Early Retirement in Australia, is it possible?

Beautiful pictures like this induce the feeling of freedom,
which is exactly what early retirement is about

Is it possible to retire early in Australia? With our high cost of living, expensive houses and age pension which doesn't kick in until you're 67? YES!

I think Australia, like America, provides a unique opportunity to go against the grain and use society's norms to your benefit. Australia, one of the most expensive countries in the world in regards to cost of living, sounds like a hard place to build enough wealth to be able to quit work for good, but what exactly makes it so expensive, and just how do you go about retiring early?

It is entirely possible to be able to retire before the age of 40 in Australia and I plan to be fully retired at 36. To be able to have enough to be able to permanently leave the work force (if you choose), you need to accumulate about 25 times how much you spend every year. So, for example, if like me, you spend about $350 per week ($18,200/year), you need to accumulate $455,000, which will take you about 13.5 years to accumulate if you earn $40,000 and invest into index funds.

So if you start saving at 20 years old, you will be financially independent at the age of 34! If you're already a bit older, say 40, then even if you have no savings, then it's entirely possible to be able to retire at the age of 54. Better than 67 isn't it!

Now, some people earn less or more money, and spend less or more money, so is there a catch all way of figuring out when you can retire? YES! Your savings rate is what determines how long it will take you to retire:

Savings Rate	Years Until Retirement
10%	43
20%	31
30%	24
40%	19
50%	15
60%	11.5
70%	8.5
80%	5.5
90%	2.75
100%	0

This table assumes that you start with $0, get a 7% return rate (diversified stock portfolio), which is net of inflation and assumes a withdrawal rate of 4%, which allows you to withdraw your balance at a rate of 4% per year without ever running out of money (it keeps up with inflation).

How do you calculate your savings rate?
You take your annual savings, eg, $20,00, and divide it by your after tax income, eg $40,000.
Therefore, $20,000/$40,000 is 0.5, which is a savings rate of 50%, allowing you to retire in 15 years, starting with nothing.

The more you save, the earlier you will be able to retire, regardless of your income!

I'll give you an example of how I am able to have a savings rate of about 45% with an entry level job that requires no training or qualifications. I spend roughly $350/week (usually only $305/week but I put some away for annual expenses like registration and insurance) and earn $40,000 after tax. Here's a rough breakdown of my spending per week:

Rent $180 (my partner pays the other half)
Food: $50 (Click here for some of my cheap recipes)
Car rego, insurance and petrol: $30
Gym: $12
Internet: $7.50
Medication: $7
Alcohol: $9 (6 beers or a bottle of wine)
Electricity and water: $15 (half of bill)
Eating out, random purchases (eg new bike), bike maintenance, holidays: $40

There you have it, I live pretty lavishly and don't feel deprived at all. I think the only difference between me and everyone else who is struggling financially is that I stay away from debt! If you just spend the time to save up cash for your first car, you basically eliminate the debt cycle for the rest of your life. I do a lot of exercise, ride my bicycle to work and read a lot, and play music. I buy high quality gear if I feel it's something that I really need and therefore it lasts a long time and costs very little on a yearly basis. For example, I just bought a pair of leather shoes for $480, that are handmade and completely rebuild-able, they are Loakes, and the per year cost of these shoes works out to be much cheaper than if I bought $150 shoes every year, or second year even!

At this rate I will retire at the age of 36, because I started saving a little late, but I'm definitely well on my way!

If you have any questions on how to reduce your expenses or investment related questions, feel free to leave a comment. I'd love to hear from you!