Some people know they’ve found The One when they discover their date loves the same music or roots for the same sports team. For Jeremy Jacobson, a good hint came when he and his future wife visited a tourist area of Beijing and she wasn’t tempted to buy any tchotchkes.
The year was 2004, and Jacobson, then a Seattle-based engineer who was in China on business, had already embarked on the aggressive savings path that would lead him to early retirement in late 2012, at age 38.
“I was car-free and biking by that point,” Jacobson, now 43, recalls.
His future wife, Winnie Tseng, now 39, shared his frugal ways, allowing the couple to bypass the persuasion phase that many would-be early retirees go through when one needs to convince the other to save upwards of half of their income. Tseng was working in tech in Taiwan when she met Jacobson in Beijing.
The couple married in 2010 and nowadays are reaping the rewards of their formerly spartan lifestyle. They have travelled the world with their 3-year-old son, Julian, and recently settled in Taiwan to allow him to attend pre-school.
Here’s how they pulled off their life of travel and leisure.
Pinch Those Pennies
Jacobson, who worked for Microsoft, arranged a work transfer to Taiwan in 2005. The move allowed him to be with Tseng and also to turbo-charge his savings, thanks to the country’s lower cost of living. He brought Tseng back to Seattle after a couple years, where the couple pinched their pennies together.
They slashed their spending on three major expenses to get the biggest bang for their savings buck. Roughly 62% of Americans’ average annual spending goes toward housing, food and transportation, according to the Bureau of Labor Statistics. Significantly reducing your spending on these three expenses will get you to early retirement a lot faster than giving up your daily latte or using Groupons for dining out.
“We lived a lifestyle that a lot of people refused to live,” Jacobson says. It helped that both Jacobson and Tseng came from lower-income families and grew up living with, and on, less. Years before Jacobson met Tseng, he did acquire more conventional trappings of a middle class life, but by the time he had met her, he had already sold his house, car and motorcycle.
To further cut expenses, the couple lived in a 900 square foot apartment, well under what they could afford on Jacobson’s $135,000 salary. (Tseng stopped working when they came to the U.S.) They ate all of their meals at home and entertained friends with potluck parties, which hardly felt like a sacrifice since Tseng is an accomplished cook.
The couple’s frugal ways allowed them to save $100,000 a year. Jacobson maxed out his 401(k) and IRA and put the remainder into a taxable brokerage account. They invested in low-cost Vanguard index funds, and by the time Jacobson retired in late 2012, they had amassed a nest egg of more than a million dollars. It was this brute savings and not, as some people assume, a lottery windfall or inheritance that got them to the point where they never have to work for pay again.
Slash Your Taxes
The Internal Revenue Service taxes Americans based on their worldwide income, but Jacobson and Tseng manage to pay next-to-nothing in taxes. For tax purposes, the couple is based in Washington, one of a handful of states with no state income state. Jacobson is registered to vote in Washington and maintains a driver’s license from the state, even though they’re now living full time in Taiwan. They live off a combination of their savings and ad and referral income from their blog, GoCurryCracker.
Most of their investment income comes from capital gains, dividends and tax-free municipal bond interest. Long-term capital gains aren’t taxed for married couples making up to $77,200 in 2018. Depending on their type, dividends are either not taxed in lower income brackets or taxed at ordinary income rates.
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The couple made about $57,000 in revenue from their blog last year, but since they live abroad, they take advantage of the foreign earned income exclusion that exempts up to $104,100 of work income per qualifying person from federal income taxes.
The family posts their spending on their blog. Their total outlay for 2017 was $93,648, or about $7,800 per month. It’s much higher than previous years, due to a combination of one-time expenses like the Alaskan cruise he treated his mother and grandmother to and rising ongoing expenses like the fact that his son is eating more and attending school. But Jacobson isn’t concerned: the family can afford to live off their savings alone, and the blog income provides a buffer. Their investment income is spitting out around $5600 a month.
Though the family is settled for now in Taiwan, they resume their world travels during school breaks; they recently got back from a trip to Vietnam during Chinese New Year. As Jeremy writes on his blog, “We are doing our best to be completely normal in every way that doesn’t involve going to work.”