Warren Buffett Was Nearly Content With Early Retirement At 25

Here is an insightful ForbesLife interview by Warren Buffett in their “When I was 25″ series. The article is primarily about how he ended up starting the investing partnership that eventually became Berkshire Hathaway. But what I didn’t know was that before that happened, he actually was ready to settle down in early retirement when he was 25 years old, content to invest just his own money:

The thing is, when I got out of college, I had $9,800, but by the end of 1955, I was up to $127,000. I thought, I’ll go back to Omaha, take some college classes, and read a lot—I was going to retire! I figured we could live on $12,000 a year, and off my $127,000 asset base, I could easily make that. I told my wife, “Compound interest guarantees I’m going to get rich.” [...]

I had no plans to start a partnership, or even have a job. I had no worries as long as I could operate on my own. I certainly did not want to sell securities to other people again.

Adjusting for inflation using CPI, $127,000 in 1955 would be about $1,100,000 in 2012 dollars. Spending $12,000 a year in 1955 would be just about $100,000 a year today. A 9% portfolio withdrawal rate is pretty high, but then again he’s Warren Buffett.

If he had gone the early retirement route, I’m sure he’d still be a comfortably rich Nebraska family man today, but given his quiet lifestyle we probably wouldn’t know anything about him. In fact, Buffett had already turned down an offer to be a partner in the hedge fund that Benjamin Graham founded. But events conspired to let him manage other people’s money without the pressures of salesmanship or marketing, and $50 billion later he’s one of the richest people alive.

I already knew from reading his biography The Snowball that he was quite the young entrepreneur and by 16 years old he had already accumulated over $58,000 in 2012 dollars ($5,000 in 1946). This was from many different micro-businesses including delivering newspapers, selling everything from gum to car washes, and owning pinball machines. He already knew that the faster he earned that money, the more time he would have to let compound interest do its thing. After moving back to Omaha, he even rented a house at first instead of buying so he wouldn’t have to commit any of his precious capital.

In any case, interesting that his initial goal was early retirement and career freedom, not necessarily doing whatever he could to accumulate more money. I look forward to the other articles in this series.

Comments

  1. Early retirement is pretty nice, and reading that this Warren made so much, so early, is really stunning. Basically shows that, if he could back then, sure other people can in this time age, as it’s gone slightly easier.

  2. The world would be a COMPLETELY different place. His mentor Graham may not have even be famous himself lol

  3. Warren’s life is a beautiful example for the upsides of capitalism. I believe that one of the reasons that inspired Warren to go back to work, instead of retire early, is that by going back to work he could make more money. Making more money inspired one of the brightest minds of his time, to create a ton of value (if you had to put a number to it $50 000 000 000) over his lifetime.

    I’m also grateful that more money inspires you, Jonathan to write this blog. You offer a ton of value to me, your reader. I hope and believe that once you have enough money to retire, the idea of making more money and helping more people will inspire you to continue this blog and continue to provide value.

    I love it.

  4. Jenna, Adaptu Community Manager says:

    Retiring at 25, that would be pretty dreamy. Glad he was planning on going back to school and reading a ton. I don’t know what I could do with that much free time.

  5. Thanks for posting this. Didn’t know that about Buffett. The world has benefited a TON from his retirement postponement.

  6. People are only truly happy when they can serve other people (Gates, Jobs, etc). SO, it’s no surprise Mr. Buffet went back to work.

  7. Jason,

    Posts like this are the reason why I have been a reader of your blog for 5 years!

    I think that people tend to achieve greatness, once their minds are not occupied by the day-to-day repeatable activities that you are paid to do in your job. Real greatness in net worth is achieved by doing something one truly enjoys, without being encumbered by daily struggles of the rat stuck in the rat race.

    It is no coincidence that Buffett made all his money after he “retired” – he simply chose to do something he loved. Joe Kennedy ( the father of JFK), also made a ton of money after “retiring”.

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