Financial Independence: How to Retire in 10 Years

The following is a guest post by James at Free in Ten Years. If you are interested in guest posting at Club Thrifty, please see our guest posting guidelines.


How to Retire in 10 Years or LessWe all like to save money, to extract every last bit of value out of our limited financial means, but what is the object of all this frugality?


For most people, being frugal allows for spending in other areas which are considered more important – perhaps saving for the purchase of a house, a child’s education or just a much desired big-ticket item. These are all possibilities given to us because we are thrifty people – or will be soon if you hang around Holly and Greg’s site for long enough.


I want to encourage you to think bigger for a moment. What if I told you that you could retire in ten years?


It’s much more attainable than most people realize and doesn’t require an extremely high income or putting your family in the poor house. What it does require is dedication to the goal and a willingness to sacrifice many of the consumer products we are told we can’t live without. It does require running an extremely lean budget, but it is certainly possible.


How Can I retire in Less Than 10 Years?

The idea is to reduce spending to the point where you are saving a large percentage of your income each year which is then invested. When the proceeds of those investments exceed your new very low spending level, you have theoretically reached theoretically financial independence and can retire!


The maths is extremely simple which I’ll demonstrate with an example:


  1. John earns $80,000 after tax and deductions per year
  2. He lives on $20,000
  3. Each year he invests the $60,000 into a low cost investment vehicle like an index fund and receives 6% compounding interest.
  4. At the end of ten years he’s got $819,396.73 in his investment account (not taking into account tax and fees)
  5. His investments will now give him roughly $50,000 per year (of course, this is on average and over the long term)
  6. He can take out his $20,000 each year (less than a 3% withdrawal) ensuring his money is never eaten by inflation – he can also increase his annual spend to keep up with inflation and never exhaust his stash.


There are of course people who can’t immediately spend 25% of their salary because of lack of work, studying, children, debt or a lack of desire and a whole host of other reasons – but many can. I want people to realize that working until you are 65 is not the only option you have.


I have decided that I don’t want to work in an office for my whole adult years – the most productive time I have on earth will be consumed by work unless I do something about it. I’ve decided to take some short term pain so that I can wake up not long from now and not have to go to work. The list of things to do in an early retirement are endless. Think of all the things you’d do if you didn’t have to go into work for a living – financial independence gives you options.


The Best Part of Reaching Financial Independence?

You don’t have to retire just because you’re financially independent!


Reaching the point where you don’t have to work doesn’t mean you have to retire if you don’t want to. It might mean that you can start pursuing a line of work you were too scared would fail, or go back to school to retrain in an area you are truly passionate about – or work for a charity. The list is endless. If you continue to do paid work, you do so knowing you could stop at any time and also that you’re increasing the safety margin of your investments for when you do retire.


Living on a Fraction of Your Income Won’t Make You Unhappy

Ever since I started living on a fraction of my income, I have become happier, more sociable and less stressed. The reason? I know that my working life has an end in sight and it gives me confidence at work because I am less reliant on it – I don’t feel the need to constantly have the latest technology because I have replaced my old expensive hobbies with free alternatives and I’m happier for the change.


I run, I garden, I read, I educate myself about the world, and spend time with friends. I have friends over to play board games instead of spending $50 at the cinema to sit in silence.


Being rich is relative and if you think you’ll be happier at a certain level of wealth or when you accumulate a particular possession, you’re wrong. Instead, I’d urge you to look at using your money to give yourself more of the one precious commodity we all can’t buy: your time here on earth.


I want to look back at my life and look at a time filled with rich experiences and friendships, not office politics and meetings.


Have you thought about an early retirement?
James blogs at Free in Ten Years where he is documenting his life as a 27 year old getting ready to retire. You can connect with him on Twitter.


(Image credit:


  1. Jamie Dickinson @ YourSavingAngels says

    Really interesting stuff right here. Making the change to live on an extremely reduced income can be done if you have the end goal in sight and really want it!

    • says

      Thanks Jamie – you’re right about having goals. If you don’t have a goal in mind it’s really difficult to maintain a really high savings rate. Our society is so well set up to take our money if we’re not thinking about it all the time. For me the goal of not having to work and being independently wealthy is strong enough to make me make the necessary sacrifices in the short term. It’s not for everyone, but everyone should have a think about it.

    • says

      Keeping the cost of living down is key.. it’s natural that people spend more as they make more, and that’s why so many end up being wage slaves, paying for their past purchases.

      My wife is possibly getting a job after 10 years out of the work force. Since we’ve been living on my salary all this time, it should be very easy to bank/invest most of hers and continue to live on mine. But I know that if we don’t do this at the start, it will quickly become next to impossible as we would become used to living on two incomes!

  2. says

    I’m currently saving 50% of my income with the goal of becoming financially independent by age 45. Saving more isn’t really an option, since the cost of living here is so high that I’d wind up living in squalor if I bumped my rate up to 75%. But I could come close to that number if I had my current income in my last town.

    Pushing the savings rate up isn’t easy. And I cannot claim that it makes me happier than not saving. I do the best I can to make sure that I budget for everything that is important to me. But I will readily admit that I haven’t been able to do and buy everything that I want to.

    • says

      They are great goals to have.

      Everyone has unique circumstances that makes achieving financial independence easier or harder than the next person. The key for me is to choose a goal that’s realistic and then work towards it by having a number of compatible goals – it sounds like you’re well and truly on your way. Nice work!

  3. says

    We’re aiming for Financial Independence in our thirties, and find that people don’t always get that we don’t think it’s going to look like traditional retirement. We’re not planning on sitting around watching tv and playing golf, but choosing interesting projects to work on and organizations to volunteer through. It’s just about having choices!

  4. says

    I want to look back at my life and look at a time filled with rich experiences and friendships, not office politics and meetings.
    That is pretty much my life motto as well.

    We are doing the whole short term pain thing too so that we can hopefully retire from our normal jobs when we are in our late 30’s or at worst early 40’s.

  5. says


    I’m with you. I’m not doing anything crazy like saving 70 or 80% of my income, but I am saving 50%. I’m on this path and hope to be financially independent within 9 years at age 37. This is going to be hard to do but it’s really important to me as I don’t want to spend my entire adulthood needing to work for someone else. I got bigger and better things to do. I want to take back control of my time!

  6. Brian says

    Your example is great and proves it can be done, however it is much hard if the person is only earning $30K after taxes or even $50K. Of course they can still do it, they just have to get a little more creative (have roomates, find extra jobs for extra income).

    My wife and I are looking at 45ish or so and being done, if we want. Of course right now we both actually like our jobs, so that helps alot!

    • says

      Everyone’s circumstances will be different and it obviously isn’t going to be possible for everyone – but I think for a large number of people it’s possible if you’re willing to make big sacrifices. Obviously the higher your income, the smaller the sacrifices need to be unless you’re used to a very high standard of living.

  7. says

    I wish that was possible for me but it just won’t be. I’m 42 with not enough retirement savings already, then have a low income in an expensive city because I freelance. Not to sound all doom and gloom, as I know my situation will improve, but retiring in 10 years is based on individual circumstances. And I also don’t see myself fully retiring either. But hopefully doing something really enjoyable to earn an income.

    • says

      Yeah, it’s not always possible in all circumstances. I started with quite a bit of debt and an average income and I’m on track, but I don’t have children and I live in a relatively low-cost city. Even then it’s going to be a push.

  8. says

    I don’t have a desire to retire in 10 years, but I do have the desire to live leaner. I want to reduce our expenses and save more money for things that we enjoy in life. I am currently working on this strategy and this post helped with the motivation.

  9. says

    I was able to leave the corporate world at 47. My husband formally retired at 55 in the same year. I chose to work in non-profit for a while, and now have my own coaching business and enjoy helping others. I appreciate the simpler life, and the ability to change other people’s lives with the knowledge I have to share.

  10. says

    When I left my full-time job in TV, I intended to be a stay-at-home mom… I virtually “retired” from my profession. Then I realized early retirement wasn’t for me. Instead, I really needed to find a job that I could enjoy doing long-term – I’ve done that now, and would happily work into my 60s if I could continue doing this!

  11. says

    I am in favor of reaching financial independence early because I did it at 38 years old, but $20K is way too extreme. It would be too difficult to maintain for any real length of time and you are giving up too many things. For example, home ownership and marriage/children.

  12. says

    James, I LOVE your passion for this topic. I really do. I too have been on a quest for some time now to figure out how I can retire long before the traditional age 59-1/2 cut off (hence the title of my blog). But through my own research I feel I need to point out that there will be a few challenges you’re going to need to examine more closely and confront:

    – You’re going to need to pay taxes on the capital gains / dividends from any earnings you make
    – You will need to redo this calculation considering inflation – it will put a damper on things in the long run
    – If the funds are in a 401k or IRA, you’re going to need a way to get the money out without penalty. You could use a 72T, but it’s paying almost nothing for interest right now
    – $20K may sound okay in 10 or even 20 years, but will it still be good enough when you’re 50, 60, 70, or 80 years old? This gets back to inflation …
    – Most investments paying near 6% will carry risk, meaning that there is no guarantee that you’ll actually have that much money in 10 years. And then you have to consider what happens if the market dives right after you “retire”? To take out a withdrawal would deplete your sources even harder. You may want to run a Monte Carlo simulation to see what the possible scenarios are.
    – Finally there are a lot of studies out there that show that the 3 and 4% withdrawal models will only last 30-35 years. That means if you retire by age 35, your money is going to run out before you are 70.

    I am really not trying to downplay your post because I do think you’ve got the right idea here and a lot of great enthusiasm. Don’t lose that! And believe me – I want to be retired as quickly as possible as well. But all of these details are a reality that will have to be dealt with.

    If you’re interested at all in how I plan to pull off my own “retire as quickly as possible” scenario, here is my plan:

    • says

      Thank you for such a great response. I’m going to have to take a bit of time to respond to this. The quick answer for now is that I think I’ve considered each of your major points – the $20k figure was an example to demonstrate a point, it’s not what I’m doing.

      My early retirement investments are in taxed accounts and are separate from my traditional accounts so that my retirement will be in two separate stages. The 6% rate of return is a decent guess at sharemarket returns in the long term if you look at the history of the ASX and the US sharemarket.

      I’ll get back to this in detail later. Thanks again!

  13. says

    I’m glad there is a community that believes in early retirement. I told one of my good friend recently about my plans to retire in 7 years and he said “there’s no way that’s possible”. This reaffirms the FACT that it is possible. Thank you!

  14. says

    When I first worked out those numbers I couldn’t believe it. I had to run them again and again and always wondered why people wouldn’t do the same thing! it is hard for many to live on 25 or 50% of income but totally worth it eventually!

  15. says

    I think financial independence – whether one choses to retire or not – is something everyone strives to achieve. I always find it fascinating when people decide to get serious about their finances, live within in their means and reduce debt – how much more fun life becomes. I think once you figure out what you want and aim all your effort to achieving it – how can you be unhappy? You’re getting your heart’s desire whether it’s to retire young or simply have financial freedom.

  16. says

    It may just be me, but if you spend $20,000 a year, that comes out to $1667 a month (roughly). Now, that leaves me to wonder if this person has any kind of health insurance or if the job pays for it. Or if this person has a closet for a home and a Ramen Noodle diet, and I seriously hope he doesn’t have any kids. I can appreciate the fact that people want to be financially independent and retire early and all that, but at what price?

    • says

      The $20k is just an example, not my situation. My retirement calculations are made with inflation in mind.

      In Australia we have universal free health care, so private health insurance isn’t an issue for me until I reach a particular level of income at which point it will be advantageous from a tax perspective to have it.

      I think my standard of living has improved since I’ve started to think about how and why I spend my money. I’m certainly not eating ramen noodles. I’m living in an embarrassingly well-off situation compared to many people living with the stress of debt and worrying about job security. I don’t have those concerns!

      • says

        Don’t take this the wrong way James, as I’m all for people doing what works for them regardless what others (even me) say or think. The problem I have is that what works for you in the place you are doesn’t always work for everyone else.

        It’s the same reason why I have a problem with so-called “financial gurus” who put out guides and whatnot telling people that their “plan” will help everyone who follows it. Financial advice isn’t one-size-fits-all and needs to be tailored to each individual’s/family’s specific situation. Some people have more discipline than others. Some places have a better infrastructure for healthcare than others. You said it yourself, “I don’t have those concerns” but many people do for one reason or another.

        I guess the bottom line is that it’s great that you are able to accomplish what you are setting out to do, but it’s not a realistic option for a majority of people, especially when the numbers you use aren’t anywhere close to the norm. As tough as it may be to accept, not everyone is meant to or even has the desire to attain the same goals as us.

        • says


          I’m not proposing this as a way that will work for everyone. This is the method that will work IF (important if) you’re able to save at the requisite rate. The point of the article is to point out that this is a possibility, and that I’m managing with an average income in my country.

          The line about ‘not having those concerns’ isn’t to say I’m able to do this because I’m lucky, but because I’ve made these financial decisions, I’m no longer stressed. Most other people are capable of getting to that point even if they don’t want to reach financial independence.

          I’m with you that this is an unusual option and isn’t for everyone. My point is that everyone should consider it and see if they are willing and capable of making the necessary sacrifices. $20k is quite a lot of money for one person to live on, $40k for a couple is very achievable for many people. I don’t think you have to be unique to reach that level of spending.

          I really appreciate your comments – it makes a nice change! Thanks for making me think about things from a different perspective.


  17. says

    It’s defiantly a great thought to retire in the next 10 years and I would love to do it but I know this just isn’t feasible for my family and I. On the other hand this still doesn’t mean I have to wait until I’m 65 either.

    In fact my goal is to quite my full time job by the time I’m 40 to go on and do other things in life than sit in an office all day.

    I know people who do this day in and day out and never take even one vacation a year. What is the excitement in that when all you do is work and never reap the reward of your hard work.

    Great post James.

  18. Justin@TheFrugalPath says

    James your enthusiasm for retiring early is great. A lot of people aren’t even sure that they can retire in their 60’s let alone before 40.
    I’d rather be financially independent and create my own business so I can call the shots rather than working for someone else. For me retirement is choices and it seems that is what you’re working towards as well.

  19. says

    Financial independence is of higher value than retiring early, at least to me. I still want to contribute to others and see people reach full potential. I am not sure retirement would give me that kind of satisfaction.

  20. says

    I have the same desire to leave the corporate world and eventually work for myself. I never thought saving like this amount and investing. I think you will succeed because you have clear goal in mind with a plan of action. Even though I like my day job I know its not what I want long term and this gives a peace of mind when I am work.

    Thank you for sharing this

  21. says

    It all begins with a little sacrificing of the little things that you enjoy the most. Then it becomes a discipline, then a habit. Then saving for your retirement will be easy. All you have to do is take that first step.

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