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What it takes to retire at 45

The Stig of financial blogging unpacks his journey towards financial independence.

The FIRE (Financial Independence, Retire Early) movement encourages its followers to save a substantial amount of their income and accumulate assets capable of generating enough passive income for them to be able to retire in their thirties or forties.

FIRE has its critics, but at its heart is a realisation that a frugal and debt-free lifestyle gives individuals more freedom around how they spend their time. The movement is not about not working, but about placing yourself in a position where you can choose when and how you work. As such, some of the principles can be useful, even for those who will probably work from nine to five for most of their lives.

One of South Africa’s most well-known FIRE followers is a blogger called Stealthy Wealth. Below, the Stig of financial blogging answers a few questions about his journey towards financial independence.

Your blog, Stealthy Wealth, tells the story of your journey towards financial independence. You aim to retire in 2030 at age 45. What made you decide to go on this journey?

Towards the end of 2015, beginning 2016, a few things happened. The first was that my wife and I found out we were expecting our first child. There is nothing quite like the imminent arrival of a baby to really make you look at life and your priorities. Secondly, we were about to make the last payment on my wife’s car. That was going to be the last instalment on our short-term debt.

I was thinking I really want the bit of extra money to make a difference in our lives and not just get absorbed in month-to-month expenses. Then around the same time I stumbled across a blog called Mr Money Mustache and that blog details a 30-something year old who retired at the age of just over 30. I really liked the idea of buying back your time by becoming financially independent and that is where it all began.

How did you calculate how much money you need to retire?

I used a concept known as the 4% rule. The long and short of it is that you can draw 4% of your capital to cover your living expenses in the first year of your retirement. Now the math is a little bit complicated but if you rearrange it a little bit it boils down to 300 times your monthly expenses in retirement is the lump sum you would need and then you pretty much have an excellent shot of never running out of money before you kick the bucket.

What percentage of your income do you currently save?

At the moment it is around a third. It does vary a little bit month to month depending on certain expenses that may come up, but I generally try  to save and invest as much as I can. It is a little bit on the low side compared to some of the other FIRE people out there, but my wife is currently a stay-at-home mom, so when she returns to work I hope to up that percentage a little more.

What were the main changes you had to make regarding your finances and lifestyle?

I think the two big things that is enabling this goal of mine is the fact that we only have one car. It is a very cheap-to-run, cheap-to-maintain hatchback and it is paid off, and we don’t plan on taking on more car debt for the foreseeable future. We’ll drive that car until it is no longer drivable and then the other big thing is I stay fairly close to my work, so my commuting cost is very minimal compared to what the average South African spends on getting to and from work.

You have been on this journey for a few years. If your investments have largely been in South Africa, chances are returns have disappointed. What does your progress look like at this point?

Like most South Africans who are working I have a pension fund through my company, which, through Regulation 28, does have quite a bit of South African exposure. So the returns over the last four years have been extremely disappointing – but, you know, investing is a long-term game. It is not three to five years, it is 10-years plus in my view. At the moment, I am about 30% behind where I hope to be, but I’m optimistic that going forward and over the remaining years until 2030 that the market will catch up some of the gains that we’ve all been craving and I should hopefully get back on track.

The FIRE movement has gained a lot of traction, particularly in the US, less so in South Africa. Most people struggle to retire and maintain their standard of living at 65. Many people will say retiring at 45 is a pipe dream. Do you think it is a realistic goal?

I think it is realistic. It is going to be challenging, I think it will be – but, you know, even if I don’t make the 2030 part, even if I take an extra year or two, I’m still going to be younger than 50 and it is going to put me miles ahead of where I would have been if I didn’t have this goal at all.

So what happens after 45? How are you going to fill your days?

I’ve still got a few years to figure it all out, but I do have some projects and ideas in mind. I would definitely like to give back to the personal finance community – either through teaching or going to schools, and just trying to increase the dismal financial literacy stats in South Africa so that more people can just be better with their finances, avoid debt and secure themselves a comfortable retirement.

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COMMENTS   40

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The older I get, the more I think it does not take FIRE or Stealthy Wealthy or whatever to retire early, but rather a rich, deceased relative with a will containing your name in a prominent place 😉

Never, Never marry a younger/older divorcee with children!!! AND DON’T GET DIVORCED!!! what say you Richard?

How to retire at 45:

1. Get a high paying job from day one…never gonna happen in SA
2. Don’t get married
3. Don’t have kids
4. Live with the parents until 45

If you do all that you can retire at 35 😛

Hey shoosh man, some people have pets! lol

Referring to do not have kids. Why is it that the poorest people in this country have the most kids on average? Also why are european nations going to be extinct as their reproduction rate to continue their culture is only 1.3 and you need a minimum 2.1 rate to continue the culture.eg Germany,sweden,Norway,iceland UK and even USA. THe muslim and the african countries are at 8kids per couple. How come they promote more children but so called rich European cultures are busy dying out and being replaced as they are not reproducing……..Miscegnation is at full steam ahead.

Personally, I also invest most of my spare cash every month. But I don’t plan on retiring at 45, I’m the type of person that will go insane sitting at home. I like working (well the work I do at least). So even should I have enough savings to retire, I’d most probably still keep on working. But currently, I’m trying to work on other income streams as well. Passive income I think is the best way to go, but to get that up and running is a ‘beach’.

Develop a hobby so you don’t get bored and just around until you die

Warren Buffet talks about a Russian lady who ran a furniture store.She retired at age 98 and left the store to her sons. She came out of retirement at age 102 to open a competing store across the road….story something like that but the point is that working is not that bad for you its the stress that if not controlled that messes you up and thats why people retire at age 65. However living in South Africa with a government that is not for the people but for stealing and undermining its citizens for its own gratification one should never rely on a government pension as they will steal it in a heart beat if they can and thats under Mandela,Mbeki,ZUMA,Ramaphosa and every other president to come in South Africa…………….You have to look after your own wealth creation and fund managers are no more skilled than you as we have seen in 2018 and with what Steinhoff exposed about how ignorant the so called experts all are.

Agree MrG9000. Not even the wealthiest citizens on the planet (The Zuckerbergs / Sorros’es / Bill Gates / Queen E / Patrice Motsepe / The Ruperts / The Wieses..uh,uhm…they all carry on “being active” in something, instead of sitting at home reading books & sipping coffee.

Retirement does not equal sitting at home doing nothing. It’s just an arbitrary age that retirement funds pay out and that employers feel the risk of higher paid aging workforce.

Retirement in this context means you are not bound to your employer or financial situation. So even if you choose to do nothing it won’t impact you.

I cannot agree with this. The 4% rule and the 25 times( as capital) spending works to retire at 60 to 65 but not at 45! Try get to 40 times spending as you may live for 50 years-doing nothing. And run the numbers with inflation at 2%-3% more than the 6% historical and returns of inflation plus 1% to 2%!!

Much improvement needed here!

Well said SAM. People don’t realise the size of capital required to retire that early, and the longterm effects of inflation.

Besides, I’m afraid of “retirement”, it’s a dangerous pastime….as no-one came out of it alive! *lol*

Agreed, the 4% (or 25 times) rule comes from the Trinity study which looked at the probability of depleting your retirement funds over a period of 30 years.
It also used the US stock market to test against.

Retiring at 45 means you could easily have 40+ years left, and you don’t want to have run out of funds when you are 60+ years old and have to go work again, The US market which can significantly differ from the SA stock market, so I personally wouldn’t retire until I can do the 3% or even 2% rule.

And then you also need to take into account country risk, there is a non-zero probability we could get hyper inflation if the government chooses the populist option of printing money instead of politically unpopular choice of reducing social spending should our debt continue to increase at the current rates.

…until SARS wants it’s CGT and 45 turns out to be 65.

This is more then feasible, personally know some that have done so. The focus on the word Retire might throw some people off, think of it more as financial independence (FI). That let’s you spend your time as you find valuable, whether work, volunteer, startup etc.

Not sure if Moneyweb is the right platform, rather look at the blogs and stories of those that have done it before. Real stories help to put in what is required for FI and that it is possible. Everyone’s situation is different, kids, parents, health etc.

I love it when you say the concept of “retirement” should be replaced by “financial independence”. Absolutely.

Even filthy rich individuals remain “active” in some sort of business or leisure activities…mostly to retain a sense of worthiness. Instead of sitting at home, reading books & sipping coffee…and feel “expended” waiting for your time to come.

All the power to him for targeting retirement at 45.

Personally, I would like to be able to choose (or not!) to work when my youngest is done with high school; at that point in time I will be ~55.

The biggest elephant in the room is the cost of health care when you get older…you may well end up living to 100 but the cost of health care for those last two or three decades will be $$$

Adopting a healthy lifestyle is the cheapest way to stay healthy. Adopt a preventative long term approach rather than a short term reactive approach.

This is only feasible if, like this gentleman, you have one child, one car etc. Wait until child no 2 or 3 arrives. Then you need a bigger house, bigger car, another car to ferry kids to and from extra murals. More school fees, more extra mural fees, more money needed for food, medical bills etc.

It’s a noble goal, but not within reach of most people. Also, why live like a miser during your young and fit years? I would rather enjoy that time with my kids, and worry about upping the savings (and working more) when they leave school etc and I spend less time with them.

I don’t know how wise this is. Sure, do some saving, but with all the uncertainties out there (and did you note for instance that the writer assumes the tax laws are not going to change?) why postpone all fun and live like a scrooge until you are 45?

“Life goes by pretty fast. If you don’t stop and look around once in a while, you might miss it”

– Ferris Bueller

As usual the majority of comments shows a lack of ability or willingness to read properly: “…and it is going to put me miles ahead of where I would have been if I didn’t have this goal at all.” The quote is the most important sentence in the whole interview. Like Hein Kruger says – while you have debt, you are a slave to the person or institution you owe money to.

Never, never, never get into any debt, other than what you pay off each month without incurring costs (like your credit card).

My views– and beware – this is busy happening to my brother-in-law right now.
It is extremely important to choose the correct Company (Insurance) to invest your pension payments into.
My brother in law retired from AmPlats 5 months ago. His pension was invested with Old Mutual. On retirement he decided to invest his pension with BlueStar – Financial Advisory Services – authorised by Sanlam.
All the compliant notifications pertaining to the transfer was given by BlueStar to Old Mutual.
Despite a plethora of written instructions, emails, telephone calls, Old Mutual reneged on everything (despite their promises and assurances) and so far refused to transfer his pension as instructed.
I wonder what is going on. Methinks they got cheesed off that these funds weren’t reinvested with them.
Can anybody from Old Mutual please give us an explanation why it has so far taken longer than 5 months to react on a compliant request?

Not to pour cold water on your hopes, but I was in a similar situation 3 years ago. My Dad worked at Amplats for 12 years, and then when he turned 60, he had to go on forced retirement. He (thankfully) found work as a consultant for a smaller company in the same industry. We attempted to move his pension to a pension preservation fund with AG, and dealing with Old Mutual during that process was horrendous, it eventually took them over a year. You call them and don’t get feedback for months at a time. Why i said thankfully, is that he had work, imagine if you retire properly and don’t have any money for your first year!! Yes there are bridging facilities, but they don’t work for free, so it’s very unnecessary to pay fees cause a company can’t do their job.

Shocking news:

No, he is not working and waiting for his pension:

Lets asks Inge to follow this story up with AMPLATS and Old Mutual…

This must be happening to a lot of people.

I started receiving my pension 20 days after I retired.

I just get that funny feeling that there are ”Bosasa” type middlemen (gatekeepers)involved here and that they got the ”hump” hence the delay…

I’m in my early 40’s, debt free (house paid off in my late 30’s), married + 3 kids in school, wife not earning a salary (since 2006). I’m busy planning to build my second dream house with cash, own 3 flats locally and 1 oversees (rental income, but bought with bank loans), etc. How did I achieve it?:
1. Good tertiary qualification. I do earn a good salary, but it is not excessive.
2. Living far below my pay scale (I’ve never bought a new car, always went for reliable but low cost second hand cars, had second hand furniture, never had a smart TV, etc.).
3. Sustained high work performance (to maximise company bonuses). Work hard to play hard.
4. Maximise tax benefits.
5. Leverage work inter company transfers as these do sometimes come with additional financial benefits.
6. Excess cash gives me the freedom to make higher risk investments (note so far this has not paid off yet, but again I am taking a longer term bet here).

I do acknowledge that I’m privilege/blessed by God. However, I also assign a large portion of this fortune to being financially wise (following guidance of my grand farther that managed to have lived through the 1930’s (last depression) & experienced a war first hand.

At the end of the day, everyone should strive not only to be financially free, but to be content with what they have. Do not be fooled by all the luxuries that we are bombarded by on a daily basis (suggest sell your TV to get rid of this if necessary). These can such you in a spiral of wasteful expenditure that does not bring happiness.

Hopefully the wife buys into the frugal lifestyle also, because a divorce is going to blow the plan out of the water.

Doesn’t stack up. With say R30k of expenses (including medical aid, school fees, life cover, short-term cover) etc. even if you earn 5% over inflation (which is big in historical terms) and do this 100% tax free you still need to save R60k a month over 20 years to hit a capital amount that will yield back your R30k a month.
And you have all the uncertainty that goes with the strategy – imagine you do it and the next 10-15 years of returns in Reg 28 funds are as bad as the last 5. You have the power of compounding real losses and a miserable lifestyle to deal with. Rather live in the now!

Of course, according to the hipster millennial economists you could put all your money into Bitcoin …. they say it can’t fail….

With 95% of the population UNDERFUNDED for retirement, this is another worthless article.

Firstly, I think that the author has possibly been a bad grandchild, or does not observe well and obviously did not spend time speaking to or visiting their grandparents, especially those in old-age homes. When young one often thinks that the “current reality” will continue and then “sh∞t happens”. For example, the hearing aids cost R29K but med aid pays R6K. If you are 45 you will most probably live as many years. Sitting around doing nothing is only fun in small doses and most people on the treadmill yearn for this when stressed. Suggest the author takes a look at most funds returns over the past 5 years and not many are looking that good to cover CPI plus 4%, which would in any case only keep your spending power at the same level. This is ludicrous and irresponsible. It can only work if you have safety nets around you and those poor people will be the ones who chose to be responsible. I am 57 with no debt, paid off house, some additional passive income and 388 times my monthly expenses in investment and pension and it is not enough. Still paying R34K towards my grandchild’s school fees and creche each year because the father and his partner do not earn enough to cover their costs and job security for the next generations in RSA looks bleak.

@TonyCCT – I think there are different perspectives to this matter. “Retiring” at 45 to the following generation means having financial security early on in life in order to pursue interests (and/or jobs) that they really like, and not to have to worry about the financial side of it too much. I have been following this blogger, called “stealthy” for a long time, and I can assure you his thinking is razor-sharp. Do yourself the favour and read his blogs from way back. As a 65-year retired person, I certainly learned a thing or two from his blogs! Maybe it would also be a good idea to pass these articles on to your son and grandchildren. That would certainly make you a “good” grandfather!!

I’d venture that those that could theoretically retire at 45 are the types that would not retire at 45; exactly because they could. Sure, adjust priorities (family:work especially) and give up the commute, but they would still be active in ventures of some sort.

Excellent Article! I’ve known the Stealthy wealth blog for a while and it’s achievable. I’m an example of it. I will FIRE at 38 this year and a living proof of it being possible, if one manages their money more wisely.

Some basic principles include: start saving early in life with your first paycheck, live below your means, don’t copy the Joneses, identify what gives you real happiness – it’s the experiences and not necessarily material goods, equity beats all asset classes in the long term, low investment costs, exploring multiple passive incomes.

The 4% rule works very well for as many years left in retirement. And It’s tested across geographies.

I coach young South Africans from all income streams on good money habits and being able to FIRE now that I have achieved it.

And just to respond to the nay Sayers – I did not inherit money, we are a middle class household, no lotteries, no windfalls, pure hard work, smart money decisions and good investing habits. I see alot of negativity in the responses below, and maybe that’s from either frustration of people not wanting to change their money habits or having blinkers on. Imagine being finally free early in life and being able to work on what you have always wanted to do and passionate about (if your work answers that, that’s great).

Thanks Inge and Stealthy Wealth for the insightfully article.

Agree, insightful article.

Have now also added Stealthy Wealth on my browser favorites…love the “say it like you mean it” writing style.

The concept of saving and being frugal to be able to retire earlier is common sense. My concern is that the 4% rule will only work for those who are wealthy and have the ability to tighten the belt in those years where the markets are in the doldrums. The wealthy have capacity to further reduce discretionary expenses. People who are less wealthy will be caught out on the 4% rule. Medical Aid inflation and poor health have trapped many. The problem with the comment “Imagine being finally freeing life…….etc” is only half part of it. Imagine 20 years on when technology and advances have made your skills redundant and you would like to possibly re-enter the job market because you would like cash to travel or assist the younger generation in obtaining more marketable skills or even a home. Met a grumpy 70 year old who retired from a bank at 55. Medical Aid inflation, increases rates and taxes and maintenance needs on his property put the squeeze on his pension. Now he is feeling very trapped as his skills are no longer relevant and his pride is preventing him from working for Butlers or similar where elderly pale males might get a look-in.

I downloaded that stealthy wealthy spreadsheet… I didn’t see CGT being taken off anything? Any interest earned is liable for CGT at your marginal tax rate

One doesn’t pay CGT on interest but on realised profit, after the sale of an asset such as shares.

But you do pay tax…its income isn’t it?

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