Retiring Before 40: How It’s Really Done -- With Less Money than You Might Imagine

NEW YORK (TheStreet) -- It’s the opposite of working till you dropRetiring before 40. There’s no shortage of blogs written by people stating just such an intention. Those writers share their own personal mantras of how to pay off debt, save more money, and begin life after work while you’re still young enough to enjoy it. Some are working toward the goal, others claim to have achieved it. Most are only a few years into their effort either way, so whether they achieve long-term success or just a huge resume gap remains to be seen.

But Akaisha and Billy Kaderli retired at age 38 – and that was 24 years ago. To say they have achieved proof-of-concept is an understatement.

Billy, a French chef, and his wife, Akaisha, bought a Santa Cruz, Calif., restaurant in 1979. Later, he became a financial advisor while she continued running the popular eatery. After six years during which she served hot dishes to customers and he cold-called prospective clients, things were getting a little tense at home.

"It got to a point where Kaish and I weren't seeing each other anymore,” Billy tells TheStreet. “She was running the restaurant and working nights -- and in California the stock market opens at 6:30 a.m., and I was done at 1 p.m. I'm at the beach, and she's just going in to do the dinner shift."

Being a “numbers guy,” he took stock of their assets and came to a seemingly crazy conclusion: "All of a sudden it just clicked. I said, 'We've got enough that if we can control our spending a bit, we can live anywhere we want.'"

She was not so sure.

"I was 36 at the time, and that wasn't in my plan at all," Akaisha admits. "I figured that I'd work until I was 55, and that would be 'retiring early.' And he comes with this harebrained idea that we're just going to chuck it all."

It took a little convincing, to say the least.

"We were tethered to our jobs, to our bills,” she says. “And the idea that we could chuck it and live comfortably really was appealing. Once I calmed down."

They analyzed their spending, and found that much of it was work-related. Two cars, a house near the beach, insurance, meals out -- the usual American overhead. The Kaderlis took two years to "test the waters" before making the leap into retirement in January 1991. Their nest egg? $500,000.

Just $500,000 to last two people a lifetime? Seriously? Can that work? It can when you spend only $22,000 a year on living expenses. As of the end of 2014, after 24 years – 8,760 days, Billy notes -- the Kaderlis have spent an average of $22,040 annually, or $60.38 per day. Basically, the Kaderlis are living on the 4% withdrawal rule.

"The S&P 500 on the day we retired was 312.49,” Billy tells TheStreet. “And if you do the math on that, up to last year, that's about an 8.18% return, plus dividends. So with a couple percent for dividends, you're right at the 10% level."

When it comes to numbers, this guy is not guessing. But after a sustained bull market, isn’t he a bit concerned about the possibility of a long-overdue correction?

"2008 did rock our boat," Billy admits. "At this point, we're a little more conservative in our investments, because we're now 62. We've gone through three or four of these down-draws in the market. So, am I nervous? I'm always nervous."

But Billy says it’s not just what you make: It’s also what you spend.

"The key to this whole thing is: How much are you spending today on your lifestyle?," he says. "If your spending level is $100 a day, then you just have to have the assets -- the net worth invested -- to support that. That's all."

However, it's a safe bet that many Americans, at least those contemplating retirement, are spending much more than $100 a day. And they will require a large enough nest egg to support their current rate of spending. The Kaderlis admit that part of their strategy is living in "cost beneficial countries" such as Mexico, El Salvador, Vietnam, and Thailand. When we spoke via Skype, they were living in Lake Atitlan, Guatemala, one of their favorite stops.

"Housing is one of the largest expenditures in any budget," Akaisha says. "So if you work on getting your housing down to an affordable amount per month, you can live just about anywhere. It's housing, transportation, taxes and food -- but housing is your biggest [budget item]."

They don't live by a budget, but to this day, they still track their spending diligently. The Kaderlis spend 21% on housing, 24% on medical expenses (a spend rate that has been impacted by some recent health issues), 20% on transportation, 22% on food and entertainment, 8% on miscellaneous and 5% on computer expenses. These are net expense amounts, after taxes.

Their housing costs have been reduced almost in half by house sitting. The couple says these stints can include spectacular beach views in well-appointed homes with maid service. Otherwise, they find monthly rates for apartments or hotels.

Could such a low-budget living arrangement work in the States? The Kaderlis say to do that here, you'll have to get creative, look for low cost-of-living areas and consider renting out a room or a floor in your house -- or owning a duplex and leasing out half of it.

Health insurance is also a major consideration. In the beginning, they bought a high deductible, catastrophic coverage plan. Now, when they visit the U.S., they take out a traveler's policy. Day-to-day, living outside of the States, the Kaderlis are exempt from the Obamacare health insurance mandate.

"We're self-insured," Akaisha says. "We pay out-of-pocket for all of our medical expenses." The couple also relies on their own version of medical tourism, visiting favorable foreign locales for health care.

And they don't own a car. They used to own a vehicle, but now use local mass transit, walk, bike, share rides with friends, or hire a driver. It’s a debt-free lifestyle built on frugality -- and freedom.

"The financial industry is not doing their job,” Billy says. “Debt is the killer. You're a wage slave when you have debt. And if you can eliminate that, it frees up a whole lot of options."

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