Retire 30 Years Early

When you picture the average retired American couple, you most likely think of gray hair and grandchildren, not monthlong hikes in Nepal, "Over the Hill" balloons, and new parents.

Which means you haven't met Paul Novell and his wife, Nina Fussing. Now entering their second year of retirement, Paul and Nina are enjoying their freedom and pursuing new hobbies. Nina has taken up photography, and Paul is helping a family member build a company. They've also done the obligatory post-daily-grind vacation.

But unlike most retirees, Paul and Nina look forward to 50 more years of retirement bliss -- Paul is 38 years old, Nina 36. And even more unlike most retirees, Paul and Nina plan on having kids -- after they've already retired!

Pitfalls of retiring early?
While leaving the working world nearly 30 years before the average American means more time to relax, it also means less time to save.

Paul and Nina overcame the challenge of saving for an early retirement by making the most of their successful (though relatively short) careers through smart investing and fervent saving. They are on track to live comfortably for the next 50 years.

Not bad, considering nearly half (46%) of workers aged 45 to 55 have saved less than $50,000 for retirement, according to the Employee Benefit Research Institute.

Shifting out of overdrive
As the tech industry took off, so too did Paul and Nina -- quite literally. In a span of 10 years, the couple moved from Silicon Valley to Brussels to San Francisco to Hong Kong, where they currently reside.

"We were both working in 'great' jobs, but the hours were crazy and we didn't see much of each other," explained Nina, who ran a Taiwan sales office and spent the better part of her 80-hour workweek away from Paul.

Back when Paul and Nina started working in the technology industry in the 1990s, they never anticipated they would retire early. And they were in good company.

According to the Retirement Confidence Survey, about half of the people who retire before age 55 didn't plan it that way. Many of those, the survey says, did so for "negative reasons" -- that is, health-related issues, corporate downsizing, or caring for a sick family member.

Though Nina wouldn't quite fall under that category, she was physically and mentally exhausted by extensive travel and a hectic work schedule. She decided she needed a change.

"The epiphany came one day when we were out hiking in Hong Kong," Nina recalled. "That one day it all came together, and we suddenly realized, 'Hey, we can really do this!'"

The decision to leave the workforce was made spontaneously -- but not lightly.

After researching their options and considering tax implications, they decided to get out early. Nina quit in February 2006 and hasn't looked back. Paul followed her soon after, retiring from his position in a start-up company the following month.

Stacking up the savings
With less than 15 years to build a nest egg that must last the rest of their lives, Paul and Nina focused on cutting back costs and saving as much as possible.

They saved about 50% of their income and tracked expenses religiously. They also took advantage of retirement plans and stock options through work. And though their contributions weren't matched by the company, they each maxed out their 401(k)s.

Perhaps another key to Paul and Nina's success is their financial compatibility -- both have the same goals and values when it comes to making financial decisions, and they work as a team to stay on track. Nina, who has kept an expense tracker since she was 17, makes sure the couple's finances stay within their budget. Paul, a self-described long-term value investor, serves as the family's portfolio manager.

Most of the couple's investments are in mutual funds that have good long-term records, managers with long tenures, and low expense ratios. Paul also chooses individual stocks, particularly dividend-paying ones, to round out the portfolio. Even with this sound investment program, the market hasn't always been kind.

"The bear market of 2000-2002 was quite painful and was a great learning experience," said Paul, who was forced to re-evaluate his picks and gave up on tech stocks entirely.

Fortunately, their portfolio recovered, and here we are -- five years later, they're happily retired.

Paul hopes his long-term investing strategy, which has served the couple well thus far, will allow them to live comfortably for years to come. Some of Paul's best-performing funds include:

And then what?
Since Paul and Nina are planning for about 50 years of retirement, they are still actively investing to supplement their savings and 401(k) cash-outs.

But when you retire at 38, Uncle Sam makes you jump through a few more hoops before you can access your retirement-plan savings.

The earliest age you'll be able to withdraw funds from your 401(k) or regular IRA, with no penalty, is 59 1/2. And for most of us, full benefits won't arrive until we're 65 or 67.

But there's a loophole
You can make early withdrawals as long as they're taken in equal amounts and spread out across more than five years -- or until you reach age 59 1/2. 

More than 20 years away from the no-penalty age, Paul opted for the loophole.

He said the biggest obstacle to leaving the corporate world early was receiving the distributions and reinvesting them over a period of time.

Paul and Nina also plan to supplement their savings with side jobs. Paul has agreed to go back to work for 18 months to help out a family member. He plans to reconvene his retirement in spring 2008. Nina, an animal lover, has been working part-time as a pet-sitter and dog-walker and volunteers weekly at the Hong Kong Dog Rescue.

The Foolish bottom line
Paul and Nina first began their early retirement research by reading through articles and discussion boards on our Motley Fool Rule Your Retirement advisory service. They learned that with long-term planning and heavy-duty saving, even an unanticipated early retirement is attainable.

"Learn from others who have done it, and don't let anyone tell you it is not possible or it is a stupid idea," Paul advises anyone interested in leaving the rat race early.

For tips on how you too can get out early and investment strategies to secure your spot in that unending vacation known as retirement, click here to join us free for 30 days at Rule Your Retirement.

Kelly Giedraitis does not own shares of any security mentioned in this article. AllianceBernstein and Eli Lilly are Motley Fool Income Investor recommendations. Berkshire Hathaway is a Stock Advisor and Inside Value recommendation. Fairholme and Third Avenue Value are Champion Funds picks. The Motley Fool has a disclosure policy.