Early retirement for renters due to investment cost improvements and higher savings rates Improving on Fran and Fred’s lifetime financial plan with earlier retirement
Fran and Fred Frugal, both age 30, are a married working couple with $100,000 in combined annual earned income. They want to understand how valuable different personal finance strategies could be to their lifetime finances and their retirement security. In their baseline projection scenario, they planned always to rent, not to have children, to retire at age 65, not to use any tax-deferred investments, and to pay average investment costs.
Obviously, in this baseline scenario Fran and Fran have NOT adopted many of the lifetime financial planning practices that would make it easier to achieve financial success in life. See the “Fran and Fred’s Baseline Lifetime Planning Assumptions:” section at the bottom of this article for more information about Fran and Fred’s current personal finances and their other lifetime financial planning assumptions.
In a series of articles, The Skilled Investor will compare different lifetime financial planning projections for Fran and Fred to illustrate the relative value of adopting different financial planning strategies. To find a list of other articles about Fran and Fred as renters, click “Age 30 Renters” in the right hand column under “Find More Articles on These Topics.”
When Fran and Fred adopt a lower cost investment strategy, they can also explore the tradeoffs between a lower savings rate and earlier retirement.
When Fran and Fred adopt what they consider to be lower, more reasonable investment costs, their projected lifetime finances improve dramatically. The following scenario graphic projects their lifetime assets using lower investment costs.
For more information about their lifetime financial plan with reduced investment costs, see: “Lifetime investment assets of renters — with investment cost improvements“In their baseline lifetime financial plan, Fran and Fred do not plan to have any children. While they could change their decision about having children, when they looked at the chart above, they realized that they did not need to build up all these assets without someone to pass them to.
Note that their baseline lifetime financial plan is described in the article entitled: “Retirement Savings Needs of Renters — prior to any financial planning improvements.“
Therefore, in this scenario Fran and Fred want to understand better their early retirement options. In their savings rate comparison scenario, “Pre-retirement Savings Rates for Renters — with and [...]