This is a guest post by Robert, who lives in Calgary and works as a financial adviser. He is married, has three kids and plans to retire at age 35. Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.
Retiring young seems to be an attractive dream. I don’t believe that it’s necessarily accessible to everyone. In part, the ability to retire young depends on a person’s environment, their ability to earn a very good income and live on much less than they earn. But everyone has opportunities that come their way, and everyone makes decisions in relation to their opportunities.
In Calgary, the environment has been especially helpful until recently. Until 2006, house prices were modest compared to Vancouver and Toronto, and compared to present-day prices in Calgary. Buying a house was possible without shackling oneself with 35 or 40 years worth of debt. Employment was plentiful and jobs paid very well. Working a professional job and saving 1/3 to 1/2 of my income, I was able to pay off my house in seven years (my goal had been eight).
A couple I know sold their house in Calgary about a year ago for $600,000. He had an income well over $100,000 per year, but they never allowed “lifestyle inflation” to expand their budget beyond about $3,500 per month. That left enough income to pay down debt and invest. But the decision they made that had the greatest impact on their ability to retire at 53 wasn’t about smart investments. When they sold their home in Calgary, they bought a bungalow in Phoenix for $150,000 just down the street from their daughter.
That left them with $450,000 to deposit to their investment account, more than they had saved while working and raising kids. They decided to retire and go on a humanitarian mission for two years in Southeast Asia. They were fortunate that there was a large differential in real estate prices between Calgary and Phoenix, but they took that opportunity when they saw it.
Although the job market became very difficult over the last two or three years, house prices remained elevated. At this time, I’m not sure that a young couple could benefit from buying a home in Calgary the way this couple did. But that’s not to say there aren’t other opportunities. Here are some examples.
Buy a home in a less expensive city. If you’re going to buy, it may be wise to consider a more affordable market. It seems unlikely we’ll experience much more price appreciation in Vancouver, Calgary or Toronto, but what about other Canadian cities? What about moving out of the country?
Plan to retire in a less expensive city. There are many countries that are popular retirement destinations, in places such as Latin America and Southeast Asia. But even within North America, there’s a large variation in cost of living. When moving between countries, there may even be an opportunity to take advantage of differences in interest rates and fluctuations in foreign exchange rates.
Live in a working-class neighbourhood. The authors of The Millionaire Next Door point out that living in an upper middle class neighbourhood exacerbates the effort to “keep up with the Joneses”. Living in a more humble neighbourhood may allow a person to more easily spend less and save more. It may even make financial sense to rent instead of own, especially if you’re planning to move within a year or two.
Be willing to explore a variety of options when making lifestyle decisions, in order to take advantage of opportunities and move yourself toward your retirement goal. What lifestyle choice have you made that’s helped you jump toward your goal? Have there been drawbacks as well as benefits?