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Finance >> Retirement >> 15-Year Retirement Plan
If you make $10 an hour, you can buy a new car, build a new home, then retire in 15 years with inexpensive medical coverage. Guaranteed. Take a quiz to determine your eligibility.
 
A 15-Year Retirement Plan for $10-per-Hour Wage Earners
This article discusses how a $10-per-hour wage earner can buy a new car, build a new home, get $150-per-month federally-qualified health coverage, and retire in 15 years on a minimum of $31,000 per year (sooner if hourly wage is higher). Read below.

Take the quiz at the bottom of this article to determine whether or not you can retire early.

To whom does article pertain?

Early retirement is not for everyone. To retire early (35 to 55) on $10 per hour, one must...

  1. Have patience;
  2. Be able to adhere to a budget and live frugally for 15 years;
  3. Live a healthy lifestyle;
  4. Have credit good enough to qualify for a $64,800 loan (discussed below);
  5. Have a spouse, partner, or friend who is willing to jointly work toward early retirement;
  6. Make at least $10 per hour, 40 hours per week, 52 weeks per year (or be able to rely upon making $20,800 during the course of a year)
Following is a detailed explanation of each of the above items, A through F.
    A. Have patience. Patience is needed, because 15 years is the minimum amount of time needed to retire early.

    B. Have discipline. Sticking to a budget is paramount in order to make the necessary annual investments on $10 per hour and thus grow the capital that will provide the early retirement.

    C. Be healthy. A healthy lifestyle is mandatory in order to keep health insurance premiums and doctor visits to a minimum. Currently (2015), federally-qualified healthcare is available for $150 per month, with a $500 annual deductible (per incident), described in detail below. Did you know that a heart-healthy diet also helps to prevent cancer, diabetes, senility (dementia), strokes, and autoimmune diseases? These topics are discussed in detail at the following links:

    1. WellBeyond100.com/HeartDisease.aspx
    2. WellBeyond100.com/PreventDementia.aspx
    3. WellBeyond100.com/ReverseAging.aspx
     
    D. Maintain good credit. Good credit is essential in order to build a new home on at least 4 acres of land (described below). Why build a new home? Because it is much less expensive than renting or owning an already-existing (or old) home. Read below to find out how and why.

    E. Choose an early-retirement-plan companion. Is it true that two can live as cheaply as one? Almost. By combining the incomes of two (or more) wage earners, both making $10 per hour, an early retirement is possible for both.

    F. Make $10 per hour, 40 hours per week. Both wage earners must make at least $10 per hour, and be paid for a 40-hour workweek, 52 weeks per year (or be able to rely upon making $20,800 during the course of a year).

What about children? Is the early retirement still possible if children come into the picture?

Of course! If any children are brought into the picture, an extra $1.90 per hour per child ($4,000 per year) is required to maintain adherence to this guide toward early retirement[1]. This number does not include college. However, a prepaid college account can be established for each child for a fraction of actual college costs[2].

What kind of interest rate can I expect on my investment, and how much will I have to live on?

Currently (2015), a conservative annual yield from the stock market is 6%. Higher-risk stocks bring a better yield, but also drop further in value during market downs. Read below to find out how to invest in low-risk stocks and expect a minimum of 6% return.

This ensures a minimum of $31,000 per year in your early retirement, more if the market is level or up.

How early can I retire?

15 years. However, if the wage earners are able to invest more than the below-described plan, earlier retirement is possible. However, it may be desirable to continue investing to enjoy an even more comfortable retirement. The longer one invests, the more money one has to retire on.

Where should I live in order to retire early on a $10-per-hour income?

Where one lives determines the majority of one's ability to save toward early retirement. A $10-per-hour wage earner living in an environment with high living expenses cannot save enough money to retire early.

The wage-earner must be willing to relocate to a low-cost environment (rural or country) where the cost of living and taxes are low. States with zero personal income tax are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington, Wyoming[8]. Two states have both zero personal income tax and zero sales tax: Alaska and New Hampshire. Since the cost of living in Alaska is very high, Alaska is beyond the scope of this article.

However, land can be bought very cheaply ($400 to $600 per acre) in southeastern South Dakota (outside Sioux Falls), which has zero personal income tax, but does have a state sales tax of 4%. The southeastern corner of South Dakota has milder weather than the rest of the state. Known for their low-crime statistics and low taxes[3], two towns, Brandon and Freeman, in South Dakota have great town infrastructures and available land at low prices[3], [4]. The wage earners may even opt to relocate to Arkansas, a state with very low property tax rates.

Additionally, inexpensive land ($700 per acre or less) can be found in New Hampshire by buying land outside the cities and away from the coastal areas[3].

Once the 15-year mortgage (described below) is paid off, two young retirees can actually live comfortably on annual earnings in the low-$30Ks per year, because they would NOT HAVE 1) high utilitiy bills, 2) state or federal income taxes[9], 3) a mortgage, 4) a car payment[7], 5) high grocery expenses[5], or high medical insurance rates[6]. Basically, they can enjoy the same lifestyle on $31,000 per year that their city-dwelling counterpart does on $70,000 or more. Where one lives, and how one lives, makes the difference in a $10-per-hour wage earner's ability to retire young.

At what age can I retire if I live in a state with no income tax and low land prices?

After building a new home on at least 4 acres of land (see plan below), two $10-per-hour wage earners can begin investing at age 20 and retire at 35. Or they can wait and retire later on more money (see table below).

And finally, the 6-step plan for retiring early on a $10-per-hour income:
 
  1. Select your land. Shop and select your land in anticipation of obtaining your $64,800 loan (below). Most realtors and land-sellers will hold your purchase pending your loan completion. Buy 4+ acres of land in South Dakota, Arkansas, or some other low-taxed state and low-cost area. In many communities, 2 acres of land is the minimum in order to build a septic system and drill a water well. Purchase an extra 2 acres (more if possible) of woodland to provide free fuel for a wood-burning stove to make winter heating costs as low as possible. Thus, to place the home on at least 4 acres (mostly wooded), a realistic estimate is $700 per acre, a total of $2,800 for 4 acres.
  2.  
  3. Shop and select your home. In anticipation of obtaining your $64,800 loan (below), most manufacturers will hold your purchase pending your loan completion. Buy a pre-fabricated home, assembled on your land by the manufacturer. Select a home for around $15,000, similar to the cottage in the above photo (16x24 ft. with a 16x20 railed-loft bedroom/bathroom). These small, inexpensive, quality homes are available from many "barn & shed" manufacturers, such as Weaver Storage Barns in Sugarcreek, Ohio and other similar small-home manufacturers, often starting at a $15,000 base price. Allow for an extra $20,000 for foundation, interior completion, backup-wood-burning stove (for reducing heating costs), plumbing, electric, septic, utility hookup, etc. Most builders will coordinate all these details for the buyer, including all necessary permits for such a project.
  4. Have the home manufacturer price out a basement, in the event there is enough money in your budget to place the home over a basement. Only include a basement if your budget permits.

    Advise the manufacturer that a wood-burning stove will be installed, and they will include it in with their building plans. For safety, locate the wood-burning stove on the ground-level floor, and place an inexpensive wood-stove thermometer (photo right) on the lowest part of the chimney pipe so that it can be easily monitored to not overheat, which can be dangerous.

    By not dividing the home up into rooms, but instead keeping it open, and installing a large ceiling fan in the non-lofted portion of the ceiling, space-heating and cooling are circulated throughout the entire home, thus requiring a fraction of the energy to heat or cool the entire house.

    Buy and install a single energy-efficient window air conditioner and place into one of the upstairs windows. Do not place downstairs, because cold air flows downward.

    Buy 2 safe temperature-controlled space heaters and run them on the safer, low energy setting (1,300 watts or less to prevent dangerous overheating of the space heaters). Place one on each floor. On the first floor, place under the ceiling fan, positioned at least 2 feet from a wall or corner. In the loft, place anywhere 2 feet away from any obstacles. If the home is insulated well (R-13 or better), the space heaters will suffice in sub-zero temperatures. Use the wood-burning stove when possible to reduce electric consumption.

    If it is necessary to drill a water well, add $5,000 ($2,000 to $5,000). Some necessary landscaping (i.e., driveway) may require another $5,000. For any possible location-related issues or contingencies, figure on an extra $5,000.

    Obviously, if the wager earners make more than $10 per hour, more land and possibly a larger home with higher utility costs could be afforded. This is determined by following the below "living expense" table that states the minimum annual investment necessary to grow the capital which will provide an early retirement.  

  5. Shop and select your new car. A new Nissan Versa Note car can be purchased for $12,000. Select (or order) your car, and the dealer will hold it for you, pending your loan below.
  6.  
  7. The loan--borrow $64,800. Visit a local bank and borrow $64,800 for the below-listed expenses. With good credit, reputable local suppliers, and written-out plan, your organized list of income vs. expenses, your $64,800 loan is very obtainable.
  8.  
    The expenses for buying land and building a new home are now as follows:
    $12,000 Purchase of car (Nissan Versa Note described above)
    $2,800 Purchase of land (minimum 4 acres @ $700 per acre)
    $15,000 Purchase of new home
    $20,000 Finishing of home (foundation, septic, plumbing, electric, interior)
    $5,000 Water well
    $5,000 Necessary landscaping (i.e., driveway)
    $5,000 Contingencies or unanticipated costs
    =========
    $64,800
    Total cost of land with new home, and amount of loan needed
     
    Monthly payments for this 15-year mortgage would be $447, or $5,364 each year, according to the mortgage calculator at MortgageCalculator.net.  

  9. Get started! Upon obtaining the loan, pay for your car, land and home selections. The builder will handle all details (permits, landscaping, electric, plumbing). Your pre-fabricated home will normally take one to two weeks to completion.
  10.  
  11. Start investing as soon as possible. Surprisingly, two $10-per-hour wage earners together earn a combined total of $41,600 annually. Living in the above-mentioned newly-built home in a low-cost environment, and spending wisely, will be able to invest $18,100 per year toward early retirement (explained below). Here is a list of realistic living expenses:
Annual expenses for 2 people living in a rural area in an income-tax-free state:

$5,364 15-year home mortgage described above
$1,668 Groceries (heart-healthy diet of low, or no, meat/diary, more legumes, rice, fruit, vegetables)[5]
$8,088 Misc. spending (gas, home/auto repair[7], auto/home insurance, clothing, modest travel, etc.)
$3,660 Federal taxes, estimated, filing separately[9]
$3,600 Personal, individual medical health insurance for 2 people[6]
$1,200 Utilities for small home (pictured above) less than 800 sq. ft. with wood-stove backup
$0 new-car payments[7]
=========
$23,500
total annual living expenses

How much money can two $10-per-hour wage earners invest annually toward early retirement?

The gross annual income of two $10-per-hour wage earners of $41,600 minus their annual living expenses of $23,500, leaves $18,100 annually to invest in stocks that grow a minimum of 6% annually. Performing an internet search on how to buy stocks can be helpful. One of many sites offering assistance is www.HowTheMarketWorks.com.

How do I invest?

Basically, the best way to invest is to buy ETFs (exchange traded funds). ETFs are not high risk, and have historically outperformed most other methods of investments.

To get started, open up an account at E-Trade (www.etrade.com), and have one of their advisors help you with your first purchase of ETFs.

To select the best ETFs, visit Morningstar, a reputable stock reporter at: http://news.morningstar.com/etf/Lists/ETFReturns.html and have the E-Trade advisor help you buy a few of the top performers.

Starting at an annual investment amount $9,050 per person, if each person increases their personal investment by only $250 per year (i.e., $9,596 the 2nd year, and so on), then using the compounding interest calculator found at www.math.about.com, after exactly 15 years, the two wage earners will have a combined total capital investment of $519,677, yielding $31,181 annually (6%), more if the market is up.

How much money will the early-retirees have to live on, not including Social Security?

Years of
 investing 
Capital
 accumulated 
 Minimum 
annual
income,
6% yield
15 $519,677 $31,181
20 $854,041 $51,243
25 $1,316,434 $78,986
30 $1,950,158 $117,010
35 $2,813,162 $168,790
40 $3,982,994 $238,980

How much will the retirees have after including early (62) Social Security?

If the retirees are 62 after 15 years, add an average Social-Security amount of $25,000 to $31,181, and their total annual income becomes $57,057.

The pre-Social-Security retirement income of $31,181 provides the same standard of living in a low-cost environment as does $75,000 or more for a city dweller with high taxes, high medical insurance rates, high utilities, with rental or mortgage payments, and with car payments and other high-cost obligations.

Let's assume they retire very early, after only 15 years of investing. Their annual home mortgage expense of $5,364 is now gone, and their federal income taxes plummet to zero, based upon the IRS tax tables at www.irs.gov/pub/irs-pdf/i1040.pdf because they fall below the tax threshold.

Post-retirement spendable income for 2 people living in a rural area in an income-tax-free state:
$ 0 mortgage
$1,668 groceries (heart-healthy diet of low, or no, meat/diary, more legumes, rice, fruit, vegetables)[5]
$7,000 [10] miscellaneous spending (gas, home/auto repair[7], auto/home insurance, clothing, etc.)
$ 0 federal taxes[9]
$3,600 personal, individual medical health insurance[6]
$1,200 utilities for small home (pictured at this link) less than 800 sq. ft. with wood-stove backup
$ 0 car payment[7]
========
$13,468
total annual living expenses

After paying all post-retirement living expenses, the two retirees now have $18,589 each year in uncommitted spending cash. Plus, add $25,000 to this upon eligibility for early Social Security payments. If desired, they can each get part-time jobs and rollover (re-invest) their $18,589 interest earnings to grow their capital until they are both ready for early Social Security income. Or perhaps they may choose to retire early and live frugally until they become eligible for early Social Security benefits. It is absolutely essential that any extra money that is available above and beyond the above budget, should not be spent, but instead be put aside into an emergency fund. This money would then be used whenever large unanticipated purchases, repairs, or replacements become necessary (car, home or auto maintenance or repairs, etc.).

Quiz to determine eligibility for early retirement:

Answer the questions below as honestly as possible to determine whether or not you are a candidate for early retirement. The correct answers are at the end of the quiz. Choose either T or F (true or false) below.

1. T F / I am the type of person who is able to forego instant gratification to work toward long-range goals.

2. T F / I can go to a discount store and not buy anything. Instead, I am able to plan my purchases.

3. T F / I live a healthy lifestyle (exercise, eat healthy, no drugs or tobacco, and no excessive alcohol)

4. T F / I do not need to go to the doctor often because of sickness.

5. T F / My credit is good enough to qualify for a $64,800 new-home mortgage.

6. T F / I have a spouse, partner, or friend who is willing to join me in working toward early retirement.

7. T F / We both make at least $10 per hour for 40 hours per week, 52 weeks per year ($20,800 per year).

In order for a $10-per-hour wage earner to retire early, all of the above conditions must be met. If you answered " T " to all of the above, congratulations, you are ready to begin your 15-year retirement plan!

====================================================

SOURCES:

[1] Funds needed to raise a child: New York Times, August 5, 2009

[2] Child-rearing costs: voices.yahoo.com/how-achieve-financial-independence-10474983.html

[3] City statistics: city-data.com

[4] "A vision for South Dakota" by Scott Munsterman, http://www.scottmunsterman.com/vision.pdf

[5] A heart-healthy diet is far less expensive (low, or no, meat/dairy) than a high-cholesterol diet that includes saturated fats, trans fats, white flour, and preservatives. A heart-healthy diet consists of legumes (beans, lentils), rice, sweet potatoes, vegetables, and fruits. Did you know that broccoli has more protein than beef and more calcium than milk? According to www.dachia.com/Broccoli_vs_Steak.html many vegetables do. Almonds have more calcium than milk. A heart-healthy diet provides plenty of protein and calcium, as discussed in detail at: www.WellBeyond100.com/HeartDisease.aspx

[6] As of this writing (2015), Christian Healthcare Ministries in Barberton, Ohio, provides federally-qualified medical coverage for $150 per month for individuals who have not abused their bodies with excessive food, excessive alcohol, tobacco, or drugs. Sign up online at www.chministries.com absolutely free with no setup or upfront costs. Christian Healthcare Ministries has not increased their monthly premiums for 10 years because they do not have a 50-story high-rise in Manhattan like many of the big insurance companies.

[7] "Wise spending" means the wage earners were careful with their cars, extending car life to 15 years, thus avoiding constant car payments. Thus, extra money is allotted in the "miscellaneous" spending category for auto maintenance and repair, and also toward the purchase of a new car in 10 or 15 years.

[8] "States Without a State Income Tax" by the IRS, www.irs.gov/efile/article/0,,id=130684,00.html

[9] IRS tax tables, http://www.irs.gov/pub/irs-pdf/i1040.pdf

[10] Post-retirement miscellaneous spending is reduced because of the absence of work-related transportation costs, clothing, and other work-related expenses.


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