How to Retire in 13 Years on an Average Salary

This is Amanda. Amanda is not normal.

This is Amanda

At her day job she brings home the US median annual salary of about $56,000 per year but she retired after 13 years on the job at the age of 37. There are two big reasons that Amanda is not normal.

Weird Thing #1: Amanda lives WAY below her means

Amanda doesn’t spend money like anyone around her. She rarely buys clothes, but when she does they’re from TJ Maxx or a thrift store. She wouldn’t dream of paying retail prices. She bikes to work to save gas money. She has several roommates and stays in the cheapest room. She rarely eats out, and when she does she orders water and the cheapest thing on the menu. Her phone is six years old and doesn’t run modern apps. Her cell bill is $20/month and she jumps between wifi spots to avoid using data. When she needs something, it’s craigslist not Amazon. When she's done needing something, it's craigslist not the trash. When her friends are blowing hundreds of dollars at the bars on the weekend, she’s behind the bar earning hundreds.⁣⁣⁣

None of this is normal. But it has allowed her to live on about $2,000 per month. That extreme frugality makes for some amazing math:

Take home salary after tax: $4,000

  • Side hustle: $500

  • Monthly expenses: $2,000

    = Monthly Savings: $2,500

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Weird Thing #2: Amanda dumps tons of money into index funds

For the uninitiated, an index fund is a simple type of investment. It’s a low cost way to own the ENTIRE stock market. Instead of trying to pick and choose stocks or paying high fees to have an expert do it for you, index funds represent a way to simply and inexpensively harness the entire growth and profits of the stock market in a single investment.

Amanda keeps it even simpler by putting all of her investing in a target date index fund, which is a nicely balanced combination of several index funds designed to be an all-in-one investment.

Amanda takes her $2,500/months savings and dumps it ALL into a single target date index fund. Over the history of the US stock market, the market has gone up about 7% per year after accounting for the cost of inflation. So take a look at Amanda’s 13 year career starting from a net worth of $0.

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The 4% Safe Withdrawal Rate

With her two weird quirks, at the age of 37, Amanda has amassed a net worth of over $640,000 all invested in her target date index fund.

A famous study called The Trinity Study looked at the historic growth and volatility of the stock market. It determined that 4% is a “safe withdrawal rate”. That means, at the moment you retire, you can take out 4% of your starting nest egg each year, and even adjust it for inflation, for the rest of your life with very high likelihood of never going broke.

That means at the age of 37 having worked 13 years at an average annual wage, Amanda can retire. She can draw $25,800 from her nest egg forever without working another day. (That’s $1,800 more than she had been spending annually to date).

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This is FI/RE!

FI/RE stands for Financial Independence, Retire Early. Instead of planning to slave away at her job her whole life, Amanda made a conscious decision to live way below her means, work a side hustle and invest an insane portion of her earnings to buy her freedom decades early. Nothing alone she did is that extraordinary, but the purposefulness of it is what caused her to live her life on her own terms.

Amanda doesn’t treasure things. She treasures freedom. Think about your life and what makes you happy. Can you be more like Amanda?


Jeremy Schneider is the founder of Personal Finance Club. After starting a company in college and living on a $36,000 per year salary for his whole career, he sold his business at the age of 34 and retired at the age of 36. Check out his instagram @personalfinanceclub.