My plan to Retire at 35

Lets be real, everyone wants to retire early and live life on their terms. When work is optional you are free to pursue passion projects, enjoy time with loved ones, or just travel the world.

Unfortunately most people right now are saying to themselves, “ya that's nice but it’s not realistic.” In this article I am going to challenge that belief by showing you how I plan to retire at age 35, and no, I am not a trust fund baby!

The Basics:

You need to save money, obvious I know, however you don’t need to save as much as you think if you lower your expenses and invest properly.

Expenses:

If you want to do what others can’t (retire super early) you have to do what others are unwilling to do. I am not talking about just saving money on expensive coffee and not having a $400 a month car payment. To achieve this feat you will need to live like a broke college student. This means renting a room (or having room mates), food budget of $400 a month, paid for used car, and the cheapest insurance policy and other monthly bills as humanly possible. Remember, you are buying back your freedom and it is expensive!

Investing:

This is the fun part, this is where all the heavy lifting happens. You must sacrifice the comforts of today to allow your money to replace you as the income earner.

Here I want to show you my investing strategy and the potential returns that can be generated.

Here is the overview of my main brokerage account I am using to grow my limited savings to the point where I can retire early.

If we look over the past year we can see an impressive 50% growth from 55 holdings, an overall dividend yield of 1.849% and an expense ratio of 0.07%.

I decided to organize the fund simply by growth assets and dividend growth assets. I prefer this organization as opposed to splitting everything up by sector because it changes the way you view each holding in a way that I think leads to achieving better results.

Dividend Assets:

Here is a look at the overview of my dividend holdings. We can see a return over 13% over the past year with 35 holdings, a 2.94% yield and an expense ratio of 0.01%.

This is a look at some of the holdings in this dividend growth portion. Full list here: https://m1.finance/5gY2OF5geEu6

You can see instead of grouping by sector I simply have a ranking of strongest companies up top with higher allocation and companies with lower dividend yields or simply companies I am not as confident in, lower down on the list with a lower allocation percentage. This allows you to put more money in strong companies and less in weaker ones (relatively speaking) instead of investing based on sectors.

I also have my favorite dividend growth ETF with 15% allocation up top. This ETF has a solid track record and a growing dividend. If you are less inclined to research companies and do your due diligence, I would put more weight into this ETF and less in individual stocks.

Growth assets:

In the growth portion of the fund we have 20 holdings, a small 0.213% dividend yield, expense ratio of 0.16%, and 111% growth over the past year.

Here are some of my growth holdings, full list here: https://m1.finance/qgsQtMD_td-O

You can see I did a similar thing as my dividend portion, I have a ranking system with my favorite companies weighted slightly higher but with 3 added growth ETF’s. Same as before, if you are less confident in individual holdings, add more weight to the ETF’s.

The beauty of this setup is the simplistic view of assets with a yield and assets focused on capital appreciation. Of course a company like Apple can be considered both due to being high growth and paying a dividend. At anytime you can move a stock from one portion of the fund to the other as you see fit and adjust their ranking by upping or lowering their allocation.

Depending on the type of person you are this is either going to be a lot of fun to setup and watch growth or be a major pain. This level of research and focus is necessary to generate the best possible returns to achieve our goal.

The combination of low expenses, a portfolio designed for max returns, and consistent discipline on your end, is what is going to make early retirement possible.

My Plan:

Let me drive home the power of this using my own numbers as an example.

I am 25 years old and just hit $50,000 invested. (most is due to growth and reinvested dividends!)

If we look at the overview of the past year between all the holdings we can see a return of over 50%! Even with this actively managed fund we created a return of 50% a year is a little high to consistently hit. Lets assume that the total return each year with dividend reinvested is 30%.

Using this investment calculator with my current $50,000 invested, 30% annual return, 10 year time horizon, and additional monthly contributions of only $200 a month (you don’t have to be rich!) I will have about $800,000 at age 35.

Conclusion:

I hope this article showing my plan for early retirement serves as inspiration that it is possible even with limited income.

The formula is simple, limit expenses and maximize returns. The more discipline you have the more success you will see.