Retirement; like your parents, but way cooler
In 1991 Billy and Akaisha Kaderli retired at the age
of 38. Now, into their 3rd decade of this
financially independent lifestyle, they invite you
to take advantage of their wisdom and experience.
Simplifying Investing for
Billy and Akaisha Kaderli
As 2016 is
in the books, I thought I would look back financially
to where we started this adventure, from January of 1991. The chart
below shows the ascent of the S&P 500 Index over our 26 years of
On our retirement date
of January 14, 1991, the S&P 500 index closed at 312.49. It has recently closed
at 2238, making roughly an 8% annual gain plus a couple percent counting dividends. Hard to imagine, right?
With all of the market ups and downs, global turmoil, governments coming and
going, businesses expanding and failing, and still producing roughly a 10%
But is this really a one-off period and not the norm?
can see that the S&P 500 returns for the last 100 years, including dividends, is
And recalculating for
the last fifty years, total return is slightly less at 9.74%. Clearly there is a
Does this mean that
every year you invest you are going to have a 10% return? No!
But what it does tell us
is that over longer time periods the return on your investment is handsomely
However, if we look at
the returns since the year 2000 they have been sub par at a annualized rate of
And finally, since the
financial crisis in 2009, the S&P 500 Index produced a total return of 14.49% including
is not rocket science and does not need to be complicated.
Getting your house in order for retirement or financial
independence is not that difficult. Many investment professionals, journalists,
and commentators seem to complicate the issue to the point that even we can't
understand it. Safe withdrawal rates, stocks, bonds, balanced funds,
commodities, options, laddered portfolios, annuities, offshore accounts, hedge
funds, life insurance ...
are you kidding?
No wonder some people are confused and scared!
What's a person to do?
First, you need to recognize your needs. Let's be realistic here.
How much are you spending now? Not how much do you make a year, but how much are
you paying out? With today's computer online tools and spreadsheets, this is a very easy task to
The longer you keep track of current
consumption, the more confident you'll become of your future spending habits.
Once you know your expenditures per year,
take a look at where that money is going. If it's to pay credit card bills or
other consumer debt, you need to pay that off first. It's fine to use credit
cards as long as you completely pay off your balance monthly. And stay out of
debt. I know this is not easy, but it's your future, and the money you were
paying in interest can now be invested.
With your debts paid off, you can commit to
financial independence. Analysts say a guideline of 25 times your annual capital
outlay should be enough to sustain your current lifestyle. With the data you've
collected in your chart, you can easily calculate a target amount.
Once you reach your invested net worth goal you can
4% on an annual basis to cover your living expenses. For example, you earn 10%
annually on your investments, you take out 4% to live on, leaving 6% to cover
inflation and to be reinvested. This is how you create a
How do you get there?
Only you know what your risk tolerance is, but have some faith in yourself.
Learn about no-load mutual funds, and low cost ETF's (Exchange Traded Funds), and become your own
financial advisor. You can do this. Remember, it's not how complicated your
investments are, it's how well they perform and whether you understand them.
You've managed your finances for 40 to 50
years already, right? Maybe you weren't perfect, but you're still here! So do
you not think that you can manage your finances for the next 40 to 50 years?
Even though you will no longer have that paycheck coming on Friday, there are
many ways to pay yourself each week. You could simply write yourself a check
each Friday, or have automatic withdrawals transferred into your checking
So start today. Get your consumer debts paid
off completely, educate yourself on investment opportunities that you
understand, and take control of your future. Dream of financial independence,
and let that motivate you.
You can do it -- we did!
About the Authors
information about financial independence and travel, visit our
and Akaisha continue to journal and photograph their world travels.
Retire Early Lifestyle Blog
About Billy & Akaisha