You might remember Mr. Money Mustache, the man who retired at 30. No, he hadn’t won Powerball or lucked into a big inheritance. He and his wife simply socked away more than half the money they made from middle-income jobs until they had an ample nest egg. Then they retired and had a son. Today they live a good and happy life on about $25,000 a year. We had a chat a few weeks back, and hoo-boy, did the Internet ever light up. Many, many people were eager to know more. Some balked. Not possible! they said. Or, quit judging us! The most common response: What about health insurance? So I circled back with Pete (just Pete, for the sake of his family’s privacy) to get a few more answers. They’ve been edited for length and clarity.
What about health insurance?
We’ve got it. At $237 a month for the family for a standard high-deductible United plan, it’s not as expensive as most people assume. I also got quotes for higher ages (we’re 38 at the moment) and found that the premiums did not increase drastically for older people.
While the situation is still not ideal because we overpay for health care in general, I like to promote the idea that it is not scary to purchase your own insurance these days. Many of my entrepreneur friends are in the same boat. In fact, I have heard from many readers who were able to opt out of a small employer-sponsored program and find a better one on the open market, pocketing the difference.
But your insurance plan has a $10,000 deductible! What do you do if someone gets really sick?
When you have early-retirement-level savings (say, $1 million), taking a $10,000 hit is only 1 percent of your wealth. You could do it year after year, for over 30 years, and you’d still have $700,000 sitting around. In my mind, that is still more secure than the typical situation of having a job, spending most of what you earn and having lower-deductible health insurance. Meanwhile, as a saver hit with unexpected bills, you could decide to go out and earn more money, or scale down your lifestyle by moving to a less expensive house or even move to another country where health care is much cheaper.
What about a college education for your kid(s)? You could never pay for that on $25,000 a year!
This comes down to the savings issue again. People often read these interviews and fixate on the fact that we only spend $25,000 per year. But we actually earn more than that in retirement income. Even if we didn’t, as an early retiree you have a heap of invested money that you can cash out and use for anything you like.
Teaching your kids how to live efficiently, choose the right university and earn money on their own will really help, too, since the same education can vary in cost by a factor of 10, depending on how you go about getting it.
I also hope to teach my son how to start a small business in high school so he feels in control of his own earnings from early in life. Thanks to the Internet, it is drastically easier for a young person to do something like software development or selling things online. As a side benefit, being an entrepreneur ends up being more educational than the formal education itself.