There’s no magic formula to retiring early. The things that will get you there are pretty simple, really.
Ask Tim Tamminga who retired last year at the age of 58. While a lot of Americans don’t have nearly enough saved for retirement, he was able to put away $2.1 million for himself and his wife Sandra over the course of his 30-year career in IT.
And he didn’t make himself miserable doing it.
Tamminga now spends his time exercising, reading, cooking and fixing up their new home.
Here’s how they did it:
1. Moved to a cheaper area. The couple recently purchased a home in Grand Rapids, Michigan. They relocated from the pricey Bay Area, where groceries alone can cost about 23% more than they do in Michigan.
They ditched their $3,300 monthly rent and paid about $210,000 in cash for what Tamminga says is a “much nicer house in a a much nicer neighborhood.” They turned one room into a home gym, borrow books from the public library rather than buying them, and often see shows at the local community theater.
Tamminga doesn’t mind the colder weather, since he doesn’t have to go outside to get to work. And they have family nearby.
2. Saved. A lot. Tamminga prioritized saving as soon as he entered the working world. He immediately contributed enough to his 401(k) to get the full company match and increased the amount he put in each year. Then he turned to mutual funds, carefully selecting those with the lowest fees.
He saved at least 25% of his income, putting away as much as $50,000 annually in a good year. That’s more than the 15% financial planners typically suggest.
“That was our goal, and it really didn’t diminish our lifestyle in any way,” Tamminga said.
With a little more than $2 million, some of which is still growing in investments, Tamminga estimates that they’ll have enough to spend $60,000 a year until they reach 95 (they’re way under budget so far this year). And they’ve saved an extra $150,000 to help their two kids with their college costs, ensuring they won’t graduate with any debt.
3. Lived beneath their means. They consider themselves frugal, and don’t eat out much.
“It’s sort of a lifelong habit that’s very much in sync with our lifestyle,” Tamminga said.
During his career he traveled a lot for work, so he enjoyed staying in to cook when he was home. But that didn’t mean the family of four gave up vacations altogether.
“Some of the things we might have done more were the exotic vacations. But we did some really cool and memorable things, like a scuba trip to the Caribbean a few years ago,” he said.
They weren’t coupon clippers and never scrimped on groceries, always buying fresh fruits and vegetables. They buy meat in bulk and freeze individual portions.
Tamminga says they “hate debt,” and haven’t taken on any except for mortgages. He drives a Lexus, which he paid for in cash 11 years ago.
4. Signed up for Obamacare. One problem with retiring early is that you’re likely kicked off your former employer’s coverage and can’t collect Medicare until age 65.
The Affordable Care Act was a clutch for the couple. Choosing a plan on the public exchange was easy, Tamminga said. Their income is low enough that he and his wife qualify for a subsidy.
Without it, they’d have to get private health insurance which can be more expensive. A health insurance calculator from the Kaiser Family Foundation estimates that the couple save about $500 a month.
Still, not everyone is comfortable kissing their paycheck goodbye years before Social Security can start rolling in at age 62.
“I think a lot of people don’t retire early because they’re afraid. We know very few people our age who have done it,” he said.
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