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Cashing in on the American Dream: How to Retire at 35 Hardcover – July 1, 1988
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In a conversational style, Terhorst explains how he realized his job was sapping the life out of him, and how he used his skills as an accountant to devise a plan that would enable him to retire at 39 years of age. Unfortunately, the specific financial advice he gives (invest in high-yield certificates of deposit) is no longer possible. But number-crunching is not the most important message that Terhorst has.
Cashing in on the American Dream advocates a no-nonsense approach to determining just what you want in life. Do you want to be free of working for others? Then it might mean giving up your car and dinners out. But it doesn't have to mean giving up what you really love (or need). Terhorst and his wife, Vicki, have been retired almost twenty years now and have spent much of it traveling the world. They have health insurance abroad, because it's cheaper than U.S. insurance, and better.
The Terhorsts have their own website and I like to check in on them once or twice a year. The fact that they have made their plan work all these years is more important than any advice they have. Cashing in on The American Dream is an inspiring book. If they could do it, why can't you?
His book is a bit dated in 2002, CDs aren't paying as much and houses in most parts of the country aren't appreciating like they once were. But it's the idea that you can escape that makes the book such an interesting read.
I would also recommend Possum Living, Your Money or Your Life, and Rental Houses for the Successful Small Investor. All three touch on the same subject though on different aspects of it.
Some people are happy with the traditional "9 to 5 'til you're 65" routine, and that's OK. But in poll after poll something like 70 - 90 percent of us would leave our present job given the opportunity. I think that fact is a function of the nature of the beast; I don't think we were evolved to end up living within the constraints of most typical employment.
Financial independence is not a pipe dream it is simply a goal that requires planning and execution the likes of which is simply beyond the attention span of most of us caught-up in the pleasures of immediate gratification at the expense of life-long servitude.
Our financial lives have failed to evolve. We spend our money, percentage-wise, almost exactly like people did 50 years ago. What is up with that? But I keep the faith, as we are a nation of pioneers. If we are ever to cash-in on the promise of our increased productivity (in the 50s they thought we'd only be working 24 hours a week by now), we need people with the fortitude to figure it out and pass it on.
Good luck if you're one of the pathfinders, I hope to hear from you.
After converting all their assets to cash, and investing it in income-producing financial instruments, The Terhorsts live strictly off the interest of their investment portfolio, and do not draw down the investment principal. In fact they grow the investment principal by the amount of inflation. That makes their retirement formula ultra conservative, and results in less income to enjoy their retirement life than they could have. But on the upside, it also greatly simplifies the retirement income strategy. And for such a very long retirement period, as much as 60 years or more, it is better to be conservative. But at the end of their lives, that means if they never draw down the principal, they will have all their investment principal unused, and wasted. They also have no children to leave it to.
Paul Terhorst does not have a formula for a draw down of his wealth based on probable life span, net yield on investments, and estimated average future rate of inflation. His rules of planning are simple, and of necessity extra conservative. There is an inflation adjusted formula, based on the geometric gradient finite series. But you won't find it here.
Despite these shortcomings, this book is an interesting read, though their rules of thumb of $50 a day average expenditures is far out of date. The Terhorst's also live overseas for the most part, which if done properly can result in a much lower overall cost of living -- for just a little lower standard of living.
The Terhorst's have not updated this book, and don't plan to. But they do maintain a website where you can follow their experiences. The best way to find it is just do Google search.
I myself retired early, at age 53, and lived overseas on much less than the Terhorst's. So I can vouch for the do-ability of it. But I don't envy their flit-about lifestyle, and find myself much happier with a pretty, young Asian wife half my age, with our little kids running around my feet. Which also means we don't travel around that much. All in all, all things considered, I find that the best place to live is the US. But there are many foreign locations that come in a close second, and for some people, would be first choice.
If you have kids, and plan to send them to college, you can pretty much forget about retiring early. But if you are childless, and plan to remain so, then I think this might be a book full of valuable tips for you.