Reimagine Retirement | Jeremy Jacobson | TEDxFolsom

To any outside observer, my family's life is indistinguishable from that of our neighbors. We live here in Folsom, just minutes from this lakeside theater. For those unfamiliar with the area, our neighborhood is primarily four-bedroom homes, three-car garages, pool in the backyard. pools we have two kids ages seven and two we do all the normal kid things school summer camp I coach their sports teams we go on vacation to Hawaii we sail we ski we go to Ted Talks we live in a fairly comfortable middle class maybe even upper middle class class life the only real difference between us and our neighbors is that I retired over 10 years ago when I was still in my 30s.

Since then, I've helped thousands of people work toward a similar goal of financial independence and early

retirement

, and I hope to achieve it. hundreds of thousands, if not millions more, maybe you are one of them now for most people

retirement

is something you plan for after age 65. We trade the briefcase or tool belt for a set of golf clubs or a suite on the porch. The focus of life shifts from work to leisure. I look at retirement through a completely different lens. Retirement is what allows people to pursue their passions, whatever they may be, completely independent of the need to make a living and best when done with the health and energy of youth.

Hopes, dreams, goals, aspirations have been put on hold or completely set aside simply due to the need to make ends meet and how much better the world could be if more people could pursue the things they truly want. they loved This brings us to the question of how am I a normal person from a normal family with a normal job and income? How do I accumulate enough money to fund my desired jobless lifestyle for life? And you say it that way, it sounds like something important. I started to wonder this. Questions related to questions when I took my first real vacation as an adult at the age of 28.

After years of investing every penny I could into them, I finally paid off my student loans and thought it was a good time to reward myself, so there I am sitting on the beach eating shrimp the size of my head and thinking about work and I had to asking if this is all there is eating sleeping working taking a few weeks off every year where you think about work never having enough time to fully decompress or do all the other things I loved and anyway who was the one decided, once we finished school and became adults, that we would no longer take off our slippers, so I took my engineering degree that the responsible adults in my life had guided me toward instead? allowing me to pursue my dream of becoming a cowboy and I applied it to this financial challenge and the answers and opportunities are what I would like to share with you today because it is simple and repeatable, although it goes against all conventional wisdom, so even if Retirement is not something that is on your radar, this may still pique your curiosity, so what I did was come up with a simple three part plan that I called save, invest, relax, the first step is to save, there is really only three things that determine how much money we could have in the future a trial time rate of return and contributions how much we save and the last one, savings, is the only thing we have any kind of direct control over, so that's where I focused now in standard, standard advice it says something like saving 10 of your after-tax income for retirement, maybe more during your PEAK internet years when you're in your 40s and 50s, but if we save 10 percent, that means that we are spending 90 percent, it will take us nine years of effort. accumulate enough cash to be able to finance our lifestyle for a single year, if we can increase our savings rate to something like 50 percent, we now have a year's worth of cash after just one year of work, and if We can come up with something, admittedly a little crazy, maybe a savings rate of 75, now we can take three years off for every year we have worked, who can save 50 of their income, not me, not the majority of the People, maybe it's a little ridiculous, so to do it we had to totally do it. reinvent ourselves right people do people do this all the time?

It's not so crazy we started a new job in a new city we got married we had kids we just reinvented ourselves our number one goal was to ensure our financial freedom so with the goal of saving 50 we had to make some changes, but nothing as ineffective and ridiculous as doing a budget. I hate budgeting for everything, you know, every expense, you know, every month is different, something always comes up. The most effective solution is to design your life so that saving is the most important thing. The automatic and inevitable result: we can't spend more without active effort is what it looks like in practice, which is why the Department of Labor's consumer spending survey looked at where people spend their money and the average household spends between 70 and 80 percent of the household money. budget on three things and three things just accommodation, transportation and food, so it's not about skipping the occasional latte, but focusing on these three things right engineering approach rule 80 20 Pareto principle let's get the most bang for the buck looking here so let's look at each of these separately transportation based on the data the average household spends something like ten thousand dollars a year on transportation it's usually cars so the depreciation interest is maintenance etc.

My main transportation for several years was a bike I bought on Craigslist for fifty dollars I rode that thing everywhere and so it doubled as my gym membership when I was finally done with it and was ready to move on I sold it for 60 dollars , so the average household spends ten thousand dollars a year and now I make a profit. We'll talk a little more about investing in a second but only contribution. Historical investment returns. We might expect ten thousand dollars to grow to twenty thousand dollars in ten years. One hundred thousand dollars in 30 years and one million in sixty. riding a bicycle for a single year instead of riding a car makes future millionaires the bicycle is truly one of the greatest wealth creation machines ever invented and we won't just do it for one year, we will do it year after year now I know A lot of people are thinking, but I can't do that where I live, the bike is not an effective transportation solution and you're right, I totally agree.

I couldn't do it where I lived either, so I sold the house I moved into. a room I rented near the office when my wife and I got married, moved to a small student apartment near the university and I only had a slightly longer bike. We were able to reduce our overall housing expenses by about 80 percent and best of all. We never accidentally remodeled the kitchen, talking about what number three item on the list is food and we did all the normal things here, we cut back on the brown bag lunch, but the real breakthrough came from focusing on developing our cooking skills, specifically cooking skills from my wife because she won't let me in the kitchen, but what happened is that our kitchen became the best restaurant in town and eating out lost its appeal, so we recently celebrated our 12th wedding anniversary and went out to enjoy a very nice dinner in one of those high-end restaurants. -At the final restaurants, you know the type they'll send you to, they'll sell you 10 cuts of meat for 100 dollars and it was amazing, it was beautiful, great atmosphere, great company, but we agreed that the food itself wasn't that great. good as what regularly comes out of our own kitchen this is the foundation on which early retirement is built by optimizing these three big expenses that guarantee that we could not spend more than 50 percent of our income and then, over time, to As our income grew, we increased our savings rate instead of growing our lifestyle now, you might be thinking, wait a second, you want me to live like I'm poor.

I grew up on the edge of poverty and I will say that deprivation is never healthy in any way. I'm just saying. That if you're willing to live a slightly less prosperous lifestyle and in one of the richest countries on the planet for a short period of time, you could reduce your working years by 20, 30, 40 years, seems like a reasonable trade-off, I don't know. If there is a non-glamorous way to describe our story, we did nothing more than live like college students for a few years longer than was socially acceptable and only after reaching our financial goals did we allow our lifestyle to grow to live longer than we do now. spend probably five to six times what we did during our peak saving year, peak saving years, but we can only do this now because we didn't do it then, so this brings us to step two of the save, invest, relax plan where we have our savings. autopilot, but we can't just take these big piles of cash that we're accumulating and put them under a mattress, we need our money to make money, so let's put it to work in the stock market, now in the stock market.

It is easily the second greatest wealth creation machine ever surpassed only by the bicycle and the longer we can let the compound interest of the stock market work for us the richer we will be and the numbers I shared earlier 10K becomes 20K in 10 years 100K and 30 per million to 60. That's it for the US historical returns of the US market. No, chances are pretty good that you've heard of Warren Buffett, who you sometimes called the greatest investor who ever lived or the Michael Jordan of investing and us. We're going to do exactly the same thing, so what you do in simple, conceptual terms is you find profitable businesses run by smart, passionate people and then you buy the entire business and as those businesses grow, your wealth grows and we're going to do the same. exactly the same thing just on a smaller scale and without his, you know, without the intelligence, connections, skills or experience of Warren Buffett, so what we're going to do is, on a regular basis, on every check payment, we are going to take those large amounts of money that we are saving and we are going to throw them into the stock market, broad-based market index funds and there are two reasons for this: they represent the most profitable corporations on the planet that are working to increase their profits year after year and two for everyone who listens to the speech and says that's not for me.

I love my job. I never want to retire. I would do this job for free. That's where they work and we want them to work to increase our future wealth. I consider it a win-win, so now. savings on autopilot investing on autopilot the third step is actually my favorite relaxation because now all we have to do is live life is not really any different just because we are saving aggressively enjoy it and we are going to do this up to our total net worth , our total portfolio grows to a size that will sustain our lifestyle forever.

Now there's a study done by a trio of professors at Trinity University and they looked at this question: How big should your wallet be to sustain a life and sustain its cost? of long-term life and the figures they reached in the worst periods of economic history were approximately 25 years of savings, so for a household that saves 50 of its income it will be a journey of 10 to 15 years, 10 a 15 percent of my life 50 of the portfolio will come from our direct contributions or savings and the other 50 will come from stock market returns. My entire post-college career was less than 16 years.

Is the same. Invest. Relax. Plan. Save. Invest. Let's recap. This is. not your grandparents' retirement, this is a concentrated effort of aggressive savings to earn an extra 40, 60, 80 hours a week for the rest of our lives, so we can do whatever we want without the emotional or psychological burden of earning a living. life. We are not going to save 10, we are going to save 50 percent, if that still seems a little extreme, let's think about it this way, in a household we are going to live on one income and save the other, we are not going to gamble I was born or Peak Running 40s and 50 we are going to save early and we are going to save from the heart.

I'm not even 50 years old and only during our retirement years did our portfolios earn more than us at every job we worked. since he was 14 years old. that is the normal result, we are not going to budget, we are going to design the lifestyle, we are going to hyper-optimize the expenses of the Big Three of housing, transportation and food, it is not a used car to save money, it is a bicycle we can buy a car later I drove here today in our new electric vehicle iswell, we're not going to buy a starter home, we're not going to buy the smallest house in the best neighborhood, we're going to rent and If we're going to rent a small house, we can pay cash for a house later and we'll focus on developing skills that improve our life and at the same time reduce expenses, for example, become the best restaurant in the city and then we will enjoy the journey that life is good.

What would you do if you never had to work again? How would you spend your time? Would you spend more time with your family? Would you volunteer in your community? Would you run for office? Dedicate yourself to your art. Okay, this is the path we take to early retirement. Financial Independence. It's simple It's repeatable What happens next is up to you Thank you