The Next Step: Millionaire store clerk eyes early retirement

There’s low-cost living, and then there’s the freegan-living millionaire featured in this edition of The Next Step, Financial Planning’s newest series. The series explores one simple question: What’s the single most impactful move someone can make toward a stronger retirement?

Here’s how it works: We invite Americans to share basic details about their savings, income and goals. We anonymize their data and present it to professional financial advisors, asking what one step could make the biggest difference.

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Each edition features one individual’s story and practical advice from advisors. In this installment, we heard from a 42-year-old store clerk in Caldwell, Idaho. Here’s how his finances stack up against the average American his age.

The saver makes just about $37,000 a year, roughly 47% less than the median full-time worker in his age range. Currently, 60% of his income goes toward retirement savings. After taxes and withholdings, he receives $2,500 in monthly income, more than enough to cover his average monthly expenses of $900.

Despite having a lower income than the typical American his age, the saver owns his home and has no debt. That puts him well ahead of the median debt figure for someone in his age bracket. The typical American between 35 and 44 years old reports a median debt figure of just over $140,000.

“I purchased a home when I was 23 — when someone like me, making $12 per hour, could purchase a home,” the saver said. “And have since paid it off.”

Along with owning his home, the saver keeps costs down by practicing freeganism, a lifestyle focused on cutting consumption and reducing food waste. Freegans often rely on discarded goods, using practices like dumpster diving, foraging, bartering and sharing.

The saver has $1.1 million stowed away for retirement, nearly 25 times more than the median adult in his age range. About 20% of that is in pretax retirement accounts, while the other 80% is evenly split between Roth accounts and nonqualified accounts. Based on his current income and contribution rate, he saves about $1,850 every month toward retirement.

His journey to this point wasn’t linear. On the path to becoming a millionaire, he faced a handful of significant financial setbacks. He invested in his employer and lost everything when the company restructured, he said. After the housing crisis, he put significant money into mortgage-backed REITs, only to lose most of it. One of his earliest investments, General Motors at age 18, was wiped out when the automaker went bankrupt in 2009.

Still, he said he’s had some sizable successes as well. He purchased Meta on its IPO day and added Nvidia shares to his portfolio a few years ago. He also bought a few bitcoins at $400. Although he sold half of them in 2019, he has held onto the rest.

“I did all this while never making over $20 per hour at my job,” he said. “It has been a kind of wild adventure accumulating something for the future.”

The saver said he wants to retire at 55, with plans to spend slightly less per month than he currently does. Based on his desired retirement age, FP projected how much money he can expect to have at 55, given a $1.1 million starting base and a monthly contribution of $1,850. In the calculation, FP assumes an average inflation-adjusted return of 7%.

General savings guidelines suggested by Fidelity Investments recommend having savings equaling one year of your annual salary by age 30, with the goal of having 10 times your annual salary saved by age 67.

With current savings far beyond Fidelity’s milestones, the saver said he’s very confident about his ability to retire. 

The saver also said he does not have a spouse with whom he shares a retirement strategy, or any children. Based on the information he shared, Financial Planning asked advisors: “What single step could make the biggest difference in this person’s retirement readiness?”

Here’s what they said:

Responses have been edited for length and clarity.

Bridging the gap for an early retirement

John Power, principal of Power PlansThe most important thing he can do is refine his income needs in retirement based on what he wants retirement to look like. Retiring at 55 means he will need private health insurance for 10 years until he is Medicare eligible, and it can be quite expensive. He also needs to craft a withdrawal plan for the next five years to avoid penalties, then the next several years until he chooses when to claim Social Security.

Jamie Ebersole, founder of Ebersole FinancialThe significant challenge will be that the individual will have no steady income stream starting at the age of 55, which means there is a significant gap between the time that he will be able to take Social Security payments and when it will be optimal to start drawing down on retirement accounts. So finding a way to fund the years from 55 to 67 or 68 will be critical. This usually is most tax efficient when assets are taken from taxable accounts, so building up those balances in addition to retirement accounts will be important for this interim period.

Switching investment gears

Carlos Salmon, partner at Wooster Square AdvisorsThe key next step is to move from aggressive growth to a more balanced and risk-aware strategy. He should consider converting pretax funds to a Roth account for better tax efficiency and plan ahead for health care costs before he becomes eligible for Medicare. In short, what got him to this point won’t necessarily carry him through the next phase.

Figuring out what retirement could look like

Michael Espinosa, president of TrueNorth RetireThe single biggest thing this individual can do to prepare for retirement has little to do with money. This person needs to make sure that he has purpose, so that he is retiring to something and not just from something. 

I could give some specific pointers around optimizing his portfolio, and making sure he is prepared for medical coverage and all that good stuff, but I have seen where good savers have a hard time flipping the switch to spending. This, above all else, needs to get worked out: envisioning how he will spend his time, energy and focus once work is optional.

Jamie Ebersole, founder of Ebersole FinancialObviously, he has done a great job of saving up to this point in his life. With what can be seen as a modest amount of income, he has been able to accumulate a very significant pool of assets for retirement. The next big step is to psychologically prepare for what it means to live in retirement. With a target retirement age of 55 and another 13 years to go until he wishes to retire, there’s plenty of time to accumulate additional assets and to develop a plan for what retirement may look like. The key to successful retirement will be figuring out what he wants to do and how to budget for that.

Psychologically, it can be very difficult to go from working to retirement if there is no plan in place that lays out what retirement would look like. I would suggest that the individual take some time to really think about what he wants to do when he retires and then try it out. He may also consider working part-time in order to stay active and smooth the transition.

Lindsey Young, founder of Quiet WealthThe question is: Given the large amounts of savings relative to his lifestyle, what kind of retirement would this person like to have? Maybe he enjoys living a modest life, and in that case an earlier retirement is something to discuss. But it’s also possible that he might want to buy a house, move to a larger house, go on trips, support family members or increase his charitable giving. Or maybe this person simply enjoys his work and would want to keep working even if he has enough money to retire today.

In this situation, the right financial steps depend greatly on what this person’s vision is for the next 10-20 years. That is why the best next step for this person is working with a financial planner to understand how different life paths would likely play out financially. For people who surprisingly find themselves being able to retire sooner rather than later, exploring different life options through a financial lens plays an invaluable role in clarifying a life vision for the coming years, which then can lead to the development of recommended financial actions.

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