Michael Quan achieved early retiring after leaving his day job at the age of 36. This story is available exclusively to Insider subscribers. Become an Insider and start reading now.
Michael Quan says understanding cash flow that comes from different assets is important.
Investing often and upping your contribution is also key to hitting your financial target early.
Also, consider accounts that don’t incur penalties for early withdrawal of funds.
Retiring early, or at least having the option of ditching your job decades before the age of 65, is a nice option to have. But if it were easy to achieve, there’d probably be a slew of retirement homes for millennials.
While having a seven-figure nest egg at your disposal may seem like a distant dream, achieving it isn’t impossible. Michael Quan fulfilled his dream of retiring early at the age of 36 after spending more than a decade saving and investing. He had amassed $1.28 million, according to records viewed by Insider, which allowed him to walk away from a 9-to-5. In 2000, he started his career as a network administrator, making $42,000 a year before he spun off into his own IT consulting firm. Over the span of his working years, he told Insider he averaged about $80,000 annually.
It wasn’t that he only had luck on his side, but rather, a combination of planning early in his career and remaining consistent in achieving his goal. He was also intentional about the types of investments he made, knowing they’d need to last him throughout his adult life. 7 tips for investing with the intent of retiring young
First on his list is understanding how different assets create cash flow through monthly or quarterly payouts, he noted. For example, some stocks pay dividends while others don’t. Investing in the latter means the only way to access cash is to sell shares. This also might not be ideal if you need to be liquid during a bad time in the market, such as when stocks are in a correction.
If you have a lot of time before retirement, you can ride out volatility and make bets on high-growth stocks. However, if you plan on retiring early, consider assets that create cash flow for a sustainable balanced portfolio, he added. For Quan, this meant investing in dividend-paying stocks such as JPMorgan Chase & Co (JPM), Coca-Cola Consolidated Inc (COKE), Bank of America Corp (BAC), and Exxon Mobil Corp (XOM). He later consolidated his equities into broad market index funds, the majority of which also pay dividends.
“If you’re going to retire early, you want to make sure that you have enough passive income coming in to take care of all of your expenses,” Quan said. “So when you’re not working, you still have income coming in. Different asset classes, such as dividends coming from the stock market or cash flow from real estate investments can really help generate that passive income for you.”
Investing in real estate is another way to add assets which cash flow. In particular, Quan likes single-family homes because they will always be in demand. He told Insider he owns two single-family homes in Las Vegas because the homes were more affordable than those in California, where he lives. He purchased the first in 2010 and the second in 2012. He said his properties are paid off, one of which a four-bedroom nets him $1,800 a month, and a three-bedroom nets him $1,300 a month.
In 2021, he also invested in a short-term rental property that he posts on Airbnb because it can generate higher cash flow. This property is a condo in Las Vegas which is paid off and nets him about $2,600 a month. Additionally, he said he has a small ownership in a multi-family unit which he inherited and earns $350 a month.
The sweet spot for Quan is buying long-term assets that keep up with inflation and have a compounding effect. When he began investing at an early age, he used the DRIP method, which stands for “dividend reinvestment plan”. This means any dividends he received from equities would automatically be put back into that fund so that the returns could compound over time, allowing them to get a bigger payout at a later date.
Automating investments is another key tip he highly recommends. There are two benefits that come from automating this process. The first is that you’re dollar-cost averaging into the market, which helps smooth out the impact of volatility since you’re buying in […]
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