Beyond Labor Day – Retire by 40

Hey Everyone, I hope you had a great Labor Day weekend. It’s fantastic to have an extra day off, but we should reflect on what this holiday is all about. Labor Day was created to celebrate workers and their socioeconomic achievements. Workers have come a long way since the Industrial Revolution. In those early years, workers toiled for 12 hours every day to eke out a living. We made a lot of progress since then and work is much better now. A family can enjoy a comfortable lifestyle by working 40 hours per week.

Well, that isn’t true for a lot of people. 40 hours/week might fund a comfortable lifestyle 30 years ago, but that isn’t enough for many households today. The median household income was about $74,480 per year in 2022. That isn’t quite enough for many families. The cost of living has exploded over the last few years.

Living costs are a big problem for young people with high housing expenses. Older homeowners are very lucky to lock in a good mortgage years ago. That’s not the case for renters and younger folks. Our monthly spending is low because our housing expense is around $1,300 per month. That’s lower than what most renters are paying these days. This is one of the reasons why so many people have side hustles today. A day job isn’t enough anymore.

Transcend Labor

Work is good. Everyone needs to work and contribute to society. The economy runs smoother when workers earn and spend freely. However, we all get old. At some point, we won’t be able to work as much.

Some workers think they can depend on Social Security to pick up the slacks when they retire, but I wouldn’t be so sure. The OASI fund is projected to run out of money in 2035. That is in 10 years! If Congress doesn’t fix the problem, all workers will receive much less Social Security benefit than projected. That’s going to hurt. Believe me, 10 years will fly by. 2035 will be here before we know it.

How many people think Congress will come together to fix Social Security? I have no confidence in our representatives. They’ll squabble and kick the can down the road. This is a difficult issue and nobody wants to deal with it. Anyway, I wouldn’t depend too much on Social Security if you’re young. Instead, you need to become an investor to help fund your retirement.

Become an investor

All of us need to figure out how to move beyond labor. Work is all you have when you’re young, but it gets harder as you age. You need to save and invest so you can join the investor class. It can take a long time for investment income to surpass earned income, but you can get there. At some point, your earned income will drop. It’s inevitable so you need to prepare.

Here are my tips.

• Learn about FIRE (financial independence, retire early).
• Save 50% of your income and invest. This isn’t easy when you’re young, but it will be possible as your earnings increase. Start with 10% and keep increasing your savings until it hits 50%.
• Save and invest in your tax-advantaged accounts. Max out your 401k contribution as soon as you can.
• Invest in the stock market.
• Invest in a business so other people can work for you.
• Rent out part of your home or invest in a rental property.
• Invest in commercial properties through real estate crowdfunding.

These are just a few ways to join the investor class. Keep investing! Eventually, your investment income will grow beyond your earned income. That’s Financial Independence. After that, you will have a lot more power. You can keep working on what you enjoy, retire, or figure out the best combination for your family. Life is so much better when you have the freedom to choose.

Are you an investor? When will your investment income surpass your earned income?

*Passive income is the key to early retirement. These days, I’m investing in multifamily properties with CrowdStreet. They have many projects across the United States. Go check them out!

Image credit: Hobi Industri

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.