Millennial Money

This couple retired in their 30s—here's why they keep $80,000 in their savings account

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How this FIRE couple retired in their 30s with $870K in Arizona

Being an early retiree means keeping a close eye on your spending. For Steve Adcock, 39, and his wife Courtney, 36, who have been retired since 2016, being financially savvy is especially important because they haven't added a penny to their investments since they left their jobs.

The couple, whose net worth sits around $1.2 million, have the majority of their investments in targeted retirement funds. But they keep their spending money in a high-yield savings account. The account has at least two years' worth of expenses at all times, which in the past few years has ranged from $60,000 to $80,000.

The Adcocks follow the "4% rule" to determine how much they can afford to spend each year. The rule says that early retirees can in most cases safely withdraw 4% a year from their retirement savings portfolio. The number is half of the 8% long-term historical average return on balanced portfolios.

Under this rule, the amount they can spend may fluctuate year to year but has gradually increased over time as their investments have grown.

"If we're having a good year and we're making money, we can be a little bit more flexible with our lifestyle," Courtney explains. "And then if we're in a down market, we will really cut back and get our [annual] budget more in the $30,000 to $40,000 range instead of up near $50,000."

Steve and Courtney Adcock.
CNBC Make It

The Adcocks add any money they earn from freelance work to their savings, but the bulk of the account comes from selling off their investments. However, their most important rule is to never sell their investments in a down market.

"Once the market rebounds and we start making money again, we will pull money out and will replenish that savings account to get back to our to two year minimum savings," Courtney says.

To be able to retire early, the Adcocks built up $870,000 worth of investments over several years by socking away up to 70% of their combined $230,000 income. They went to extremes to save as much as possible, including slashing their spending and moving out of their Tucson, Arizona, home into an Airstream trailer.

Even though all that money in savings could be working for them if it were tucked away in investments, Steve and Courtney enjoy the peace of mind that comes with knowing their needs will be taken care of should the markets run into trouble.

The strategy helped them weather the storm when the market crashed at the beginning of the Covid-19 pandemic. The Adcocks stuck to their savings and didn't sell any investments — even when their net worth was down almost $200,000 in March 2020 — and are now in a better position than when the pandemic started. 

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