Retired before 30

Meet the 29-Year-Old Retiree
by Laura Rowley

Posted on Wednesday, October 29, 2008, 12:00AM

Madison DuPaix has been meeting a lot of new people since she left her full-time job at a Fortune 500 insurance firm in February. When new acquaintances ask what she does for a living, she's a little tongue-tied. "At first I would stare blankly, then I would say I'm on a leave of absence from work, or I'm a stay-at-home mom," she says. "When I feel comfortable with them I tell them what's really going on."

That's because it's kind of hard to explain how she managed to stash away enough to retire from her full-time job at age 29 -- without ever earning more than six figures. "To me, the freedom was always more important -- if I had to choose between spending money on something and saving, I would save," says DuPaix, who lives with her spouse and two young sons in Wisconsin.

Dual Values

DuPaix is characteristic of her freewheeling generation -- striving for the ultimate work-life balance -- and at the same time a throwback to the post-Depression era, when socking money away for the future was both a core value and a way of life. She offers an intriguing model for a new generation of savers as the golden era of leveraged living comes to a crashing halt.

"To be honest, it was a little bit of a mathematical game," DuPaix says. "You only need so much money [to retire], so why not get it over with and get on with your life?"

DuPaix got hooked on saving at age 16. "My mom, an accountant, did my taxes from my first job working in retail, and I ended up losing a lot of the money I made to taxes," she says. "I was really upset, and my mom explained that if you open an Individual Retirement Account you would be able to get most of your money back. I saw it as a choice between getting the money after a long time and never getting it at all."

A Frugal Hobby

DuPaix put away $600 that year. "That piqued my interest; it was this world that I didn't understand, and I realized you could play around with things and make things happen. That started to intrigue me."

Later, she got a full scholarship to the University of Wisconsin, where she double-majored in finance, investments, and banking, and risk management and insurance. While her college roommates were taking out student loans, she was investing her part-time earnings in low-cost index funds. (She switched her retirement savings to a Roth IRA when that vehicle became available.)

DuPaix worked for a year after graduation before going back for a master's degree. She then took a full-time position in 2002, saving half of her take-home pay. "I started maxing out my retirement accounts right away and investing outside of retirement accounts in index funds," she says. "Personal finance was my hobby."

A Clear Path

DuPaix frequented online forums about early retirement, and read books such as "Cashing In On the American Dream" by Paul Terhorst (who retired at 35 to travel the world). Part of her success was good timing: She and her spouse rented for a few years, then bought a condo with an adjustable-rate mortgage at 3.625 percent. They sold at the top of the market and rolled the profits into a new home.

Another key to success was her decision to super-save in her 20s before she had children; DuPaix says she simply extended the frugal habits of her college years. "I've always saved for something first before I buy it -- it makes everything cheaper in the long run," she says. "I never spent a lot on things people typically spend money on, like dressing great or coffee every day. When we went on vacation, we used frequent-flyer miles and hotel points. I always tried to work whatever system was available. My family teases me because they know I'll find best bargain to do something or I won't do it."

But most important, DuPaix suggests, was setting clear goals: "I knew I wanted to retire early and thought 34 would be a good age. That was a fluid working number, but it gave me something to aim for. I reached it early because I realized I didn't need as much."

Good Provider

That's because after crunching the numbers, she discovered that two-thirds of her salary was going to daycare, taxes, and retirement savings. She now achieves the same annual cash flow by drawing down 2 percent of her savings. In February and March, she pulled out two- to three-year's worth of living expenses and put them in cash; the rest is in stocks. (She says her stock portfolio is down 17 percent this year.)

The family has enough savings for DuPaix's spouse to retire as well, but after testing it out on a three-month paternity leave, he decided he likes his full-time gig. His job also provides health insurance, a key to making early retirement affordable over the long haul.

Decisions, Decisions

After "sending off the same email 100 times" to family and friends who asked for advice, DuPaix started a blog last year called My Dollar Plan, in which she explains her roadmap to early retirement, and offers personal finance tips. "That wasn't supposed to be a business, it was supposed to be a hobby," says DuPaix, who nevertheless created an income stream with advertising.

Some of her methods aren't for the faint of heart or the financially disorganized. For instance, DuPaix makes several thousand dollars a year doing credit card arbitrage. She sets aside the money in advance for a purchase, but rather than spending the cash, puts it into an interest-bearing account, while continually revolving a gigantic balance onto zero-percent-interest credit cards every 12 months. (She says it hasn't affected her credit score.)

"On the blog I say, ‘Here's what I did' -- not, ‘You could do it, too,'" DuPaix says. "Because I don't want people to believe that all you have to do is start early and make a bunch of money. It's the way you make decisions on things, and operate your whole lifestyle."

Free Time

DuPaix says she enjoyed her old job, but she loves her new schedule more -- hanging out with her kids, meeting family and friends for lunch, blogging three mornings a week, and writing the Kids and Money section for About.com (she still has a part-time nanny).

"Retirement doesn't mean no more income," says DuPaix. "It means doing what I love, and knowing when I wake up every day I can do whatever I want."