My wife and I retired just before turning 40, and here are the nuts and bolts of how we did it. Retiring by 40 requires a very modest budget or very lucky circumstances (and we had some of both). Still, many people could retire much earlier than normal by budgeting, saving, and investing the way we did, and so we wanted to share our approach.

How We Did It

So, how exactly did we go about all of this? I’ve written a series to go through the basic details.

Our Story

I got my first job in high school and quickly concluded that I wanted to retire as early as possible. I enjoyed my job, but I did not like the idea that my next life phase was decades of having to work to live. My wife and I met in college, and fortunately she was on board with the idea of early retirement.

We started tech jobs right out of college in 2002 and signed up to save 30% of our incomes in 401(k)s. Compared to our college lifestyle, the 70% of our income we had left still felt like a lot. The next year we decided to start saving up for a house, and we were shocked at how much money we would need. We realized that we needed to get even more serious about saving.

We tried different ways of budgeting and controlling our spending, but they all felt like scrimping and required too much tracking. Finally we found something that worked, and as the months went by our down payment started to pile up. We learned that we didn’t need a 20% down payment after all, and with our savings and some bonuses we bought a house in 2004.

We first redirected our savings to outfitting our house. Then, when the thirst of Target and Home Depot were finally slaked, we redirected it again, half to paying off our mortgage early and half toward retirement. We were growing at work and getting solid raises and promotions, but our budget kept us from automatically spending the extra money. We ended up keeping the same budget for eight years, directing all of our raises toward savings. In the end, we were saving close to 70% of our after tax income.

In late 2009 we paid off our house, and we redirected all of our savings to invest for retirement. It was a scary time to invest, but we believed the stock market would recover, and it did.

In 2014, we decided to try early retirement. We both quit work. I wasn’t sure how to spend my time, and I found it hard to be home with small kids (then ages 3 and 1), so I ended up back at work after a year. My wife didn’t enjoy being home alone and started working again another year later.

In 2020, with older kids, more hobbies, and more savings, we found a good moment and decided to retire again. It’s early days still for our second early retirement, but so far we’re keeping much busier and have been consistently enjoying it.

As I said, our very early retirement was the result of some very lucky circumstances - our parents supported us through college, we found high paying jobs we enjoyed, we were both naturally frugal, we started on this journey together very early, and houses were much more affordable when we bought ours. Still, even without those tailwinds, we still would likely have retired much earlier than normal.