The Simplest Path to Retirement

Simplicity is a beautiful thing.

Simplicity is going to be key to anyone who wants to be ahead saving for their future. Sadly but also happily (depending on your perspective), it is not very hard at all to live a simple life compared to the average American household. According to this article from USA Today, the average US Family brings in $74,664; then they go and spend $67,801 on various items. Therefore, if you want to define simple as less than average, you need to spend less than $185 each day.

Obviously, a major component to this spending is where you choose to live. Yes, this is a choice. Next on this list, I would have thought food because that is very necessary to live. Surprise! Nope, the next highest portion of our income goes to transportation at just about $750 each month. Surprisingly, this also is a choice.

I took the liberty of listing out each of the categories of this article in a spreadsheet and doing some math to see what these expenses look like in monthly terms. Then I did some FIRE math (link soon to explain) and found that this family is saving 10% of their after tax income. Each year that this family works, they save 1/10 of what they need to live on for a year. This means that every 10 years of work earns them a year of retirement. If they want to continue to spend $68,000 each year off of investments in retirement (with a safe withdrawl rate of 5%) they will need 1.36 M. If they continue to save $6800, they will have this saved up in 197 YEARS!

I then took an example family of the same income, and adjusted all of their numbers to what I think a still-reasonable, well-off, and happy life would look like. I took out the reading budget because my imaginary family all got their library cards. I took out the tobacco and misc categories, because misc… what is that? Are they losing their money somewhere? and tobacco is difficult to quit, but is possible! I quit just over a year ago and it is making me happier and healthier so I can enjoy my future! I also think if they want to enjoy a cigar or pipe, that can go into entertainment. I also lowered their entertainment spending to $25/month rather than $250. No one needs to see a broadway show or take a family of 5 to the 50-yard line of an NFL game each month. Other areas that I hope to write more about… I adjusted their transportation costs from $750/month to $400 and their food budget from $600 to $300.

This new family I created still spends a fair amount at right around $50,000, but look! Now they are saving $25,000/year! That means that each two years that they work they can retire for one. If they want to safely live off of investments of just shy of 1 million they can work 39 years (definitely less unless they don’t plan to get any raises or bonuses or make money any other way and if they keep all of their money in a mattress gaining no interest) then retire.

All of this is to make a point that income is not the driving factor for most families in the United States. It is how we spend our money.

What if your family only needed to spend half of the other average families in order to live a happy and normal life? What would that look like? Well, to be honest it looks the about the same on the outside, except that chunk of money that you didn’t use can pay for another whole year of your life! Instead of working from 25 to 65 like other average Americans, congratulations! you just earned a retirement at 45! or you earned 40 years of working part time. You can see the options and freedom opening up immediately.

What if you take it further and practice extreme asceticism? Financially speaking, your spending is the ultimate factor in determining when you can retire. Though extremely contrary to what any retirement planner will recommend, it is undeniably true.

This is where faith comes in. Living a life of faith frees us from worries of the world. We are not of this world, although we are in the world. We recognize that there is so much more to life than what we have or how we spend our money. A relationship with God is most important, then relationship with others. In college I encountered an inspiring group of men in the heart of New York City who live a happy life with essentially no belongings. The Franciscan Friars of the Renewal (CFRs) have written out their life of poverty in their “Rule and Constitutions”.

“Every friar freely dispossesses himself of any personal savings account, means of credit, stipends, gifts, royalties, inheritances, properties or benefits.”

“The friars are encouraged to beg for their basic needs and for materials necessary for their apostolic works, and where necessary, with the permission of the local ordinary. All goods given to the community through the generosity of benefactors, should serve only the fundamental needs of the friars. All excessive funds or superfluous goods (that is, beyond what is necessary to sustain the Community for one year) should be given to the poor.”

Wall Street Stock Broker and CFR are both walking the NYC streets, both sleep under a roof, and both will eat today. However, spend an hour with each of them and tell me, who has more joy and peace in their life?

Katie and I are not called to be either of these, but somewhere in between. But to make the point, if my annual spending is $0, then I can retire today! Every day I have spent nothing, and every day I need nothing. That is the dream. Then, any money that I accidentally come across doesn’t even need to belong to me. It can then pass by me and go straight to someone who could use it more than me! Money is not equivalent to our joy… ever.

So that’s it, the simplest path to retirement is to depend completely on God and be a friar or religious sister! Congrats to all those who are called to live that amazing vocation, yet not all of us are called to this.

In future articles, I am looking forward to exploring these ideas more. Where is the balance of challenging ourselves to cut out waste and not focusing too much of our lives worrying about money and efficiency? Katie loves to remind me that we cannot live completely like monks in our house. We need some things and we want our daughter to live with some comforts. What does this look like for the “Average American Family”? Any ideas? Feel free to send your thoughts.

** Also, if anyone is ever in NYC for the first Saturday of the month, I would highly recommend meeting some CFRs at Catholic Underground! Pray, hang out and see a concert all underneath a beautiful church. https://www.catholicunderground.net/