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How to Reach Financial Retirement

When you have enough assets or passive income streams, you can withdraw from traditional work and use your time as you see fit.

We will all retire one day, whether by choice, age, circumstance, or physical condition.

Retirement is simply a period when you’re no longer actively working for income. It’s when your time can be spent on more leisure activities.

What is Retirement?

Retirement is defined as a “withdrawal from one’s position or occupation or from active working life.”

Many people define retirement as a period during which they can spend their time however they want. Some picture themselves sitting on a beach, while others may find themselves traveling and spending more time with family and friends.

However, as we know it today, retirement didn’t exist until roughly one hundred years ago. It was solidified as a life stage when a retirement age was established to receive government benefits.

Four Types of Retirement

1. Traditional Retirement

Most people understand this type of retirement: You work for 40-50 years and retire when you reach the full retirement age set by the Social Security Administration to receive benefits.

Even though you may have enough money to retire before the full retirement date, you continue to work until those SS benefits are available.

2. Early (Independent) retirement

If you retire before the “full retirement age” set by Social Security, you’re retiring early.

Others define early retirement as having enough savings or investments that generate income to cover living expenses. This enables them to retire from their jobs and explore new opportunities before the defined retirement age set by the Social Security Administration.

You can choose to retire when you achieve financial independence or have multiple sources of income to cover your living expenses. When you have enough assets or passive income streams, you can withdraw from traditional work and use your time as you see fit.

3. Part-time (Working) Retirement

When you choose to continue working, you can call yourself semi-retired. You can either work to give yourself a sense of purpose or to supplement your income.

4. Mini Retirements (Sabbaticals)

You can choose to work for a period of years and then “retire” for 1-2 years before rejoining the workforce. The idea is to work for a period of years and save your income (and invest in growing income) so you can take a mini-retirement or what some professions refer to as a sabbatical.

During these mini-retirements, you’ll have savings to cover your living expenses.

Don’t Retire, Instead Rewire

You’re never too young to start retirement planning.

In fact, starting as early as possible can allow you to choose when to retire rather than waiting for the full retirement age set by a government agency.

I encourage you to start thinking about what retirement means to you.

I covered these topics in greater detail in my book, Happy Money Happy Life. Get a copy and flip to the Happy Work chapter.

What Happens After You Retire

You’ll need a life plan because boredom may occur after you regain your time. Some have even shared that they have too much time and little to do.

As you work towards retirement, it’s important to discover the elements of your lifestyle that you enjoy. What do you enjoy doing? What hobbies excite you? What interests do you have?

Here’s the thing: You don’t have to wait until retirement to find out. In fact, it’s best to live a semblance of the life you want in retirement–today.

1. Choose a routine

Retirement offers flexibility, but for many, that freedom can create stress. After years of adhering to a work routine, it can be difficult to find daily meaning without some sort of daily activity.

As you prepare for retirement, consider how you’d spend your days and integrate them into your current lifestyle.

2. Remain socially connected

Continue to foster relationships with people you enjoy, trust, and share common interests. It’s important to remain connected with others. And equally important to meet new people who can usher enjoyable moments and deeply meaningful connections.

3. Continue learning

Retiring well includes having a healthy mind. It’s important to challenge your brain with activities to remain sharp.

When you’re no longer working, you are less likely to encounter situations that require learning something new or meeting new people. You’ll need to be proactive in retirement to keep your mind growing.

4. Have experiences

Retirement is about having time for more preferred experiences. It can be easy to retire and sit at home, binge-watching shows.

You’ll need to put yourself out there to gain new experiences. Whether you decide to volunteer, attend local events, or travel, prioritize gaining experiences and creating new memories.

How to Reach Financial Retirement

Financial retirement is the fourth destination in the financial wellness stages. For many, it is the final stop in the financial journey.

To reach financial retirement consider the following:

Step 1: Know when to start

Start planning for retirement. The sooner you contribute to your retirement accounts, the more time your money has to grow. Now, it’s still not too late if you’re later in life. You’ll simply need more catchup contributions to meet your financial targets.

Step 2: Calculate your retirement goal

How much you need in retirement depends on your lifestyle choices and expenses. If you have lower lifestyle expenses, you’ll need a lower amount, too.

Many financial advisors offer investment advice, stating most people need at least $1 million to retire comfortably.

So, how much money do you need to retire? 

Consider the rule of 25. It states you’re ready to retire when you have 25 times your planned annual spending.

For example, if your annual expenses are $60,000, you’ll need $1,500,000 ($60,000×25) saved.

Step 3: Prioritize financial goals

Chances are you have other financial goals, such as buying a house or paying off debt. It’s vital to prioritize retirement savings as you work towards these goals.

Remember, time magnifies your contributions. Don’t wait until you’ve achieved other financial goals before contributing to retirement.

Don’t Wait to Start Investing for Retirement

The following table shows the investment growth over time for two individuals.

We’ll assume investing in an index fund following the S&P 500 index. Historically, the S&P 500 has had an average annual return of around 7-10%. Let’s use a conservative estimate of 7% for this example.

One person started investing at age 25 and the other at age 35. Both individuals invest $6,000 annually until they reach age 65.

AgeStart at 25 years oldStart at 35 years old

What You Need to Reach Financial Retirement

Do the following to reach your financial retirement goals:

1. Have an emergency fund.

Make sure you have six months of cash savings to cover emergencies. Remember, emergencies happen. It’s not a matter of if but when it happens.

Having an emergency fund ensures you don’t tap into retirement savings.

2. Use high-yield savings accounts and certificates of deposit (CDs).

Grow your savings by earning more interest. You don’t have to keep your emergency fund in a low-interest savings account. Learn how to use CD laddering and find the best high-yield savings accounts on

3. Contribute to 401(k) or similar retirement plans

At the same time you’re building up your emergency fund, make sure you’re contributing to retirement accounts, such as a 401(k) plan.

For company-sponsored plans, contribute at least the minimum amount to get the employer match, but aim for 10% or more of your gross income.

Retirement accounts have tax advantages, including lowering your taxable income today or making tax-free investments in the future.

4. Investing using Roth IRAs

In addition to contributing to an employer-sponsored plan, use another tax-advantaged account known as an IRA.

Roth IRAs, for instance, are after-tax contributions that grow tax-free. There are no taxes when you reach 59.5 years old and start withdrawing the funds from the account.

The IRS sets the contribution limits and minimum distribution requirements.

5. Invest in the stock market

In addition to using tax-advantaged retirement accounts, you can invest additional money using a general investing account.

Consider doing this after maxing your contributions in retirement accounts.

General investing includes buying stocks, mutual funds, index funds, exchange-traded funds (ETFs), bonds, REITs, and more.

Learn how to invest for retirement.

The following table illustrates different investment types.

Investment TypeDescription
StocksOwnership shares in publicly traded companies. Stocks offer the potential for high returns but also carry higher risks due to market volatility. Beginners can invest in individual stocks or through diversified mutual funds and ETFs.
Mutual FundsPooled funds that invest in a diversified portfolio of stocks, bonds, or other securities, professionally managed by fund managers. Investors buy shares of the mutual fund.
Index FundsMutual funds or ETFs that aim to replicate the performance of a specific market index, such as the S&P 500. Index funds offer broad market exposure and typically lower fees.
Exchange-Traded FundsSimilar to mutual funds, ETFs hold a diversified portfolio of assets but trade on stock exchanges like individual stocks. ETFs offer liquidity, diversification, and typically lower expense ratios compared to mutual funds.
BondsBonds are debt securities issued by governments, municipalities, or corporations, representing loans made by investors to the issuer. Investors receive periodic interest payments.
Real Estate Investment Trusts (REITs)Companies that own, operate, or finance income-generating real estate across various sectors. REITs allow investors to access real estate markets without owning physical properties.


  1. Stocks: Purchasing shares of Apple Inc. (AAPL) or Google’s parent company Alphabet Inc. (GOOGL) represents ownership in these tech giants, with the potential for capital appreciation and dividends.
  2. Mutual Funds: Investing in the Vanguard Total Stock Market Index Fund provides exposure to a diversified portfolio of U.S. stocks across various sectors and market capitalizations.
  3. Index Funds: Buying shares of the SPDR S&P 500 ETF (SPY) allows investors to mirror the performance of the S&P 500 index, which comprises 500 of the largest publicly traded U.S. companies.
  4. Exchange-Traded Funds: Investing in the Vanguard Total Bond Market ETF (BND) provides exposure to a diversified portfolio of U.S. investment-grade bonds, offering income and capital preservation.
  5. Bonds: Purchasing U.S. Treasury Bonds involves lending money to the U.S. government in exchange for periodic interest payments and repayment of the principal amount at maturity.
  6. Real Estate Investment Trusts (REITs): Investing in a REIT like Realty Income Corporation (O) allows investors to earn income from rental properties, commercial real estate, or mortgages without owning physical real estate assets.

This table provides an overview of different types of investments available to investors, each offering unique features, risks, and potential returns.

6. Use additional employee perks to help grow your assets

Learn as much as you can about your employee benefits.

  • Taking advantage of tuition reimbursement can help you get a degree that could lead to a higher salary.
  • Using stock purchase programs, stock options, or restricted stock units can be sizeable additions to your portfolio.

Read more on company benefits and perks.

Here’s a table listing examples of employee benefits:

Employee BenefitsDescription
Tuition ReimbursementEmployers offer financial assistance to employees pursuing higher education or professional development, covering tuition costs for approved courses or degree programs.
Stock Purchase ProgramsCompanies allow employees to purchase company stock at a discounted price through payroll deductions.
Stock OptionsGrants employees the right to purchase company stock at a predetermined price, known as the exercise price or strike price, within a specified period.
Restricted Stock Units (RSUs)Companies grant employees shares of company stock that are subject to a vesting schedule, typically tied to the employee’s continued service or achievement of performance milestones.


  1. Tuition Reimbursement: ABC Corporation offers up to $5,000 per year in tuition reimbursement for employees pursuing degrees related to their current job or future career aspirations.
  2. Stock Purchase Programs: XYZ Inc. employees can participate in the Employee Stock Purchase Plan (ESPP), which allows them to buy company stock at a 15% discount through payroll deductions.
  3. Stock Options: John, an employee at Tech Innovations, was granted stock options, which allowed him to purchase 500 shares of company stock at $50 per share within the next five years.
  4. Restricted Stock Units (RSUs): Sarah, a manager at Global Enterprises, received 100 RSUs as part of her annual bonus package, which vest over a four-year period, with 25% vesting each year.

These employee benefits and perks provide valuable opportunities for employees to grow their retirement portfolio.

7. Invest in real estate

When investing in rental properties, consider them assets that generate a positive cash flow.

Your primary home, however, is not an investment. It’s your residence and can’t be liquidated for cash unless you have another place to live.

8. Diversify your income streams

If you’re wondering where you’ll get the money to save for retirement, consider taking on a part-time job or starting a side hustle.

Many services connect you to people who might need to borrow your stuff (extra bedroom, car), need your expertise (designing), or need help completing tasks such as putting Ikea furniture together.

9. Pay off debt and reduce your liabilities

The fewer financial obligations, the less income you’ll need.

As you plan to reach retirement, focus on paying off debt. Start by eliminating your credit card and unsecured debts. Then, work on eliminating student loans and car notes. Eventually, pay off any home equity and mortgage on your home.

Learn how to become debt-free.

Watch out for Lifestyle Inflation

Lifestyle inflation is an enemy of retirement. Know your spending habits and inclinations that can derail retiring.

Read about the next stage in the financial wellness roadmap: Financial Independence.

Jason Vitug

Jason Vitug is a bestselling author, entrepreneur, and founder of and His purpose to help others live their best lives through experiential and purposeful living. Jason is also a certified yoga teacher and breathwork specialist and has traveled to over 40 countries.

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