I retired in 2018 at the age of 55 after a 30-plus year career as a securities regulator (think stock cops).
Many people told me that I was too young to retire, or told me that I would be bored, and advised against it. But what I have found is that oftentimes, we (and those around us) have preconceived notions about what is normal, what is possible, and what societal expectations are.
I took the leap of faith, with a lot of careful planning , and am so glad that I did. I’m still relatively young, and able to enjoy the freedom of not working full time.
Here’s how you can do it successfully, too.
1. Plan to make some money: As early as possible, give serious thought to how you can make the best use of your time and energy to generate income. Carefully consider your choices around education, and whether or not it can help you financially get you where you want to go. Is that master’s degree that’s costing $30,000 and an infinite number of hours going to result in more earning power for you – or is it not? Are you even going to use or need the degree?
2. Start saving early: Start funding your retirement plans (401(k), IRA, Roth IRA) as soon as you can. Educate yourself about each type of plan available to you, how much you can contribute, and overall plan rules. In the same vein, you must understand the investments you have available to you and those you are invested in. Do not rely on someone else to understand and process this information for you – knowledge is power and your savings is the lifeline to your retirement. Nothing against financial advisors, but you need to have your own understanding.
3. Spend less than you make: In order to have money to invest for retirement, you have to spend less than you make. Ideally, you should spend as little as possible while still maintaining a satisfying lifestyle during your working years. If you want to get there, you will especially need to pay attention to big money sucks, like an expensive car, too much house, or eating out too frequently. Take all of your leftover money and invest it!
4. Understand your income and expenses in retirement: Create a budget for after retirement. Where is your income going to come from, and what expenses will you have? Pad your expenses and allow a cushion for the unexpected, because the unexpected always happens. Estimating your life expectancy is important here — early retirees may live for 40 or 50 years or longer on their investments. This understanding about how much will be coming in and going out is critical to assessing if you are ready to cut the cord with your nine to five or not.
5. Understand how, when, and where to draw from the assets you have accumulated: Which accounts should you begin withdrawing money from in retirement? You may have assets in taxable accounts, tax-deferred accounts, or Roth IRA accounts — each type of account has its own taxation and other considerations, like penalties for early withdrawal. Don’t let any of this discourage you. Just get in there and learn about each one well prior to retirement so there are no surprises. There’s plenty of information all over the internet for you to educate yourself.
6. Seek out a support group: Look on Facebook, Reddit, or other social media sites for groups of people who are in your same position. You can learn so much from the discussions there on topics including finance, healthy living, how to manage your newfound freedom, etc.
7. Seek out a Low Cost of Living State (LCOL): Locating yourself in a retiree-friendly state is key in stretching your retirement dollars. Look for a location that has some combination of low property prices, low property taxes, or no/low income taxes. Again, the internet is a great resource for plugging these numbers in and exploring what might be a good fit for you.
8. Shop, shop, shop! Shop around for the best prices on everything you spend money on. Shop your utilities, phone and internet services, cable (who needs cable anymore??), insurance, mortgage, groceries. Checking your credit card bills for subscriptions you may no longer need or want can be a surprising exercise. Do you know what you are paying for? In the same vein, explore discounts available to older people — many discounts start at 50 years of age and can be significant.
9. Plan to get busy: While being on permanent vacation may sound like fun while you are working, the reality of not having a job to go to every day is quite different. Sitting around all day gets old quick! Give some thought to how you want to design your retirement life, and then execute it. Whether it is volunteering, a part-time job, hobbies, connecting with friends and family, traveling — you need to have a plan and interact with others. I personally feel like I am busier than ever before with all of my post-retirement activities. And, I love every minute of it.
10. Enjoy yourself: Getting adjusted to not reporting to your job every day takes some getting used to. Losing the identity of your working self can be difficult for some people. Be kind to yourself and give yourself some time to break in to your new way of life. Believe me, t’s going to be great!
Parting thoughts: Early retirement really is a possibility — it takes some forethought and careful planning. But anyone can do it. I’m living proof of that! Click here to read more about my plans for What’s Next!
Questions? Send us an email.