Trading Work for Never-Ending Weekends: How to Retire Early


I’m a long way from retirement, but I’ve definitely had those days. You know the ones I mean — when you’re tired and irritable, when it’s cold and gray and windy, when everything feels like more of the same old thing, when you haven’t had time to do your laundry let alone spend time with your friends, and, on top of it all, the thought of grinding out a few more decades at the office seems utterly insurmountable.

If you hear the word “retirement” on a day like that, it probably sounds a lot more like “emancipation” (I know it does for me). After all, if you didn’t have to work, you could spend more time with your family and your friends, catch up on your golf game, take up new hobbies, travel the world...

Hold on a minute. If you’re slipping away into sweet reverie, you might need a reality check. Here it goes. Retiring early is no dream — it’s a goal, and an ambitious one at that. That isn’t to say you can’t or shouldn’t go for it. But unless you strike it rich in the lottery, succeeding at retiring early will mean careful planning, hard work, and near-superhuman self discipline. Here’s what you’ll have to do to make it happen. (See also: Deciding What You Want Out of Retirement)

Save — a Lot

You probably already know that experts recommend that you save a lot for retirement. Exactly how much is a matter of debate. It’s also highly personal, as it depends on your lifestyle, what you want to do during retirement, and (everyone’s least-favorite calculation) how long you think you’ll live. This is where things get tricky in terms of retiring early. In essence, working for a shorter period of time puts you at a disadvantage on both ends of the saving equation: you’ll have fewer earning years, and more years during which you’ll have to rely on your savings.

So how much might you need to save? Rather than start with someone who makes six figures, let’s look at averages. The medium income in the U.S. is $50,000. Average life expectancy is almost 78 years. If you are 35 and would like to retire at 60 with 80% of your pre-retirement income, you will need to save about $1 million — and that’s assuming you get the estimated Social Security payment. You can check out the retirement calculator I used to figure this out, but no matter how you fiddle with the numbers, retiring early will add up to a big one.

Live Cheap

Saving enough to retire early will mean living on less than you make, and you’d better get used to it; your Spartan lifestyle will become even more crucial when you stop working. When you’re working eight (or more) hours a day, a wide-open schedule can seem like a dream come true. But there’s another financial benefit to working that you may not have thought of — being stuck at work all day leaves you with much less time to spend money.

So what about when you’re retired and have nothing but time? Can you keep yourself occupied and keep your spending in check? This can be a real challenge, especially when expensive hobbies and travel are part of your plans. This is why having a lot of savings and using careful planning are so important. A good financial planner can help you with this, but when you don’t have earning power, you need a good cushion to ensure your money lasts. After all, the last thing you need is to run up against the end of your savings when you’re too old to go back to work.

Stick to the Plan

Because retiring early is a challenge, it’s important to have a clear plan for how you’re going to get there. Exactly how early do want to retire? How much will you need to save to make that possible? These are questions you need to answer to ensure you’re on the right track to making your goal a reality. A financial planner can help you run the numbers. Then it’s up to you to keep that plan on track. The numbers make it sound easier than it really is, at least for most of us. Living on less can be tough — especially when everyone around you is spending like there’s no tomorrow.

Find a Source of Passive Income

If you’re not familiar with the term passive income, you’re missing out on one of the sweetest deals in the investing world. In essence, passive income is income that’s generated without your labor. In other words, you don’t have to work for it — or at least not as hard as you have to work for most of the other income you’ll earn in your life. Investments such as dividend stocks and real estate, or royalties generated from something you’ve created such as a website or book, are considered passive income. Once a source of passive income is up and running, all that’s left for you to do is accept the check in the mail.

Rethink “Retired”

A member of my family retired in his 60s, but was soon back to working part-time. Why had he chosen to go back to the grind?

“You can only play so much golf,” he told me. As an energetic, healthy, and active guy, he just wasn’t happy without some real work to do. He has flexible, part-time work that he enjoys, and he’s still home in time to have lunch with his wife.

Retiring at 65 used to mean a handful of years of retirement. Now, it can mean 20 or more. So, while you may relish a lazy Sunday now, those long, uneventful days may not have the same appeal when they become an everyday reality. If you’re hoping to retire early, consider including work in the picture. It’ll make it easier to afford the things you enjoy. Plus, the time you spend working might even make that extra leisure time more enjoyable.

Understand the Risks

Retiring early isn’t easy. It does have its rewards, but it isn’t without risk. Medical or other unexpected expenses can dry up your savings too soon; you may not enjoy a life of leisure as much as you’d hoped, and, not least of all, the financial and personal sacrifices you have to make to retire early can have a cost, too. If it’s really a different kind of life you want, you might want to ask yourself whether you can start living it now, perhaps by pursuing more of the things you love, or finding a job that you can be happy going to for a few more years. No matter what you choose, just be sure to avoid jumping at a dream. Those coveted post-work years can be sweet, but don’t kid yourself — it’ll take a lot of hard work to get there.

Are you working toward punching out early? Or have you successfully made the leap to early retirement? I'd love to hear about how you made it happen!

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Guest's picture

To plan for an early retirement, one must clearly define "retirement" - as you have mentioned "Rethink Retired". Tim Ferriss's idea of 4-hour work week and mini retirements appeals me a lot. This would keep people active and driven by a purpose throughout their lives (learning new language, visit new place, experience something new) - in contrast to the lives of eternal boredom some retirees are going through.

Guest's picture

All good advice, but you have to be extremely wary of financial planners. Vast majority either charge a hefty annual percentage fee for managing your assets or steer you to their expensive affiliated mutual funds or do both. Only deal with independent fixed fee-only financial planners. And even then you'll probably still get burned more than you'd benefit.

Investing for yourself is really quite simple once you understand the reason for expected long-term positive returns and understand that short-term turbulence in the markets is to be expected and ignored. Then just select appropriate mix of stock and bond index funds (more stocks if you don't mind the turbulence, more bonds if you are very risk-averse) and set it on auto-pilot for a few decades with regular new investments. 20-30-40 years you're rich without any particular effort or stress. There're tons of good resources on the web and books (William Bernstein, Bogleheads) that teach you how to do it. Spend 100 hours educating yourself and save hundreds of thousands of dollars over your lifetime relative to using crooked advisors and planners.