4 steps to retire early, from a couple who did it in their 30s

Here's how this North Carolina couple could retire in their 30s
Here's how this North Carolina couple could retire in their 30s

You don't have to win the lottery or inherit a windfall to retire early.

Take Justin and Kaisorn McCurry, who retired with more than $1 million in their 30s thanks to smart saving and investing habits. They did it on a relatively modest income for a family of five.

"Neither of us ever reached a six-figure salary, with my salary topping out at $69,000 and [Kaisorn's] at $74,000," McCurry writes on his blog, Root of Good.

If you want to follow suit, start with their four-step plan to retiring early.

The McCurry family
Source: The McCurry family 

1. Start tracking your expenses

Do you know how much you spend eating out, on Uber or on monthly subscriptions? It's probably more than you think.

"You have to know what you are spending before you can plan your retirement budget," writes McCurry. He prefers using Personal Capital to track expenses, but there are other sites out there that do similar things, like Mint or You Need a Budget. You can also write down your purchases in a notebook or keep a spreadsheet on your computer.

2. Think about your future lifestyle

Do you plan on traveling a lot, or buying a vacation home? Do you want to gift money to family members?

"Think about what you want to do in retirement and what it might cost," says McCurry. "Take your time on this. This is probably the hardest part of budgeting for retirement expenses, as it can be difficult to think of what you want to do for fun for the rest of your life."

Justin McCurry with family on vacation in Mexico.
Source: Justin McCurry

3. Project how your spending will change in retirement

"Figure out areas where your spending in retirement might differ from your spending while working," writes McCurry. "You will spend less in some categories, like commuting, and will probably spend more in other categories, like entertainment, recreation and travel."

When setting his family's retirement budget, McCurry added an extra $8,000 to their average annual spending to cover costs like healthcare and travel.

4. Set your retirement budget

"Take your current expenses and add or subtract as necessary in areas of spending that will change in retirement," says McCurry. "Don't forget categories like 'income tax' that you may not keep track of right now."

For his family, that meant adding $8,000 to their average annual spending of $24,000, bringing their bottom line retirement budget to $32,000 a year, which they stuck to in 2014 and 2015.

This millennial went from broke to millionaire within five years
This millennial went from broke to millionaire within five years

Your budget doesn't have to be completely set in stone. In fact, in 2016, the McCurrys revisited their portfolio and realized they could increase their retirement budget to $40,000 a year. On the flip side, they can "always trim back on spending in some areas if our investment portfolio performed really poorly or we had an unexpected expense in one category," McCurry notes.

For now, their retirement budget is $40,000 a year. You can read more about how they made that work as a family of five in 2016 here.

In terms of making sure they'll have enough in their portfolio to live on during retirement, the McCurry's use the "4 percent rule" — the slightly controversial adage that's used to help you determine the amount you can withdraw from your retirement savings each year without running out.

For example, the McCurrys had about $1.15 million in their investment portfolio at the start of 2016. Justin explains: "Applying our magical four percent variable withdrawal rate to the $1,150,000 current value gives us an annual withdrawal of $46,000. Add to that an estimate of $20,000 in Root of Good, freelancing and consulting income for 2016, and we could spend up to $66,000 in 2016."

And, of course, just because they can spend that much doesn't mean they will.

Now, check out the McCurry's No. 1 money saving tip and start socking away money today

How this couple saved over $1 million in retirement savings to retire by 43
How this couple saved over $1 million in retirement savings to retire by 43