Since I'm retired, I suppose I should join in the discussion. But I'm not going to offer much advice or give you a plan because we didn't really have a master plan. We just stumbled along taking one step at a time and it worked out fairly well for us. So this is more of a story. Maybe it will make someone consider something new, or maybe it will convince you that our path is not right for you.
First is an observation- waiting until you are older to have kids makes it tough to retire young. My kids were born when I was 24 and 26. By the time they were out of college, we were still young enough to take lots of bicycle trips through France, Italy, Ireland, the Netherlands, etc. Its too late for a lot of you to alter that decision, but if you are still young, its something to think about.
It takes money to retire from work. In the good old days, employers offered defined benefit plans, but not so much any more. If you are a firefighter or a law enforcement officer, you have one of the last good deals. But unfortunately, many of you have to do your investing on your own in defined contribution plans. If that is the case for you, you better start early and contribute until it hurts, and you better do some reading on investing. Social Security will keep you from starvation, but you'll want more than that.
I retired from the Marine Corps after 20 years at age 41. "Retired" is a misleading term in this case. It gave me a pension for life, but not enough to finish putting the kids through college or have a decent standard of living. I wouldn't have a boat and my wife wouldn't have two horses if all we had was that pension. Before I retired from the USMC I started working on a night school MBA. I didn't really know what I wanted to be when I grew up, but I thought that might give me more choices. And my wife was a public school teacher so we were not entirely dependent on my income. The fact that our kids were older permitted her to work full time.
For the first two years as a civilian I was a banker. I soon learned that wasn't what I wanted to be when I grew up, so I became a stock broker. I really wasn't very good at that since its really a sales job and I'm not a closer. Any brokerage firm has just what any client needs from Federally insured CDs to guided commodity futures accounts guaranteed to lose all your money in 6 months or less. I wanted to explain and educate clients on what was right for them. Closers pick products with the best commissions and just sell. The office manager sometimes came to me to have me explain some new product the firm was pushing. My MBA helped with that, but it didn't sell stuff.
You've heard the old saying "Them that can do, and them that can't teach." I'm an example of that. I applied to teach a graduate investments course at a private university that catered to adults who wanted to go to school at night. I was able to tell the students how to ask the right questions and protect themselves from their brokers and investment advisors. I got great student reviews. Then since my resume said that I had worked at a bank, they asked me to step in and teach a Money and Banking course when another professor had to drop out two weeks before it started. That went well too. So they said "those courses aren't offered all that often, but would you like to try economics." Why not. So for the next 20 years I taught at a couple of private universities, all at night. Notice that I never planned to be a teacher. I just stumbled into it and it worked out for me. I didn't make a hell of a lot of money, but with my wife's income as a teacher and my Marine Corp pension, it was enough to keep me in boats. And the neat thing was that since courses lasted just 4 or 5 weeks, I didn't have to miss an entire semester if I wanted to take a bike trip to Europe during my wife's summer vacation. I could just not ask for or accept a course during that period.
By the time I was 65 I was ready to truly retire. Teaching from 5:30 to 10 PM and then maybe having a long drive home was wearing me down, and the quality of students was dropping. Starting Social Security offset the lose of income some, and my wife worked a couple more years. Its only fair- she's almost four years younger than I am.
So back to the defined benefit pension plan subject. Teachers don't get pensions anywhere close to firefighters, but they do OK. My wife's pension exceeds the total of my USMC pension and my Social Security combined, and all of those pensions get adjusted for inflation. If you don't want to deal with someone else's kids for years or frequently go overseas without dependents and get shot at, I don't blame you. But we survived and now have an income for life. And after we turned 65, then Tricare picks up all the copays and deductibles after Medicare pays, so our health care is essentially free after we pay the Medicare Part B premiums. When I made the decision to stay in at mid-career I had no idea how valuable that benefit would be, but after all the surgeries and problems we've had as old farts, I now realize that its almost priceless.
But even if those pensions are nice, we wouldn't be able to keep the boat and two horses without a bit extra. From the time IRAs were created in the early 1980s we contributed the maximum every year. My wife also contributed to her 403b plan, which is sort of like an a 401k but for teachers. For the last few years before she retired, she contributed 20% of her income. Sometimes it hurt, but now we're glad she did. And since I have an MBA and was a stock broker, we haven't made too many really stupid decisions with our investments.
Another thing that helps. We're still living in the house that we bought in 1975 when the Marine Corps sent me here 5 years before I retired. Its only an 1800 foot tract house but we've done some remodeling. An awful lot of our friends have kept trading up to much nicer and larger houses, but a lot of them still have mortgages. Our house has been paid for for many years. We'd rather have bike trips, boats, and horses than a bigger and nicer house. I'm very lucky that my wife concurs with me on that subject. I know that a lot of wives would not.
Some of you have expressed a desire to move out in the woods and own some land. That doesn't appeal to me at all. There is no "out in the woods" in SoCal anywhere near the ocean or the harbor, and I want to stay near the water until I can't go in it any more. Who knows how long that will be, but I'm taking it a year at a time. I'm 77, but as long as I can find young studs willing to pull the anchor and dig out my fish, maybe I'll make it to 80.
As I said up front, this is more of a story than a plan. If there is any advice, I guess its
1. Have kids young if you want to retire young.
2. If you don't have a job with a defined benefit plan, contribute until it hurts to a tax sheltered plan such as an IRA or 401k and do some reading on investments. Learn what an Index Fund is and consider using them for the bulk of your portfolio. Very few people can beat the market, but the market does OK in the long term.
3. Plan, but be open to things that you never considered. "No Battle Plan Survives Contact With the Enemy."
4. If your wife doesn't already love horses, don't let her get into them. They are far more expensive than boats.