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Retire Early: A Complete Guide to Early Retirement

Early retirement is not just a distant dream. It's a tangible goal within reach for those willing to plan, save, and invest wisely.

I wanted to retire early.

Early retirement was something I wanted when I was still in college. I was working two jobs and going to school full-time. I knew I would finally have a career, not just a job, once I graduated. But I also knew I wanted to quit working by the time I was 30.

Back then, I didn’t know how to actually retire early. I had no idea what it took or what first step to take. I just had a strong desire to be free.

I think that was exhaustion talking, from working two jobs and going to school full-time.

The idea of retiring early has become increasingly appealing. Imagine bidding farewell to the daily grind and embracing a life of freedom. This guide will walk you through everything you need to know about early retirement.

What is Early Retirement?

Early retirement, often referred to as “retiring early,” is the act of leaving the workforce before reaching the conventional retirement age. While the typical retirement age hovers around 65, early retirees aim to achieve financial independence and exit the workforce much sooner, sometimes in their 40s or even earlier.

The Benefits of Early Retirement

There are benefits to retiring early, including the freedom to pursue your passions and hobbies without the constraints of a traditional job. You get to follow your interests in your schedule, not around a work one.

With more time on your hands, you can create new memories, like traveling around the world. You could also have more moments with loved ones and finally have the opportunity to work on those passion projects.

Lastly, stepping away from work stress can improve your mental health and physical well-being. I certainly have felt a profound change in my mental and physiological health.

Challenges and Misconceptions

One of the biggest challenges of early retirement is ensuring you have enough savings to sustain your lifestyle for decades without a steady paycheck. However, it is possible to create passive income streams to help you do just that.

I have found that some may view early retirees with skepticism. I’ve certainly had people question my decision. Some younger retirees have also shared some people assume they are simply “lazy.” As you can imagine, working to break the hamster wheel of work is not for the faint of heart.

Now, with that said, I want to highlight an important issue with retiring early: some struggle to find a sense of purpose or fulfillment in their daily lives. After leaving work, you’re no longer forced to get up on a schedule or be mentally challenged. It can take a toll. However, my experience has been different. I’m rarely bored because I have a profound sense of curiosity.

Why You Should Retire Early

Early retirement isn’t just about escaping the workforce; it’s about designing a life of autonomy and fulfillment. By retiring early, you prioritize your well-being, happiness, and freedom over the traditional notion of working until old age.

I covered this in detail in my book, Happy Money Happy Life. I walk you through stories of others who are living financially free and their reasoning for retiring.

You’re also not alone: there is a community of people who have chosen FIRE–financial independence retire early. It’s a movement made up of all types of people looking to break free.

What Do You Need to Know About Retiring Early

Early retirement hinges on attaining financial independence, which means having enough passive income to cover your expenses without relying on a job. It requires:

  • Investment Strategies: Building a robust investment portfolio is crucial for generating passive income and growing your wealth over time.
  • Budgeting and Expense Management: Controlling your expenses and living below your means is essential for saving and investing a significant portion of your income.
  • Healthcare Considerations: Early retirees must plan for healthcare costs, as employer-sponsored health insurance may no longer be available.

Steps to Make Early Retirement Possible

Step 1: Set Clear Goals

Define your retirement goals, including your desired retirement age, lifestyle, and financial targets. Understand that retiring early simply means having enough income to cover your lifestyle expenses. You can retire at 30, 40, or 50. Anytime you retire before the “traditional” retirement age means you’ve retired early.

You’ll need to know things like, your financial independence number.

Step 2: Create a Financial Plan

Assess your current financial situation, create a budget, and develop a savings and investment strategy tailored to your goals.

You’ll need to know how you’re doing financially so you can make the necessary changes. Complete a financial checkup. This will help you see areas that need your attention, such as paying off debt or reducing expenses.

Everyone needs a financial plan. However, if you’re looking to accelerate your path to retirement, you’ll need a plan focused on an aggressive savings and investing strategy.

Step 3: Maximize Income Streams

Explore alternative income streams such as rental properties, side businesses, or freelance work to bolster your savings.

You will need more income to fund your investments to retire early. Start a few side hustles to increase your money flow.

Once you stop working, the steady paycheck disappears. Many early retirees depend on withdrawals or dividend payments from investments to pay for their expenses.

However, you want to have multiple income streams, meaning having other sources of money flowing into your life. Just because you’ve retired from traditional work doesn’t mean you can’t still earn money doing work you enjoy.

Step 4: Invest in Independence

Hopefully, you’re already contributing to retirement. This means investing using 401(k) plans and IRAs. When investing for independence, you need a brokerage account for this specific purpose. You’ll also need to know how early retirees invest in index funds, ETFs, and terms like safe withdrawal rates.

Read this: How to achieve financial independence.

Step 5: Stay Flexible

Understand that there are some things you can control and many things outside your circle of influence. For example, you can control how much you invest but can’t control how the stock market performs (although historically, the market will work in your favor).

I’ve found the importance of adopting a healthy money mindset. It’s allowed me to stay flexible, consistent in my investing philosophy, and motivated to keep my lifestyle expenses from creeping up.

What To Do Next

Early retirement is not just a distant dream. It’s a tangible goal within reach for those willing to plan, save, and invest wisely.

By understanding the benefits, challenges, and steps required to retire early, you can embark on a journey toward financial independence.

Jason Vitug

Jason Vitug is a bestselling author, entrepreneur, and founder of phroogal.com and thesmilelifestyle.com. 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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