Learning From Literature

Retire Before Mom And Dad by Rob Berger

Cover of Retire Before Mom And Dad

Retire Before Mom and Dad: The Simple Numbers Behind A Lifetime of Financial Freedom by Rob Berger is a personal finance book published in 2019.

One of the biggest goals for many people is to enjoy retirement, not work until death. However, the average American aged 60-64 only has about $221,451 in retirement savings. If that money isn’t invested, it would only provide around $7,381 annually.

Retirement planning often feels overwhelming, but Berger simplifies the process, showing that anyone can retire comfortably, regardless of their income.

The Five Big Lies:

  • Financial freedom requires a big salary
  • Financial freedom takes 40 years or longer
  • Happiness is expensive
  • Investing is complicated
  • Debt is a fact of life

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Enjoy!

Table of Contents

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Part One – Your Superpower

What Is The Money Multiplier?
  • Compounding (Money Multiplier)
  • Hypothetical Example:
    • Salary: $50,000
    • Time: 45 years (age 22 to 67)
    • Savings: 5% (~$208/month)
    • Return: 9.3% (historical average of diversified portfolio since 1926)
  • Results:
    • Without investing: $112,320
    • With investing: $1,708,072
How Does The It Work? — The 3 Components
  • Power of Time
    • Original Hypothetical = $1,708,072
    • Start 1 year later → $153,504 less
    • Start 5 years later → $643,197 less
    • Start 20 years later → $1,462,889 less
  • Power of Amount
  • Power of Return
    • 1926–2017: 70% stock / 30% bond return = 9.3%
    • 9.3% return → $1,708,072
    • 9.0% return → $1,540,214

Part 2 – Financial Freedom

7 Levels of Financial Independence

Financial Freedom = the ability to live off your savings

  • Levels allow you to monitor progress
  • Even if not fully independent, having a growing retirement account gives you freedom to make decisions you otherwise couldn’t
  • At Level 4, yearly return starts to equal yearly savings
  • Levels 1 – 3 and Levels 5 – 7 take the same amount of time
    • Compounding makes big money for you

Level 1 — 1 Month of Expenses Saved

Level 2 — 3 Months of Expenses Saved

Level 3 — 6 Months of Expenses Saved

Level 4 — 1 Year of Expenses Saved

Level 5 -— 5 Years of Expenses Saved

Level 6 — 10 Years of Expenses Saved

Level 7 — 25 Years of Expenses Saved

How Much Should You Save?
  • “Slingshot Effect” → exponential financial growth
    • Frank: Saves $500 / Spends $4,500 → 9 months to save 1 month of expenses
    • John: Saves $1,000 / Spends $4,000 → 4 months to save 1 month of expenses
  • Savings Rate > Salary
    • 10% savings rate comparison:
      • $500k income → Save $50k / Spend $450k
      • $50k income → Save $5k / Spend $45k
    • Both need 9 years to save 1 year of expenses
Why Is 25 Years Of Expenses The Goal? The 4% Rule
  • Save 25x your annual expenses to retire
    • Why? → Withdrawing 4% per year is a common rule to make savings last for life
    • Factors in inflation, market dips, and conservative portfolios
  • Annual Expenses ÷ 0.04 = Target Retirement Savings
    • $100k/yr → $2.5 million
    • $50k/yr → $1.25 million
  • It’s more achievable than it sounds thanks to compounding
    • $5/day for 45 years → $1.23 million

Part 3 – Buying Your Freedom

The Cost Of Happiness
  • Many joys are low-cost – time with loved ones, nature, exercise, books
  • “Value Planning” (Smart Couples Finish Rich – David Bach)
    • Define how money supports your values and goals
    • Align spending and saving with what truly matters
The Myth Of Sacrifice, The Money Audit, & The Power Of Habits
  • Most lifestyle changes don’t hurt happiness as much as we fear
    • Try removing or changing one habit for 3 weeks (no coffee out, bring lunch, less TV)
    • Afterward, ask: Was it really that bad?
  • For each item, ask:
    • Do I really want or need this?
    • Could I use a cheaper version?
    • Can I get the same thing for less?

Part 4 – Investing

  • Investing is a simple and effective way to build wealth
  • However, before investing you need a basic foundation or you’ll make serious mistakes
  • The author explains products in easy-to-understand language

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