How Can you Afford Early Retirement?

Retirement is one of the most frequent topics in personal finance blogosphere, next to perhaps saving money tips. Retirement is the destination of our financial journey. Almost all PF bloggers agree that there’s only one major aim to save for, retirement.

Question here is, what can you do now to take an early retirement? I am trying to put a picture of what is needed to achieve it.

The basic  idea is, you should save for future, post-retirement, life while controlling spending now. The more you save and the clever you are in investing, the earlier you can take retirement.

Off-course if your work is enjoyable and you love to stick on, like me, you may not think of early retirement. Sadly, that’s not the case, most feel their job is just a medium to achieve other goals in life, so, most of us look for independence as early as possible. Relationship with boss/manager/employer, pressing home issues, health or other important duties are the reasons people often look for early retirement.

People want to go alone freeing their mind and body from the demands of a day job. A challenging job takes a toll on our mind and body, we can’t sustain for long putting long-hours, unless we manage to do it effortlessly. There’s no denying that often I feel stressed and exhausted because of extreme work pressure I go through to meet dead lines.

People, I know, cite these reasons for seeking out early retirement.

  1. Independence from drudgery and monotonous work.
  2. Fulfilling life’s other ambitions/goals.
  3. Family issues where one parent needs to stay home for taking care of kids.
  4. Health related issues which get aggravated by nature of the job.
  5. Workplace environment, politics and constant denial of promotion/increment, etc.
My friend and avid blogger Joe, retired last month, at an age of 39. I respect him for taking the bold step. He could afford it because his wife works and his side income (through the blog) has steadied and mainly because he has enough money saved from 16 years of employment at a high paying job. Still he is cautious and didn’t rule out rejoining the work force again if things don’t go his way. During his retirement, Joe would still be earning money though his blog and through investments he made all long. And with wife’s pay check he may very well weather the storm.
There is another documented story of a couple going alone at an age of 40. They traveled the world, chronicled their experience, wisdom and knowledge in form of a book and earned money by selling it. They are proud of their decision and encourage others to live like them. There is a forum for early retirement seekers out there as well.
Now the big question is, if you too want to retire early, how can you achieve that?

The problem is, even though we look for early exit, we seldom afford to do so. Due to lack of retirement saving. In personal finance term, a financial independence is a state where you no longer need to work for living. Your money would provide you necessary income.

To put things simply, you can only take early retirement if you reach financial independence (there are cases when one income suffices the family need, letting one partner to retire. We are not talking about that here). Below are few points that can help you streamline your thoughts. Read them, re read them and focus on each of them, try to memorize, if you want to.

Now, there are only three real ways to achieve financial independence early.

  1. Earning More Money
  2. Saving More Money
  3. Optimizing investment for higher return (read where to invest my money now)

Below tips may help you getting out of any financial mess you created (high credit card debt, losing money in stock market, etc.) thus far. Even if you didn’t create a mess, these can help you focus on your journey towards early retirement.

Begin now

When did I start thinking about retirement? Even before I started working. As an immigrant, all you want is the best for your family, so I have to work hard. Nevertheless, knowing how much toil I have to put in to reach my goals, I realize I don’t want to spend a lot of time making sacrifices. You should do the same too. Don’t wait until you’re thirty or worse forty before you think or even plan for it. By the time you’re sixty, you still don’t have enough funds to cover all your needs.

The answer, if you want badly, start now, from today.

Be committed

I’ll tell you this as early as possible. I can basically list down 100 tips and tricks on how to retire early; but if you don’t have the discipline, commitment, and determination, I don’t expect you to take the first step right now or follow the right course. You’ll always bring what could have been very good financial habits. It’s not going to be easy, especially if you’re not used to financial planning or saving. But unless you do your darn best to stay committed, you don’t reap any in the end.

Invest in financial literacy

I’m not going to lecture you about the different kinds of investments you can make, including stocks, bonds, and mutual funds. They can be quite complicated and deserve their own spot. What I’m going to let you know is the importance of financial education. The investment options I tell you are just tools in making you rich. They can still fail miserably if you don’t know how to make the right decisions when it comes to your investments. Fortunately, improving your financial education is no longer difficult. There are already hundreds of financial counselors and advisers all over the country, and they are all certified and professionals. You can visit my blog often to get some more tips about how to be wise with money, savings, and investments. You can also read books or attend financial seminars.

Start paying off your debt

By the time you’re twenty-five or thirty, you should control your debts as much as possible. In fact, you should already be paying your debt religiously by then like your mortgage and car loan. Debts can create huge dents in your commitment to save and invest for your retirement. ( related – 51 ways to get out of debt)

Keep yourself healthy

We can talk about money until kingdom come, but all the wealth in the world is futile if you’re on your deathbed by the time you’re fifty or sixty. As you grow older, your metabolism slows down and you become more prone to all sorts of diseases. It’s then recommended to also be serious with your health. Besides, before you retire, you still have to work harder. You can only do that when you’re in the pink of health. (related – Stay healthy to become rich)

Set aside money

How much should you save every month? If you can, spend just half of your income for your expenses, we do it constantly. Otherwise, consider at least 8 percent of your total income. That should be a good start for you. Now to make sure that you don’t ever forget it, you can automate the debit in your salary account and move the funds to your savings account. Better yet, open a time deposit, which earns higher interest than savings account.

Moreover, you don’t get tempted to touch your funds. You can also try this very simple technique: make your savings an expense. Whatever money is left, you can decide to use it for other stuff you wish to buy or as additional savings (I hope you go for the latter). (Related – How much do you need in retirement saving)

Change your lifestyle

If you’re used to finer things in life, it’s time to done them down a bit. Savings is one of your best steps in trying to prepare yourself for early retirement. Besides, there are already plenty of things you can use as substitutes. You can subscribe to Netflix instead of watching movies in cinemas, settle in more affordable accommodation than five-star hotels, or cook meals at home than order or eat out.

Think long-term

There are many types of investments, though they may be classified in three plans: short-term, medium term, and long-term. The last one is the most ideal one for you since you want to build your wealth, not use it very soon. Moreover, long-term investments are more stable and offer more money as long as you’re willing to be patient with their growth. (Related – How to prioritize saving goals)

Chronicle and have good company

Keep a diary of your journey. If possible open a blog and write your progress. When going gets tough (and sure they will be on days), you shall get courage from your past victories. Make a plan to save certain amount every year put down your goals in writing.

It is also important to have company of people taking the same journey. Form a local group or club for early retirement seekers. You can join online groups/forums as well. Constant encouragement, information sharing and learning from each other are the main benefits of having a company of like minded people.

Believe me, taking early retirement is possible, and honestly, it’s very hard to achieve unless you are a high income earner. Still, any one, even with lesser income, can achieve it with discipline, hard-work and self-control over time, and, only if you want it badly enough.

Before we end today’s discussion, let me remind you that in global economy our jobs are not stable and secure forever. We can lose our jobs any day – anytime. And, especially if you’re in your 50’s, you may not get a comparable job again. In that situation an early financial independence can become your savior. 

What do you think readers, if you’re planning for early retirement, do you want to share your experience?

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  1. says

    Great tips! I thought I wanted to retire early, but I don’t know. I probably will want to later on in life, but right now I’m having fun working hard. I want to leave my options open, so I’m doing what I can right now.

  2. says

    I hope to retire early. I love my profession, though, and it pays well but not exorbitantly. So if I don’t get to it’s not the end of the world. But I’d like to at least have the option.

  3. says

    Please allow me to be a bit philosophical here. Do you think that retiring is the end goal of life? What exactly we try to retire from? If it is the job we are trying to get rid of then we are not in the right place to begin with.
    As for me, I want to keep working till I depart. I may switch the nature of work but I think to keep working is synonymous to staying alive.
    I would say that we should better think about leaving one job with all our harvests and start a new work and new life.

    • says

      Brilliant thought. While writing this piece I did think the same way. Where are we retiring from? Then I came to a conclusion that we want to retire from a day-to-ay mundane job which we do not have any interest left on, which we only do to earn a living.

    • says

      I would have to agree with you. I think a lot of people’s definition of retirement is escaping the 9-5 routine. I haven’t done 9-5 in over 6 years. Gaining financial independence to do what I want is the goal I am aiming for. I love working, as long as it’s something I enjoy.

    • says

      I also like this thought! I think if you are already looking forward to retirement, then you are in the wrong place…. It makes me think of the whole live to work vs work to live debate!

  4. says

    As a mid twenties Guy I haven’t decided if I want to retire early or not yet but I am saving aggressively. I hope to pick up the pace even more over the next few years and see how things go. I already save around 25% of my income so I think I am off to a good start!

    • says

      This is actually great start! Did you calculate your net worth 20 years from now, provided you maintain same income growth and savings rate?

  5. says

    These are great tis!

    I am definitely on the path to early retirement. We are 32 now and hope to be completely retired by 50. I think we can do it by saving, investing, and keeping our expenses very low!

    • says

      I am sure you can achieve financial independence pretty much before that. your side income can only grow from your blog helping you increase your net worth quiet faster.

  6. Sam says

    I think it’s easier than people think because we don’t need as much money as we think.

    It also all depends on how much you want it!


    • says

      Oh I completely forgot about your retirement. Readers, here’s another example of taking early retirement, Sam took retirement even earlier than Joe in his late mid thirties. You cna read more about it on his blog financial Samurai, he’s also an author of a related book about engineering your own layoff for maximum separation benefit.

  7. says

    Similar to other couples, I was forced to leave my day job ro look after our three children but I cannot say that I am already retired. It was actually my fear before I left the corporate world — the fear of losing an income. I was glad I was able to work at home as a freelance writer, virtual assistant, and blogger. These jobs gave me higher earnings; thus, we were able to pay off our loans and debts. We were also able to start investing on forex and stocks trading. Though we have enough savings for our retirement and children’s college education, I would prefer to continue working as long as I can so that we can earn more, save more, invest more, and maybe leave a good inheritance to our kids. Anyway, I do not see the need to retire because I can enjoy life with my husband and children, dine out, and travel, without leaving my job.

    • says

      Manette this shows how lucky you are, a forced situation has become boon for you. I am asking my wife to take on freelancing work. I am sure she’ll enjoy it.

      To me you haven’t retired, you switched your career and now you are too happy to retire.

  8. says

    Early retirement is nice, but what if instead of retirement we just worked in a new capacity so that we could continue to be fulfilled? I’m convinced that people die mentally (if not physically) when they stop working.

    • says

      Yes I agree with you many just don’t retire, they always look for things to indulge in. Even if you don’t get money, still a unpaid/volunteer work can be taken up for fun, company and social needs.

      I sure will die mentally if I can’t do anything.

    • says

      Oh yeah some people just get busier during retirement. The reason being they love what they do without getting worried about time pressure and stress.

  9. SaveGreenTeam says

    Retirement is different things to different people as I know people in their 30’s that work hard every day(for themselves) that if you ask them, they will tell you they are retired. Why? because they truly enjoy their business and its not work to them. They can take off whenever they wish for a trip, or be at all the kids events, or just lay back and do nothing while still maintaining the peace of financial security. Others play golf every day, some travel the world, I choose to run my suburban mini-farm.

    The 2 constants in all of these scenarios are:
    1) No debt-No credit cards, revolving credit, car payments, or house payment-nada. Cash is used for every purchase or the purchase is not made.
    2) A steady passive income-whether from investments, real estate, or business ownership without the necessity of personal involvement.

    Retirement is the ability to choose your path each day without restriction of time or money, no matter what age. Unfortunately, for the majority of people, it takes them to their 50’s to understand what they should have done in their 20’s.

    Good post-don’t know how I missed it, guess I was just too busy with my retirement.

  10. capital investment advisors, finance advisor says

    Well I think early retirement can be a good idea, but you need to make sure that you have enough of investments for after retirement expenses and financial security. You can relocate to new place also, you can do lot of things and all you need is to be financially secure for this decision.

  11. Allison says

    Please proofread your articles before posting them; it’s hard to read fluidly with so many grammatical errors…

  12. says

    Been slowly starting to work on my retirement savings. Getting out of debt is the first hurdle and increasing my income are both in the works. Already live pretty frugally now just need to earn more.

  13. says

    The economic climate is so bad nowadays that I think it may be smart for people to think about retirement as soon as possible and not just when they are able to reach it.

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