Early Retiree Couple Made $100,000 After Firing Financial Advisor

• Kiersten and Julien Saunders joined the FIRE movement and retired at age 40.
• In their book “Cashing Out,” they share the decisions that helped them win their first $100,000.
• They fired their financial advisor and decided to manage their investments independently.

At the peak of their corporate careers, Kiersten and Julien Saunders he delayed his honeymoon for months to accommodate his demanding work schedules. When their long-awaited vacation was finally taken, the couple still found themselves compulsively checking their work emails.

It was then that they realized that their lives needed to change. Julien had already heard of the Movement for Financial Independence/Early Retirement (FIRE) through your friends and online research. After their honeymoon, the couple decided to get down to business and start living minimally (at one point even saving 70% of their combined income) so they could retire early.

Now in their 40s, the Saunderses have left their full-time corporate jobs, live modestly in passive income of their investments and travel across the US to help the black community achieve financial independence.

In his new book, “Withdraw Money: Winning the Game of Wealth by Walking Away”, share the key moves that helped them earn their first $100,000 for early retirement.

Julien researched the term “expense fee,” the hidden fee he paid to manage his mutual funds.

In the past, Julien trusted a Financial Advisor who invested his retirement savings in Investment funds. Mutual funds are groups of securities purchased with money pooled from a large group of investors. They are professionally managed by fund managers who monitor the market around the clock and conduct trades on behalf of the fund’s investors.

Determined to make the most of his money, Julien researched investments for months. He learned that mutual funds charge a fee called expense ratio, which covers the operating costs of the fund. Expense ratios may seem small at first, typically ranging from 0.25% to 1%, although some companies may charge a premium for their expert market analysis, but they dramatically affect the performance of your portfolio.

For example, $20,000 in assets with a 5% annual return and no additional contributions yields a gross value of $52,065.95 over 20 years. With an expense ratio of 0.25%, you will end up paying $2,471 in fees. If the expense ratio is 1%, you’re looking at $9,243 in fees.

In the end, the 0.25% expense ratio fund ends up with a net worth of $50,595, while the 1% expense ratio fund has a net worth of $43,822, almost a $7,000 loss only for the fees associated with administering the fund.

The Saunders had to fire their financial adviser to move their money into index funds.

Julien’s investigation led him to index funds, passively managed investment vehicles that track the performance of specific groups of stocks in the market. Because they are passively managed, their expense ratio is around 0.49%, with some as low as 0.03%.

“Investing in index funds had been around for decades, but had been presented as a boring, predictable, and lazy approach to investing. However, I was intrigued and ready to give it a try,” he writes.

When he told his financial advisor what he wanted to do with his portfolio, Julien met resistance. This led him to investigate how financial advisors get paid in the first place.

“It turned out that Martin’s pay was largely based on commission,” writes Julien. “Every time one of his clients bought specific funds or financial products that he recommended, he made money on that transaction.”

Although Julien’s financial advisor was not intentionally malicious, Julien was surprised to learn that his financial advisor was not legally required to make recommendations in his best interest.

He writes, “In theory, I could recommend funds that would earn him and his company a good commission, even if they weren’t the most profitable for me.”

In legal terms, financial advisers are not always bound by fiduciary duty, an ethical obligation to give a client the best advice for their financial situation. Certified financial planners are always fiduciaries.

The pair bet on index funds.

After making the difficult decision to break up with his financial advisor, Julien transferred all of his retirement savings into index funds. The couple also participated in their employer-sponsored singles show. 401(k) plans and reallocated 90% of their portfolios to index funds, and the remaining 10% to bond funds.

The couple earned their first $100,000 by maxing out their respective 401(k)s through the end of their careers. They write: “Sometimes whenever we received a surprise influx of cash, we would invest in a brokerage account buying, you guessed it, more index funds.

In the book, the pair compare investing to basketball. On any given day, any player can be voted “the best” depending on who is having a good season. Trying to bet your money on the best player is a risky investment as he may or may not be right. If he does, he may gain a lot, but if he doesn’t, his investment may be lost. It’s similar to how investment managers manage mutual funds: They spend their days chasing the best stocks to buy.

On the other hand, you could bet your money on the fact that basketball fans will continue to watch, no matter who is on top. It’s a safe and boring bet, but you’re guaranteed to win some money. Those are index funds: a bit boring, but a safer place for your cash in the long run.

“When you invest in index funds, you are betting on the fact that, overall, a given index will continue to perform favorably,” the pair write. “You understand that some companies will succeed and fail far beyond anyone’s imagination, but don’t let those individual gains or losses distract you from the overall performance of the market. This is because you are paying attention to the market as a whole and their long-term performance, not day to day.