My parents retired at 42! Three things I learned and three things I’m doing better
In 1994, my parents hosted a dinner party at our home. It was a formal engagement; suits and ties, catering, champagne, and musicians. I was 12, my sister was 10, and we ran around with a few other kids as the adults mingled and celebrated my dad’s retirement. He was 42.
A few months prior, my dad was a Finance Director for General Dynamics, a large defense contractor in St. Louis that build tanks and fighter jets. The company announced its intention to relocate to Washington DC, closer to the politicians signing their contracts. My dad was offered a big raise and the opportunity to continue his successful career. He turned it down and stepped off the corporate ladder forever.
A few days later, the CEO of General Dynamics wrote him a letter. He espoused his admiration for the boldness of my dad’s decision and shared some regrets for parts of life he missed as he rose in the ranks. As did most people in my family’s orbit, this CEO saw the final result and admired it. But while the accomplishment is one thing, the journey is much more important. And growing up, watching my parents evolve from workers to full-time parents instilled in me life-changing philosophies and attitudes.
I vaguely remember a visit to my dad’s office. I have a loose recollection of shaking the hand of the CEO and ex-astronaut at a cocktail party. I occasionally remember that when my dad traveled for work, he would bring back chocolate. But I never really knew him as an office worker. He never complained about his job or got stuck in evening traffic. And the same with my mom, who I know worked because she told me, but I never really experienced it. But I remember all the summer trips overseas we took as a family after they retired.
Parents do their best to raise children well. And often make difficult trade-offs along the way as they “provide” financially for their family. So, it’s hard to see an alternative to working hard and using your remaining time to be a parent. But, I saw a different life. Here’s what I learned:
Quality time vs. the quantity of time isn’t a trade-off
Kids value time with their parents, and parents value time with their kids. Everyone understands this intuitively, but few live it. The crutch many people use is the quality vs. quantity of time argument: that one week vacation spent with the cellphone off as a family versus the months and months away at the office and the drain of a demanding job. But it’s not either-or. Creating both is not only possible, it’s the most profound parenting you can do.
Work ethic doesn’t have to be learned in association with a paycheck
Like everything else, kids learn from their parents. And teaching work ethic is critical to a child’s success and happiness. But seeing a parent leave before sunrise and return after sunset doesn’t teach work ethic. Kids have no idea what you do during the day, and they don’t care. I would go so far as to say that kids don’t learn work ethic very effectively by watching parents complete their tasks. Driving off to work for eight hours doesn’t teach work ethic. On the other hand, eight hours hand-in-hand on a science project most certainly does.
Happiness and validation are usually found outside of work
It’s easy to confuse your self-worth and your paycheck as the same thing. But an impressive business title doesn’t make you a better friend or parent. In fact, the more you commit to work and the higher up the ladder you seek validation, the further away parents drift from the most important things in life. There are certainly some fun, rewarding, and fulfilling aspects of work for most people. But the things that make us truly happy are our families, our hobbies, and our passions. Unfortunately, those things are almost always mutually exclusive.
To retire early, you need to bail on the corporate track, or you miss the years with your family at home. It also usually means committing spending austerity. So there’s no executive title at work, no fancy car, lavish home, or designer clothes. And many people spend their entire lives thinking those things will validate their life choices. The earlier you develop a tolerance or perhaps even a fondness of not caring what people think, the sooner you realize that what you really want is simply to spend your time on what is most important to you.
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My dad likes to joke with me that my motivation is just to retire earlier than he did. He also preaches that part-time work on things you enjoy doing is a great option too. And while I am on a faster timeline, it’s not out of competitiveness or a deep-seated desire to impress my parents. The truth is that I’m doing things slightly differently and more strategically, learning from the decisions my parents made. And experiencing firsthand the life they have been living paycheck-free for the past few decades.
I started much earlier
My parents, always frugal by nature, kicked off a journey to financial independence around age 25. I started my journey around age 14. And while I didn’t start earning a lot of money until graduation from my MBA program at age 27, I already had a vision and a plan. That foundation and inspiration allowed me to make every decision, however mundane, through the lens of the final goal. The result of this earlier start was that by age 34, I had surpassed my parent’s net worth when they retired at 42. And this brings me to the 2nd thing I’m doing better.
I have a much higher financial independence (FI) number
When my parents stopped working in the early nineties, the economy looked a lot different. There was more stability in the stock market, and growth was slower but consistent. It was hard to imagine things being any different. Then, the Dot-Com Bubble and the Great Recession jolted everyone at the turn of the next century. It forced many people, my parents included, into a strategy of asset protection, pivoting from carefree growth. My dad didn’t share any specific results or learnings from those two dramatic downturns, but he continuously planted the seed with me that I needed more money than I might think. He tells me things like, “When you think you’re ready to retire, come talk to me first.” Or “You should plan on working longer than you’ll want.” He’d cross out my retirement date goal on my whiteboard and write it out for ten years later. But I got the message: I need more money.
This serves two purposes: the first is that it will make my finances more resilient to downturns, and secondly, I’ll have more freedom to inflate my lifestyle at some point.
I’m growing wealth differently by diversifying in real estate
My parents have been mortgage-free since 1986, but they’ve only ever owned one place at a time. The only investments they’ve had in their portfolio were in the stock market. This isn’t a bad thing; in fact, it’s the reason they had such tremendous net worth growth in the roughly fifteen years they kicked off and then reached financial independence. But my strategy has been slightly different thanks to my in-laws, who are enthusiastic rental property owners. Real estate has many virtues, but there are three primary benefits that I am capitalizing on: first, it’s one of the few investment types where you can easily borrow against. I only need 20% of the property’s cost to buy it and start generating returns, paid for by a tenant. The second advantage of real estate is cash flow. While the mortgage’s payoff period might not generate much, if any, cash, the future passive cash flow is perfect for those who don’t want to touch their assets growing in the stock market. Lastly, real estate appreciates slowly but consistently, which means that cash flow aside, my net worth grows every year.
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All parents want their kids to be better off than they were. I think my parents did it pretty well, considering they mostly figured out the FIRE movement (Financial Independence, Retire Early) decades before it was a movement. I complemented everything I learned from them with a burgeoning personal finance community online dedicated to the same principles. And this is also why I entered the space myself, podcasting and writing a book. Financial independence and retiring early was my childhood, and it’s my current lifestyle, my passion, and my purpose. I owe that to my parents.
When I was a kid, my friends seemed to admire money. They spoke proudly of their parent’s accomplishments, of their titles, networks, and possessions. But their parents admired my parents for leaving it all behind.
About the Author:
During the day, Mike O’Leary is a Corporate Finance leader for Fortune 500 Companies. He also co-hosts the podcast Friends on FIRE and has a deep passion for helping others with their personal finances.
Mike earned a bachelor’s degree from the University of Michigan and an MBA from the University of Miami. Mike is a father, husband, writer, traveler, videographer, and DIYer. He and his wife live in Atlanta, GA, with their two daughters.
