EPISODE
528

Kristy Shen

Canada's Youngest Retiree

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We are obsessed with young retirees on So Money. And when I read about today’s guest, I booked her immediately. Kristy Shen believes to be Canada’s youngest retiree, calling it quits from her 9 to 5, along with her husband Bryce, at 31 years old. Today, they’re traveling the world with $1 million in the bank (earning interest).

Learn the inner financial workings of their early retirement strategy: how much they saved, how they invested their money and how much they’re living of of now…and why they have no plans to ever make more money.

If you’d like to learn more about Kristy visit www.millennial-revolution.com or follow her on Twitter @FIREcracker_Rev.

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  • sr dev

    I don’t understand the math that allowed her to bank $1M in 8 years, from age 23 to 31, while earning only $60k per year after taxes.

    If they saved every penny earned they would only have $480k in 8 years. So unless they made some incredibly profound investments, I don’t see how their portfolio gained that much, to enable them to cash out with $1M.

    • Jeremy Baesler

      Doubling your money in 2 years is nonsense unless she starting arms or drug trafficking, or getting lucky playing individual stocks, or flipping over inflated Canadian real estate. I will tell you that 1 million in 8 years is possible with a lot of hard work and careful investments. Being a software developer in your early 30s has got to be the best age to be in recent memory. In 2006 when I graduated from college I easily got a software development job as the market for these jobs was in high demand. During the deep recession you could flip jobs every few years for 20% increases in pay and pickup house forclosures for pennies on the dollar while most everyone else was struggling. There is a reason all these “money gurus” are almost always software devs. It is an unfair advantage in this field because of the high demand and salaries they command. The low cost of entry and high salary makes it a good job to start out in. It’s not for everyone though.

      • sr dev

        You can definitely achieve good results if you’re flipping houses and jobs or “Breaking Bad”. But that’s not what this person said.

        She didn’t want to buy a house for herself, so I doubt she went for flipping. But the math just doesn’t work out. Or at least it needs to be explained better.

        And where does she and her husband live now? At her mom’s? in an inexpensive apartment? How do they manage a rent and keep traveling around the world? Do they pack and move every couple of months?

        At best, I got the impression that this was an alignment of the stars at a time when the economy and her financials lined up.

        But if it is not repeatable and realistic, it’s not really advice for a broader audience.

        • Jeremy Baesler

          I couldn’t agree with you more. It’s not realistic for most people with more average incomes and not being in the market at the right time. The best you can do is take on similar habits and apply them to your own unique situation. Everyone has the ability to become financially successful, it’s just a matter of the time horizon.

        • Paul Lee

          It’s called Chinese math. It’s junks.

      • Bernard Roach

        All you need to do to double your money in 2 years is just save the same amount for 2 years if you are starting with 0. It doesn’t matter the amount. I am a dev and I doubt I work harder than anyone else. Shen is correct to say that cost control/lifestyle adjustment is probably the single most important component of getting to FI as well as not paying too much attention to social consumerism cues. That and high savings rate and getting your money to accrue compound interest. And time. 8 years is longer than you think when you are saving 60% of your income.

    • Gigi La Moore

      60k each.

      • sr dev

        That’s not what the transcript says:
        “WE made approximately $60,000 to start after taxes, so that gave us a head start.”

        And the doubling of their savings from $500k in 2012, to $1M in 2014 is preposterous.

        I’m calling BS on this one. Way too many holes, and even if they did it, is it repeatable by others?

        • Gigi La Moore

          They were computer engineers. Regardless of the transcript, I think it would be each based on their careers.

    • Angela

      One Mathematical Model for you…

      While 10% maybe a bit high, no raises as an engineer is a bad assumption. I went from 60K salary to 80K salary. Hubby went from 60K to 90K.

      Assuming no pay raises and 59% savings rate and 10% growth they would hit 1M between 31 and 32:

      Age Year Total Saved
      23 2008 $70,800.00 (59% of $120,000)
      24 2009 $148,680.00
      25 2010 $234,348.00
      26 2011 $328,582.80
      27 2012 $432,241.08
      28 2013 $546,265.19
      29 2014 $671,691.71
      30 2015 $809,660.88
      31 2016 $961,426.97
      32 2017 $1,128,369.66

      • rimohamed .

        We’ve been in a low growth environment for several years not withstanding the initial market recovery in the US about 3-4 years ago. Canada did not see the same jump. 10% consistently would likely be real estate appreciation in certain parts of Toronto only.

        • Angela

          Everyone has a different situation. I am just showing how it is not nonsense.

          I took a look at my average rate of returns on my own retirement plan and found that i had 11% avg over 5 years and 14% avg over 9 years. Those are personal rates of return from the providers website. And just for fun here is the break out by year and yes that says 37.5% in 2009.
          + 2017 3.90%
          + 2016 12.90%
          + 2015 -3.10%
          + 2014 8.60%
          + 2013 33.50%
          + 2012 15.00%
          + 2011 -3.60%
          + 2010 24.60%
          + 2009 37.50%

      • disqus_3Wu6MsSHGY

        If you show me where to get constant 10% I will give you back 3%…Deal??

        • Angela

          LOL. I don’t want your 3%. You don’t need a constant 10% a year. That is an average over 10 years. Investing in aggressive mutual funds such as midcap can return 10%. Here is an example The fund has returned 20.69 percent over the past year, 10.51 percent over the past three years, 14.84 percent over the past five years, and 10.52 percent over the past decade. http://money.usnews.com/funds/mutual-funds/mid-cap-growth/t-rowe-price-institutional-mid-cap-equi/pmegx/performance

          • disqus_3Wu6MsSHGY

            in the past three, five years, past decade… Sure… You took the best decade (the bullish market since the crash of 2008)… Sure… But it seems you do not have much understanding of finances and the stock market. Here is just a hint- in the previous decade (1997 to 2007) this stock did … Close to zero…
            I do not think you have many years of experience.
            In any case there is not much point to bring an example (your example) of a fund that requires $1M minimum to invest, and is actually closed to new investors, right….

    • Bernard Roach

      We have been on a 300% bull run since the 2009 lows of the crash. That is approixmately a 16% compound growth rate. If you are saving 60000 per year for 8 years at 16% you get about 1M. BTW they saved more than 60K per year on average. It would take about 5 years to save 500K with these numbers.

      Here is a quick google sheet calculation
      https://docs.google.com/spreadsheets/d/1tTaCcZYhKO7tQzeRsuKoGWzneXZkzKqqq6AFMcKUMxw/edit?usp=sharing

    • disqus_3Wu6MsSHGY

      She meant $60K each (making the household income 120K)- But still- in less than 10 years to get to $1M Portfolio is almost impossible. Yes they benefited from the back wind of an up bullish market, but still, very difficult for a young bimbo to get this portfolio at such a young age and from savings only (unless there is a windfall she does not disclose). In any case, go ahead and retire to you boring dull life and do nothing in the next 50 years; quite miserable.

      • Zeric E

        So traveling the world, writing children’s books, and contributing time to charities that interest you is a boring dull life, where as working a full time job is exciting? Each to their own.

        • disqus_3Wu6MsSHGY

          The short answer is YES (Boring). [The long answer I will not bother to get into, but try traveling longer than a year]. Of course for non-creative people any of these may be just fine with no difference. Thanks for asking…

          • Zeric E

            As you hinted at, it’s very much a matter a perspective. The retail cashier or factory line assembler is quite unlikely to choose working over travel or seeking other forms of entertainment, and these types of jobs make up a large portion of the employment universe.

            Most people do not find their jobs sufficiently fulfilling to chose them over more leisurely endeavors. If you have found such a profession, I genuinely applaud you. You are in the minority.

          • disqus_3Wu6MsSHGY

            I gave you the short answer, but it seems you keep beating the subject, maybe to prove to YOURSELF something; only that “you have not learned yet what I already forgot”… and you think at age 28 you own the world and the wisdom.
            I will give you only just few hints (and then retire from here, also getting boring):
            1. If you look at the Forbes 400 (you know what’s this?), these people are all Billionaires (not Millionaires, right), surely CAN retire, but they ALL (100%), at ANY age (to their 90s)- Work… wow.
            2. I am not is this list, but I passed the $1m mark long ago. I did not retire to life of nothing, however.
            3. I had traveled extensively, even for periods of 8 months (the longest), but after 2-3 weeks I am already craving work, do something, creative. Maybe because I am a … man???
            4. Lastly… “the factory line workers”… So this is your target niche? I doubt if they even read you blog…
            So, yes, go ahead, retire to a mindless life, writing a mindless blog, for mindless people who agree with you. Be my guest; you did not impress me a bit.

          • Zeric E

            I’m a man, decades beyond 28, and I don’t write a blog. Your lack of attentiveness to detail and wildly incorrect assumptions echo throughout your bizarre emotional response.

            Clearly there is no possibility for a rational discussion with you on this topic, so at this point I’ll just wish you the best.

  • onjoFilms

    I basically put $1mil in the bank too. But I started when I was 23 putting the maximum in a 401K until I was 40. Trading in and out of stocks. But I find it hard to stop working as I have a business and it is just so hard to close the doors when it is successfully earning income. That’s my challenge. (55 now)

  • rimohamed .

    I still don’t really get the math as well unless they were flipping homes in addition to working or had stock options in a start-up to IPO company. $120K net per year, rent, work-related expenses, living expenses (even frugal), etc – the math is very aggressive.

  • Cool guy

    $1m wouldn’t work in the US….healthcare is covered for life in Canada, not in the US.

    • Larry Ng

      Yes it will work. Go to Gocurrycracker.com and see how it is done. I retired and have lifetime help care due to a 5 years vested retirement from a goverment job.

  • Angela

    I am happy to have stumbled onto this podcast today! I am for sure going back to check out the rest. My hubby and I are a few years behind Shen and her husband, but we should be at around 1 million by age 38. Both Software Engineers as well. And As Shen says tracking is critical.

  • Steve

    So they will be renters for the foreseeable future I assume. Also, the mantra of “do what makes you happy” in this case didn’t apply. Software engineering was only a means to an end. A career should not only pay the bills but also be self fulfilling. The interviewee said she may do coding for non-profits. I think the concept of retiring is subjective. Some may never fully “retire” for the reason that their career is what makes them happy.

    • Zeric E

      Unfortunately aptitude/interest doesn’t necessarily translate into a reasonable income for everyone. Needing food and shelter causes many to seek employment that isn’t self fulfilling, just a means to an end.

      I’ve known several people who have master degrees in fields that they love, but were unable to find employment. Eventually they sought careers in other fields out of necessity.

      Those who find a good paying career in which they have aptitude and opportunity to accel in, and is also self fulfilling, should consider themselves fortunate.

  • awakeinwa

    If one had invested in tqqq (triple nasdaq etf) last 7 yrs, they would’ve yielded 1,527% as of close today.

    Leveraged etf’s dollar cost averaged invested is a rational risk adjusted efficient approach to wealth accumulation.

    http://ddnum.com/articles/leveragedETFs.php

    You’re welcome.

  • Seeking WorldlyWisdom

    It’s like how Neo wake up from The Matrix. 😉

  • Jerry Taylor

    wonder if they have a home base … things stored somewhere? Sounds like the travel all the time???? And she is saying I think they generate 40K a year in income and live on that including WORLD TRAVEL. Does Canadian insurance work while you are traveling the world?

  • Welfarebum

    I don’t think your plan is realistic over the long term. You shouldn’t call yourself “retired”. You’re just taking a break from your career and enjoying life and adventure for a few years while you are young and healthy – and before you have kids. And this is a valid lifestyle choice. I actually think it’s a good thing to do in today’s housing market and social-economic environment. But it’s not “retirement”.

    I speak from experience because I reached my goal of $1M as well when I was in my 30s. My wife and I quit our professional jobs, traveled and enjoyed life for several years, and felt very confident in our freedom.

    But then kids happened. Three is total. Kids changed everything. They are very expensive. Just the diapers alone cost a fortune. And travel? Suddenly, I needed to buy 5 plane tickets instead of 2. And kids can’t handle long layovers and red-eyes, which are typically cheaper. 5 event tickets. 5 meals. Two hotel rooms (most rooms only take 4 max). 5 pairs of shoes. 5 backpacks. 5x more shampoo, toothpaste, sunblock.

    And once your kids are at age 6+, they need STABILITY. They need an opportunity to form and build lifelong friendships, go out and play with trusted friends, and take courses and join teams. Piano lessons means you need a piano. Ski lessons means you need 5 sets of skis. Soccer and hockey teams mean you need to pay for fees and gear. And you need to be able to drive them to their events. Five bikes, five pairs of roller blades and skates, five helmets, five everything. And a very busy, inefficient lifestyle.

    Renting stopped working. We were forced to move from two different houses by landlords who were selling or developing. Ultimately we could only find the stability needed by buying a house.

    Before kids, I remember our frugal budget was $2K/month for everything excluding accommodation. Today with our teen and pre-teen kids, the budget is more like $8K/month excluding accommodation.

    Once this reality hit, I called myself “semi-retired” instead of “retired” because I take on contracts here and there to supplement investment income. So does my wife.

    With today’s low investment returns of around 3%, you would need $5M invested in order to earn $5M x 3% x ~70% after tax = $105K/year to provide for our family without having to work.

    So enjoy your time off and freedom and adventure. But have a backup plan for when your biological clock goes off and you want to start a family. Because $1M won’t cut it.

    • Zeric E

      Agreed that the lifestyle you have is not compatible with early retirement, but that lifestyle is based on certain choices you made. That’s not to say there is anything wrong with them, but 3 kids don’t “just happen”, it’s a lifestyle choice. Those serious about very early retirement generally should limit children to one or none.

      105K in expenses for 2 adults and 3 kids seems higher than necessary. Many families do just fine spending less, again it’s about choices of where one lives and overall lifestyle. Again, nothing wrong with spending that much, but it’s a *choice*, just as an early retirement is a choice and not a requirement. If having many children is one’s priority, great, do that. If saving massively and living a frugal lifestyle so you can retire early is one’s priority, than do that.

      • Welfarebum

        Yes, I agree you probably shouldn’t plan for any kids. We know many couples who opted for no kids, and their lives are much less expensive and they were able to sustain the early retirement achievement. But even one kid messes up the equation.

        I had similar goals to yours, and spent a lot of time doing research by asking older couples, who’d been there and done that, what they could teach me from their experiences. Just as every new generation thinks that they invented sex, they also think that they invented early retirement! Several of my uncles and their friends sold their businesses and retired early in the 1950s. Others have done it, and know of the pitfalls, so learn from them.

        My main point is that you should have a backup plan and keep your professional skills up-to-date. Taking on an occasional contract will keep your resume from being tossed in the garbage in the future. Again, I speak from experience of myself and many couples we know.
        If you read financial books and listen to lots of financial gurus, they will all tell you that “running out of money” is your biggest risk when you retire early.

        My parents bought their first house in suburban Vancouver for $2,500 in 1960. My older brother bought his house in the 1980s for $80K. Those houses are now $2M. Money depreciates fast over the decades and will likely continue to do so. Your $1M may be seem like a lot now, but in 20 years starter homes may be $10M, Wal-Mart T-shirts $200, Big Macs $50, and average working salaries $500K/year.

        • Zeric E

          Yep, running out of money is the biggest and maybe only risk. Just as one needs a very good plan to reach their goal (however many dollars that may be and in what ever time frame they desire), they also need a very good plan on how to generate income from those assets. The plan must grow income over time to outpace inflation. The first few years of retirement one should only spend interest and dividends and not plan on selling assets to generate income, let the base assets continue to grow. All the above applies rather retiring at 35 or 65.

          Interestingly you mention real estate, as I’ve known people who use that as their retirement income generation vehicle. I’ve owned rental property in the past and it’s not my preferred income stream, but it does work and the income rises with inflation. Right now the only real estate related income I have is from REITs, much less hassle, but also a lot less control. With direct RE ownership sometimes you get lucky, I had a house that more than tripled in value in less than 10 years and since it was leveraged with a loan, my % ROI was much higher. I’ve also seen people lose everything in leveraged RE, it’s not for everyone that’s for sure.

          • Welfarebum

            Yes, I agree with your thinking. But also note that there is risk in all investments. And even the best of plans can be derailed by bad luck and bad timing beyond your control. You have to take that into account in your planning. You can’t always expect status quo “invest and outpace inflation”. Your $1M capital can easily turn into $500K in one horrendous year in the markets, whether you are in real estate, blue chips, speculative stocks, bonds, or other asset classes. Even the “pros” regularly have terrible years. It’s happened over and over and over in the past – big, unexpected market crashes.

            And then what? If the unthinkable happens and you are down 50%, you get scared. Your retirement nest egg is no longer adequate. And you realize you haven’t worked for many years and are not up to date with your skill-set and you’ve lost touch with your past business contacts. As a result, are no longer seen as employable by companies. And economic downturns often accompany big market crashes, and so in your time of need nobody will be hiring.

            I’ve seen many guys “retire” early only to return and try to restart their careers after realizing that they no longer had enough capital to go on without working.

            I still think that the “semi-retired” strategy is WAY safer and more sensible. Take your $1M and slowly average into extremely diverse asset classes. Then transition to part-time, seasonal, and contract work. Use the returns from your nest egg to supplement income during the low income periods. Hopefully your capital grows.

            You end up with plenty of freedom and time to travel, but you also keep your professional skills up to date and yourself employable in case the investments blow up or other events cause you to run out of money.

            This is the model I’ve followed since “semi-retiring” 16 years ago when I was in my 30s. I’ve enjoyed a lot of great trips and adventures with my wife and kids, have tons of free time to pursue my personal interests and sports, yet haven’t let my professional skills become too stale and occasionally pick up contract work.

          • Zeric E

            We’re on the same page. People need diverse streams of income, one of which is optionally working (depending on what is happening to their passive income).

            Funny thing, that the most successful early retirees are not likely to be known to public. That’s the irony: the bloggers most known for preaching early retirement, in reality are working at least part time. To become a popular blogger requires on going *work*. It may not be a traditional job, but make no mistake, it is work.

            $1M is a nice number bloggers like to throw around, but it isn’t large enough to generate sufficient income from unleveraged assets for most people to never work again, and certainly not enough for a family. Regardless of the number, the key is to create an increasing stream of income from the assets that doesn’t highly depend on the value of the assets, and live on *less* than the income it produces. When one does that, to a large extent it doesn’t matter when the market goes down because it still produces the same sufficient income. That’s why I said before it’s important not to spend down assets, especially early on, and ideally never. That goes counter to a lot of traditional retirement advice out there that discusses the “draw down” phase of their financial plan, but it is the safest strategy.

            Our situations sound similar, but I don’t have kids which makes it easier.

          • Welfarebum

            You are spot on. Years ago you only had to achieve a certain net worth goal, say $1M, and you were considered to be set for life. But with today’s alarmingly low yields (practically every asset class is overvalued by historical measure), your total investment income is the only factor that counts.

            Many middle class working couples can earn good money. A fireman and teacher or nurse can, together, pull in $200K annually.

            Now go try to gross $200K in reliable investment income. At 3% yields, you need a $6.7M nest egg. Almost everyone I know who is contemplating retirement, in semi-retirement, or in full retirement is struggling with this challenge. The only ones who aren’t seem to be government employee with generous pensions or friends who managed to accumulate 8-figure nest eggs.

            My father challenged me to save 1/2 my income all my life. I did just that for 20 years after graduating from engineering. I didn’t run out and buy a new car or live in a fancy place. I lived way below my means in a single room of a dumpy house shared by 5 guys before eventually buying a cheap, old condo. I always lived below my means, but this just made me financially stronger and stronger.

            As the years rolled by, my diverse investments grew. In my 30s I had my first $1M. By my 40s, I had $4M. Only in the last 10 years, with 3 kids, did I stop being so frugal and began to dramatically increase my spending and standard of living.

            But thanks to that diverse nest egg generating income, and my income supplement from the occasional contract, we can comfortably afford this lifestyle. It all stems from my dad’s challenge to save 1/2 and always live below my means. I’m teaching my kids the same valuable lesson.

          • Zeric E

            I’m guessing you must live in a fairly expensive area based on the numbers you have been mentioning. Where I live it’s unlikely for a pair of firemen/nurse/teacher/etc to pull in $200k together, more likely it would be around $140k-$150k, however on the flip side area expenses are reasonable and many families live just fine on household incomes under $100k.

            Interestingly my wife and I were talking about another couple she knows that lives in the area. They have housing, car, and child care expenses that total to about 50K annually. We don’t have *any* of those same expenses due to no debt and no children. We save/invest more even though our income is lower…and they have no passive income to speak of.

            Saving half is admirable, when I was working full time in a well paid position (now I work part time, sometimes), the best I managed to save was about 35%. Non the less, it still added up.

            The key to getting that passive income going and building income generating assets is starting young. I cringe when I see many young people get their first real job and within a year they: 1- buy a brand new car (on credit), 2- move to an expensive apartment; 3- buy a bunch of furniture using plastic; 4- go on a vacation first chance they get using plastic. That puts them on the path of financial slavery making it impossible to invest in any meaningful way. Continuing those habits is a guarantee to work a *long* time and have a subsistence retirement on SS when they finally reach the point where they can’t work anymore.

            The reality though is, if everyone was frugal and lived well below their means the economy would virtually collapse since it is so consumer based. Therefore, those behaviors are not encouraged or taught, societal pressures are the opposite.

          • Zeric E

            I just realized you are in Canada and I’m in the USA, that explains the difference in income levels/costs. CDN vs. USD.

          • Welfarebum

            Very good points. When I was a younger man out of university I remember encouraging my friends to also live below their means and commit to saving a significant portion of their income. I’d show them the spreadsheets I made and how such a strategy could reliably lead to a million dollars in less than 20 years.

            They seemed excited about it, but impulse buying got the best of them and only one friend actually stuck with the plan. Today, that friend also has a few million dollars, no debt, and could retire comfortably when he wants to pull the trigger.

            The funny thing is that, even with all that frugal living and money saving, I ended up having no less adventurous life than my friends who bought all the fancy “stuff” on credit. When I was young I still was able to take time off to backpack around Australia, Europe, and South American. And I did everything any young man would do: dating, lots of sports, going out with friends. What I didn’t do is impulse buy junk that I didn’t need.

            Living below your means empowers you because not only does your savings grow over time, but you get very used to being frugal. So when unexpected expenses or opportunities come up, you can easily fund them. Whenever I was laid off from a tech company in a downturn, I would shrug my shoulders because I could easily fund my budget from savings and could take my time to find the next right job.

            Contrast that with the guy who spends years living beyond his means and accumulating debt. Not only does he have no savings, but has adjusted his inefficient lifestyle to an income level higher than he earns. So when he is hit with a job loss, opportunity (requiring money), or unexpected expenses, he’s immediately in trouble. He’s already running at a deficit and has no savings to get him through the tough times. To cope he has to take a dramatic hit to his standard of living and panics to find a job. It’s not a good way to navigate through life.

            By the way, I’m in suburban Vancouver. A friend of mine is a fireman and he tells me “no fireman in our station earns less than $100K now”. And a senior nurse here earns around $90K but can easily boost that with overtime pay. Same with teachers. Some of the government worker salaries here are crazy high – similar to what I hear has happened in California. But the cost of living, including all forms of taxes, accommodation, and cost of goods and services is very high here too. Probably at or near the highest in North America.