to my university graduation. At that stage of life, I had barely any money and so I had to learn to take a pretty hard look at each and every decision in my life. I could choose to do whatever I wanted to do so long as I could make it work with the very limited resources I had at the time. It was an incredibly freeing experience and was a bit of an epiphany to me. Literally everything in life represents a decision that is yours to make and that the impact of many small decisions add up significantly over a lifetime.
The main point is that I realized while traveling that summer is that I could do whatever I wanted all day, every day. And it didn’t have to cost a lot of money to do so.
Tawcan: That’s funny because I came to similar realization when I lived and traveled Europe on an 800 € per month budget.
Secondly, I realized quite early on in my career, certainly within the first year or so of working, that my passions in life were not going to be fulfilled by my chosen career. While I needed and enjoyed the paycheque at the time, sitting in a cubicle all day working as a very small part in a very large machine was incredibly stifling to me. I also quickly realized that most people I worked with were not particularly happy, and for the most part had accepted that working everyday was their lot in life. This was especially striking because many of these people made very decent salaries. It was my impression that many of them did not think that life could be greater than grinding out one day to the next. I often found myself daydreaming about how I wanted my life to be, and I was pretty determined to make my life extraordinary from then on. My path to financial independence was born around that time I would say.
Tawcan: Love it. This is exactly why I practice being FI despite not FI yet.
Q 3. What was your strategy that allowed you to retire so early? Do you have any secrets that you could share? Please describe your investment strategy.
A 3. My investments are composed of a diversified portfolio of primarily passive equity investments, with a focus on minimizing expenses. Working in the financial industry made me realize that most people are better off with passive investments than paying excessive fees for “financial advice” which is pervasive in Canada. We also own 2 rental condos from when my wife and I were single and we each used to live in. We are currently uncertain whether we will continue to rent them in the long run but for now that is the case.
This being said, it is important to have more than just the investment side of the equation figured out if you want to retire early. While I was working I earned the salary of a professional and could have spent all of it without being careful. Managing my expenses was a far bigger factor in my ability to retire at this stage than whether I earned 5%, 10% or 20% per year on my investments! This is such an important factor that is not stressed enough, but I do believe that you should also be maximizing your happiness while you are working as well and still enjoy life while working. Balance is very important in life.
Tawcan: Totally! Finding the right personal balance is the key. If you think you’ll finally be happy once you reach FI, you probably will never be happy. Keeping your expenses low is really truly the best way to control the timeline of your FI journey.
Q 4. Are you taking advantage of tax-sheltered accounts like RRSP and TFSA? Do you have any RRSP withdrawal strategies or are you leaving RRSP until you are 71 years old?
A 4. Yes, I use of both of those vehicles. My wife, on the other hand, is an artist and also an American citizen, so she hasn’t started contributing to either vehicle. Her income is low and so contributing to the RRSP doesn’t make sense for her, and the TFSA also isn’t great for her because the USA requires additional tax reporting and investment restrictions on her because they don’t recognize it like the do for RRSPs and so far it isn’t worth the hassle.
For people retiring at an early age it is very likely you will have sizeable non-registered investments so there is some optimization that is needed to minimize your tax burden over your life. I plan quite far ahead but right now and for the foreseeable future it is pretty simple, tax shelter the maximum amount possible.
Tawcan: And that is exactly why we made some financial independence assumptions to determine our tax consequences in FI.
Q 5. What’s your daily life now that you have retired? Are you “working” on different personal projects?
A 5. I have a 1 year old daughter and most of the day is spent taking care of her. She is the ultimate personal project if you want to look at it that way. We feel that it is extremely important to spend time with her and allow her to learn from us because our parents were such positive influences in our lives. My wife also is still involved in various artistic pursuits and having my freedom greatly increases her flexibility to continue her passions. We have been able to travel so that she can take on projects and spent a considerable amount of time in Europe last year. I have many personal projects that I like to spend time on besides my daughter, and those fit in around the edges for now. My main passions are chess, photography and I love to travel also.
Tawcan: Hey sounds like we should be friends. I love photography and travel too!
Q 6. Do you feel that you have a better quality of life after retirement? Are you feeling more at peace and do you feel healthier?
A 6. Absolutely, my quality of life is immensely better after retirement. I now leisurely wake up with my happy family, instead of rushing to get to the office. I certainly feel healthier and I believe things will only get better.
Q 7. Did you have a budget prior to retirement? If so, do you still budget now that you are retired? Is there any difference between the two budgets?
A 7. I have had budgets in the past before retirement, but after a while it just became routine and so I haven’t written one down in quite a while. I have a philosophy of looking at each and every item I spend money on and considering if that is really the best way to make my life better. So in a sense I would be looking at my budget continuously, rather than saying, “it is the beginning of the month and I have $100 for whatever category of expense, how am I going to spend it”. I have always been extremely careful of managing needs versus wants, and I abhor waste of almost any kind.
That being said we do have a rough budget now with my wife on board. The biggest difference in dollar terms is that I no longer have such a large income tax bill. Trading your time for money, or working for a salary, is the least tax efficient way of making money and so I am somewhat surprised more people don’t jump on board the early retirement train. Besides that, things haven’t changed much because we have been living at a level of spending where we are comfortable for a long time and just because I have stopped working doesn’t mean we have to slash things all of a sudden. Our core spending levels have been about the same for many years now. While I was working I just saved a large percentage of my earnings because we already enjoyed our lifestyle at that level.
Q 8. Was there something that convinced you to finally quit your work? Was it a difficult decision? How did you know that you would be OK financially without working fulltime?
A 8. My career was quite mathematical and so I had been doing calculations for years to see the financial impact and level of risk around my decision. There wasn’t one thing that was the deciding factor but the birth of our daughter made the decision easier. It wasn’t really a difficult decision, in fact it probably made my transition out of the workforce easier because I could use parental leave as a sort of reasonable excuse rather than having to potentially have an awkward conversation around the reasons for leaving and having to answer questions about leaving without planning for another full-time job. Most people still don’t really understand when I try to tell them about what I am doing because it is just so uncommon.
Q 9. Do you have any regrets retiring from your full time job? Have you considered going back to work?
A 9. I do miss some aspects of working full time. I made some good friends over the course of my career and I am not as close to them as before. But the vast majority of it, I don’t miss at all. Slaving away until midnight for a client that doesn’t even realize I exist? Nope, not in the slightest.
I don’t think that I will never “work” again either. In fact, I work arguably harder now looking after my daughter that I did in my previous jobs. I also have many passions and I can now spend time trying to perhaps grow those into something more than just hobbies. For instance I would love to be a travel photographer, however that is not an easy or realistic way to make a living for all but a handful of people in the world. But I may at some point make a little money leading photographic tours or something similar. I don’t think I will return to working exclusively for the money again anytime soon though.
Q 10. What would you tell someone like me who is trying to achieve financial independence? Do you have any advice for retiring early?
A 10. Do what makes you happiest. Keep working towards your goals. It is achievable with the right mindset and persistence. Part of the reason I did this interview is because I wanted to make a point that despite many people not understanding the concept or early retirement or not believing it is possible, you can do it, and I am an example of that. I firmly believe that most people I worked alongside could achieve exactly the same outcome that I have had.
The funny thing is that most people consider what I am doing as some sort of impossibility that cannot be believed, however most of those people could make the same choices and be able to leave their jobs decades earlier than they think. It is this inability to consider things outside of what is considered normal that holds people back, and the first thing they need to do is adopt the mindset of the dreamer.
Q 11. Do you have anything else you would like to share with me and my readers?
A 11. Thanks for your interest in my story if you made it this far. Dare to push your limits a little further. You will be pleasantly surprised what is slightly beyond your horizon and how many misconceptions we have about the unknown.
Wow that was a lot of great stuff coming from someone who has retired early and now able to decide his own schedule each day. Thank you J for sharing your story and all the advice.