Thoughts on “Early Retirement Extreme”

I love listening to podcasts when I’m driving, exercising, or stretching. It’s free education and entertainment. A recent podcast I’ve listened to that I feel I need to write about is one on the Survival Podcast featuring Jack Spirko interviewing Jacob Fisker of Early Retirement Extreme.

I have always been fans of both Jack Spirko and Jacob Fisker, so having these two together in a podcast is brilliant. Basically, Spirko is a “modern survivalist” who works to set up a homestead in the country where he can take refuge in if there is ever some disaster scenario. He focuses on self-reliance, independence, frugality, and being prepared. Even if nothing happens, it doesn’t hurt to be prepared.

Jacob Fisker of ERE, on the other hand, is different. Whereas Jack Spirko works outside the system (or “off the grid”) in order to free himself from it, ERE is about using the system to your advantage, i.e. applying capitalism to achieve freedom (or as the ERE website sometimes says, taking advantage of “rentier capitalism”).

Fisker’s story is remarkable. He takes retirement to the absolute extreme. Mainstream retirement advice is that you save up 5% or 10% of your income and then over forty years or so, assuming some wildly optimistic rate of return and then harnessing the power of compound interest, you will retire when you are incredibly old and frail with an income that is about $50,000 a year.

ERE, in a nutshell, states that you save up to 85% of your income and then retire within five years. Because you are saving up in five years, compound interest does not matter. What is remarkable about Fisker is that he was able to retire at age 33 after saving 85% of his income with an income of only $25,000. He achieved this by e.g. not having a car and walking to work (walking about five miles back and forth).

Suppose the typical person earns $50,000, and assuming zero taxation (for simplicity), then in five years, assuming you save up 85% and assuming zero rate of return on your savings (again for simplicity), you’d have a little over $200,000 saved up. Assuming a rate of return of 5% on the savings if invested in a mixture of cash, bonds, stocks, REITs, etc, you’d be earning about $10,000 per year or about $800 per month.

Can you live off $800 per month? In a country like Australia or even the United States, I think it’s highly unlikely. Maybe you can buy a place in the country and scrape by, but I’m not too sure.

However, in a country like Thailand, $800 per month is more than enough.

JC of Retire Cheap Asia is a retirement consultant who lives in Thailand. He advises expats from America and other developed countries on how to retire in Thailand. According to him, the minimum amount you need to survive in Thailand is $500 per month. At $500 per month, you live a very rough and bare life. However, if you have $1000 per month, you live a life of luxury. An income of $800 per month achieved through five years of Early Retirement Extreme would afford you a comfortable existence in Thailand (see Retire Cheap Asia Retirement Income Categories). This applies not just to Thailand but other countries like Cambodia, Philippines, and maybe even Belize and many others.

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