How to Retire Early in San Diego – A Guide to Early Retirement in Southern California


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With employment levels near record levels, chances are that you are employed and working a full-time job. Yet, with the paychecks rolling in, you may be dreaming about early retirement. You’re not alone. There’s a movement of early retirement seekers called FIRE or Financial Independence Retire Early.

Retiring early is achievable, even easy, in many lower cost-of-living areas. Yet, if you’re seeking early retirement in San Diego, you’ll need to plan. A retirement calculator and strategy can help, as living in Southern California is expensive.

If you’re serious about early retirement, then the first step is to determine what it means to you.

Retiring early in your 30’s is distinct from leaving the traditional workforce in your 40’s, 50’s or 60’s.

When you consider early retirement, does that mean quitting immediately or leaving work to do your own thing? Many early retirees, especially those in the FIRE movement, regard early retirement as living life on your own terms and working how and when you choose.

So, in traditional terms, early retirement is more like self-employment or part-time work for many.

As you contemplate your early retirement, this guide will walk you through every step to consider before leaving your job!

You’ll discover:

  • How long it takes to achieve $1,000,000?
  • Which early retirement age is right for you?
  • 5 specific early retirement planning steps
  • Targeted advice to retire early in San Diego

How Long Does It Take to Reach $1,000,000?

A one-million-dollar liquid net worth is a reasonable goal for retirement. For some, it might be more than enough, while for others, not even close.

We’ll use this figure as a median benchmark for this study. As such, you can evaluate, based on your retirement goals, whether you will need more or less. Of course, putting together a more comprehensive retirement plan will help you determine the exact amount you should be targeting.

Although you can reach one million by hitting the lottery, it’s more likely that you’ll acquire one million dollars through investing in stock and bond funds and possibly some real-estate investments.

When calculating how long it takes to reach one million dollars, you’ll notice that time is a crucial factor in wealth-building. The longer your money is growing and compounding in the financial markets, the less you must save!

The following chart shows how long it takes to reach certain financial benchmarks by investing. The calculations assume that you’ll earn an average annual return of 8%, possibly with a diversified stock and bond portfolio.

Notice that if you invest $5,000 per year for five years, your account will be worth $31,680. Invest that same $5,000 annually and in 40 years, you’ll have a tidy $1.4 million.

How Much You’ll Earn by Investing

invested annually rate and years

In fact, Albert Einstein reportedly claimed:

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it. Compound interest is the most powerful force in the universe.”

Albert Einstein

By understanding how much you need to save and invest, and for how long, you’re on your way to understanding the choices you must make to retire early in San Diego.

Assume that you leave your money invested, growing and compounding in your workplace retirement account and other investment accounts, you have a shot at 8% annualized growth. You may want to chat with a San Diego financial advisor now to help you properly align your investments.

How to Retire at age 45?

Assume that you’re 30 today and want to retire at age 45. If you saved $15,000 per year, and the money grew at an average 8% annually, at age 45 you’d have roughly $440,000. Double your savings to $30,000 annually and your financial account values hit approximately $900,000.

With an employer match to your 401(k) account, and modest living, it might be possible to hit one million dollars in 15 years, depending upon your income and savings rate.

For a quick estimate, use our calculator below to see which variables you can adjust to reach this goal. Of course, a more comprehensive plan is encouraged to help you achieve this goal.

Retirement Age Calculator

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What Will $1,000,000 get you in San Diego?

wealthy san diego

A general rule of thumb states you can withdraw approximately 4% of your investable assets every year during your retirement. Of course, this is a rough approximation, but it is a great starting point.

If you withdraw $40,000 annually from your $1,000,000 investments, you’ll have to live on that amount until you can file for Social Security. Likewise, you can use that $40,000 as supplemental income while you work part-time work to boost your disposable income.

In order to live on $40,000 to $60,0000 in San Diego, you’ll need to be creative.

We know folks who retired early that live in very nice trailers, RVs or small homes in inland communities. With mobile home prices well below $100,000 and affordable mobile home lot rents, you could cover housing costs for under $1,500 to $2,000 per month.

Another San Diego early retirement strategy is to rent out a room or two out in your home. This income can go far to offset your housing costs and expedite your early retirement goal.

Prepare your own food, enjoy cheap entertainment, and living affordably is possible. The internet is replete with frugal living tips and strategies. If you find it difficult to stick to a strict budget, we recommend looking into ynab.com (You Need A Budget). There is no better tool to help you track and allocate your resources on a daily basis.

To minimize the cost of health care, go to https://www.healthcare.gov/ and check out reasonably-priced plans. You might be eligible for subsidies as well. This is another area where a trusted financial advisor can help.

In San Diego, one key to early retirement is crafting low-cost housing and living expenses. With planning and creativity, it’s possible.

Next, the specifics, of how to craft a path to achieve your early retirement FIRE dream.

Early Retirement Planning Advice

It should be obvious that in order to retire early you must make tradeoffs. If you want to retire early in San Diego, you’ll need to save a large percentage of your current income and live modestly once you leave the nine to five. Unless you manage to amass several million dollars or hit on a lucrative early retirement gig, early retirees are likely to face years of simple living.

If you’re in, here are some actionable steps to begin the early retirement journey.

Automate to Save Money and Retire Early – FIRE Strategies

Saving and investing is the cornerstone of a retire early plan. Many FIRE movement members claim to save 50 to 70% of their income.

The easiest way to begin is with automation.

Work backward to figure out how much you need to save to hit your retirement target.

A 35-year-old, seeking to retire with $1,000,000 at age 55 has 20 years to save and invest. A retirement calculator and financial advisor can help turn the dream into specific saving and investing numbers.

Imagine that Brittany saved $80,000 by age 35 and wants to reach $1,000,000 in 20 years. If she can average a 7.5% rate of return on her investments, she’ll need to save and invest roughly $15,250 per year or approximately $1,270 per month.

Reduce the average annual return assumption to 7% and Brittany would need to save and invest roughly $17,000 per year.

To simplify her early retirement dream, she can contribute the $1,270 into her workplace 401(k) account and invest her money in primarily stock funds earmarked for early retirement. If her employer adds money as well, she’ll have a cushion, should market returns disappoint.

To Retire Early, Increase Your Income

increase your incomeThe most effective way to increase your personal rate of return (e.g. income) is to become better at your craft to increase your income. Take extra college courses to become an expert, gain the necessary credentials to move up the corporate ladder, go back to school (if possible) to help you take that extra step. There are too many generalists and not enough experts. By becoming an expert, the demand for your expertise will rise, thus increasing your take-home pay.

It is also not uncommon for those seeking early retirement to work more than one job.

TaskRabbit workers, Uber Drivers, and Upwork freelancers all participate in the gig economy to grow their income. It’s easy to sign up for a platform, specify your pay rate and availability, and add in a few work hours in the evenings or on weekends.

Then there’s the old-fashioned way of taking a shift or two at the mall, hardware big box store, or your local restaurant (with tips) to grow your cash flow.

The entrepreneurial-minded can list their services on Craigslist, sell their stuff on eBay or create another side-hustle job to fit their skills and time.

Target extra income towards a cash “emergency fund”, additional retirement savings, and to pay off debt. Pick a side hustle that you’re good at and enjoy, to combat fatigue.

Eliminate all Debt to Retire Early (except the Mortgage)

Eradicate debt to achieve early retirement. Regardless of how much you’re saving and investing, if you’re paying 13% to 20% interest payments on debt, you’re in trouble.

If you earn up to 8% on your investments but are paying 20% interest on your credit card bill, you’re losing 12% by maintaining debt.

Any early retirement plan must tackle debt immediately. Be reasonable and choose a debt repayment plan that makes sense for you. From the snowball to the high-interest rate debt payoff approach there’s a method for you.

The Consumer Protection Financial Bureau (CFPB) offers a quick worksheet and accessible tips to eradicate debt.

Pay off debt before considering early retirement.

Early Retirees Must Understand the Financial Markets

We discussed how much money you will need to retire early. We covered how much to invest each month and what returns to expect. Yet, it’s important to realize what investing can and can’t do for your retirement plan.

Investing in the financial markets – stock and bond funds – is a way to earn greater than savings account returns. Yet, in exchange for those higher returns, you should expect volatility as markets go up and down with the overall economic business cycle.

Although long-term stock market gains average over 9%, there were plenty of years when the stock market lost money. Yes, investing in the stock market is risky, though you are expected to be compensated via market returns for taking on this risk. In 2018, the S&P 500, a proxy for the U.S. stock market, lost 4.28%. And during the sub-prime loan crisis and recession in 2008, the stock market lost 36.55%. Yet, in 2009, markets rebounded for a return of 25.94%.

Bond markets are also volatile, although less so than stocks. In 2018 10-year treasury bonds lost .02% and in 2018 they lost 9.10%. Yet, in 2014, 10-year treasuries rebounded for a 10.75% gain.

This data and the lack of a crystal ball to project future returns means that you should always stay diversified and have enough cash for emergencies.

average returns stocks treasuries and bondsDespite the up and down years for the S&P 500 stock market index, the 3-month Treasury Bill (a proxy for cash), and the 10-year Treasury Bond returns, the average returns were robust.

1969-2018 Average Annual Returns for Financial Assets:

  • S&P 500 (stock): 9.73%
  • 3-month Treasury Bill (cash): 4.71%
  • 10-year Treasury Bond (bond): 6.69%

For Early Retirement Success, Save and Invest Aggressively

It may not be enough to only save in your 401(k). Successful early retirees also contribute to a traditional or Roth IRA. These aggressive investors will likely have a brokerage account with an investment management firm where they deploy additional cash into passively managed index funds.

As mentioned earlier, you should set up an automated savings schedule that feeds into a well-diversified investment portfolio. The more aggressive you invest, the greater your expected returns. Though, remember that your portfolio should be well-diversified into index funds and professionally managed for risk. Read more about how we do this for our clients.

Remember that the markets are volatile and it is normal for investors to become very worried when there are market declines. These market declines typically occur during recessions.

One major risk to consider for those planning to retire early is what to expect during a recession. There is a good chance that you might be laid-off while your investment portfolio has lost some of its gains. Chances are, this will be a very stressful time.

Working with a fiduciary financial planner can help you navigate these troubled times to ensure that you stay on track. Having the right resources to support you should never be understated.

Retire Early in San Diego – Questions to Consider

Consider these questions as you craft your early retirement plan:

  • Is retiring early worth it? After assessing the sacrifices including aggressive saving, investing and lifestyle adjustments, decide whether you’re willing to do what it takes to retire early.
  • How can I save money to retire early? Look for ways that you can slim your own budget to make your FIRE dream a reality.
  • Consider how to retire early at 40, 45, 50, 55 or 60. It is significantly easier to retire early at 55 than it is at 45. Decide which retirement age makes the most sense for you.
  • What steps do you need to take, daily, weekly, monthly and annually to retire early?

After some soul searching, if early retirement is still your dream, then begin to implement a plan.

Know that you do not have to make the necessary lifestyle changes at once. A slow, but steady change is often preferable to an abrupt short-lived adjustment. Though, it is better to start sooner rather than later.

Early Retirement in San Diego Wrap up

The internet is filled with FIRE, and early retirement Facebook groups, blogs, and articles from reputable media outlets. Gain inspiration and ideas from others on the journey.

Map out an honest appraisal of your essential versus discretionary wants and needs.

Decades ago a large family typically lived in a small 3-bedroom home or apartment with one bathroom. They prepared all the meals at home and vacationed in a cabin or tent. Your lifestyle and values don’t need to be governed by advertisers or the media.

Realize that true wealth and happiness go beyond material possessions.

If you want to retire early in beautiful San Diego, reach out to us for non-biased guidance on your journey to a new lifestyle.  Keep in mind that Morningstar Research found that a good financial advisor can add the equivalent of +1.59% in annual portfolio returns through financial advice alone.

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