"Does Sydney man’s plan to retire at 35 make sense?"

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Did
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Joined: Mon Apr 01, 2013 7:50 am

"Does Sydney man’s plan to retire at 35 make sense?"

Post by Did »

"A SYDNEY man says he’s not going to buy a house so he can put all his money into the stockmarket and live a life of leisure by 35. So is the plan as crazy as it sounds?"
http://www.news.com.au/finance/money/in ... 0f97c67d58

IlliniDave
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Re: "Does Sydney man’s plan to retire at 35 make sense?"

Post by IlliniDave »

I knew someone here in the US who did that, retired in the latter 90s at about that age. But I lost touch with him after he left work and don't know if he was successful in the long haul. I also don't know to what extent he depended on stocks versus other strategies.

On the surface it sounds a little overly optimistic (tripling his money in 5 years), but fundamentally he's aiming the same way we all are: accumulate a large pile of resources and pair it with relatively frugal lifestyle.

To me owning a home is more of a lifestyle choice than a wealth-building strategy since I am deliberate about wealth-building. So I don't see forgoing that in an HCOL area to be a problem with his plan. In the US with the new tax system and doubled standard deductibles, the math of owning versus renting for people living in most of the country (as measured by geographic area) is a little different than it was prior. Not familiar at all with Australia.

Nomad
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Re: "Does Sydney man’s plan to retire at 35 make sense?"

Post by Nomad »

If he can live say renting a room with bills included and that is cheaper than owning a house, then yes he is saving money and will reach his
target quicker.
You have to gauge the costs against the convenience. I think renting in someone else's house is a young persons thing.

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Sclass
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Re: "Does Sydney man’s plan to retire at 35 make sense?"

Post by Sclass »

I’d say this is possible and his gains by age 30 are indicative of strong investing skills. He could have only saved so much from his salary by then. He’s definitely riding an exponential.

The 3x gain is hard to get around though. He will need average returns in the low double digits for five years to pull this off.

One thing he has right, he will have an even tougher job doing it if he buys a home for himself.* That’ll just be a diversion for his $ if he really can do 15-20% in stocks which are the numbers I came up with on my financial calculator just now.

If he fails he’ll be homeless and broke.

Do people succeed at this? Yeah. I know several people. Just get out the HP12c. PV =$40,000, PMT = $20,000/yr, n=13 years, INT=15%. Boom. Roughly a million dollars.

This story reminds me of some coworkers who wanted $4 million in retirement to make $200,000 a year from bonds. The problem with that line of thinking is they needed to readjust their risk appetite to ever get to those levels in a lifetime. I wonder if the blog author is suffering from the inverse conundrum. He has set his long term targets low considering his current trajectory.**

*buying multiple homes for other people to rent is another story but I don’t think that was the guy’s strategy.

**the spreadsheet on his website suggests a steep trajectory powered by investment gains.

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