A man who quit his law job at 49 says if you want to retire early, your income is only part of it

Robert Berger forbes editorCourtesy of Rob Berger
  • Rob Berger, a deputy editor at Forbes, retired from his law job at age 49 after saving an amount equal to 25 times his annual expenses - the magic number for achieving financial independence.
  • Berger kept his expenses relatively low, which meant two things: he was able to save more of his income each year, and thus, he needed a smaller nest egg to leave work.
  • "We are conditioned to define financial success based on a fat paycheck. Yet Financial Freedom hinges on how much you spend, not how much you make," Berger writes in his new book "Retire Before Mom and Dad."
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In his new book "Retire Before Mom and Dad," Rob Berger, a deputy editor at Forbes, says that income has much less to do with achieving financial independence than we give it credit for.

Berger, who founded the personal-finance site DoughRoller.net, retired at age 49 from his career as a lawyer. He had saved up (and invested) an amount equal to 25 years' worth of his annual expenses - the magic number for reaching financial independence, he writes.

"Level 7 is the Ultimate Financial Freedom. It's here that you can completely retire from work if you so choose," Berger writes. "Or, if you're like me, you can work on projects you love while still earning an income. The choice is yours."

But Berger says a high salary doesn't explain his ability to leave work earlier than the average person. The amount he needed to save was dependent on how much he spent each year, and he kept his expenses relatively low.

"We are conditioned to define financial success based on a fat paycheck. Yet Financial Freedom hinges on how much you spend, not how much you make," Berger writes. To be sure, increasing your income can be an incredibly valuable tool for building wealth. If your expenses remain at the same level, earning more can skyrocket your savings rate and put you on the fast track to early retirement.

Take a look at Berger's seven levels to reaching financial freedom:

  • Level 1: one month of expenses saved
  • Level 2: three months of expenses saved
  • Level 3: six months of expenses saved
  • Level 4: one year of expenses saved
  • Level 5: five years of expenses saved
  • Level 6: 10 years of expenses saved
  • Level 7: 25 years of expenses saved

The final level is predicated on the 4% "guideline," he says. The 4% guideline tells us that when we invest an amount equal to 25 times what we spend in a given year, we will be able to indefinitely withdraw 4% of that nest egg each year thereafter (assuming we earn the average rate of return on our investments).

To get your financial freedom number, you can either multiply your annual expenses by 25 (ex. $50,000 x 25 = $1,250,000) or divide your annual expenses by 4% (ex. $50,000/0.04 = $1,250,000).

"The 7 Levels are the same whether you are a teacher making $40,000 a year or LeBron James making $50 million," Berger writes. "How long it takes you to reach each level depends entirely on what percentage of your income you spend and save, not how much you make. A teacher saving 10% of her income will reach Level 7 in the exact same number of years as it would take LeBron James if he saved 10% of his salary."

Now, using Berger's above example, if James and the teacher both had expenses totaling $30,000 a year, the basketball star would reach financial freedom much sooner. But that's an unlikely scenario.

"That's not to say that income is irrelevant," Berger writes. "But Financial Freedom is first and foremost about our expenses, not our income."

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