Rae Hartley Beck first started writing about personal finance in 2011 with a regular column in her college newspaper as a staff writer. Since then she has become a leader in the Financial Independence, Retire Early (FIRE) movement and has over 300 by.
Rae Hartley Beck Deputy Editor of Investing and RetirementRae Hartley Beck first started writing about personal finance in 2011 with a regular column in her college newspaper as a staff writer. Since then she has become a leader in the Financial Independence, Retire Early (FIRE) movement and has over 300 by.
Rae Hartley Beck Deputy Editor of Investing and RetirementRae Hartley Beck first started writing about personal finance in 2011 with a regular column in her college newspaper as a staff writer. Since then she has become a leader in the Financial Independence, Retire Early (FIRE) movement and has over 300 by.
Rae Hartley Beck Deputy Editor of Investing and RetirementRae Hartley Beck first started writing about personal finance in 2011 with a regular column in her college newspaper as a staff writer. Since then she has become a leader in the Financial Independence, Retire Early (FIRE) movement and has over 300 by.
| Deputy Editor of Investing and Retirement
Updated: Jun 14, 2023, 3:04am
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For those with an eye on early retirement before age 65, it helps to break your retirement planning into two phases: before retirement and after retirement. By planning for each phase, you can move toward an early retirement with a greater level of confidence.
If 9 to 5 until 65 isn’t your cup of tea, early retirement may be your ticket out. Retiring early is possible through a balance of living off less now, investing more, and living on less later. Through the magic of compound interest, the earlier you start the less you have to invest now and the more you’ll have available later.
Determining a goal post for when you want to retire early can help you determine how much you need to invest and where.
If you’d like to retire by 30, unless you have the salary of a CEO with the lifestyle of a monk, you’ll have a hard time. Investing aggressively in real estate to own as many investment properties as quickly as possible and taking on all the risk that comes with it may be your only option. Using geographic arbitrage to move to a significantly cheaper country can also allow you to retire extremely early if you’ve prepared properly.
Retiring in your 50’s is a much more attainable goal, especially if you start early. Increasing your investing rate kills two birds with one stone. If you’re able to invest more, the amount you need to live on decreases, which simultaneously reduces the amount you need saved to retire early, and gets you to the finish line faster.
The earlier you start and the more you save, especially in tax-advantaged accounts, the more likely you’ll be able to achieve your goal of retiring early.
Don’t retire from a bad life, retire to a good one. Many retirees who leave the workforce at a traditional age or early find themselves struggling to adjust to a new paradigm. While you are financially planning for an early retirement, you should be emotionally and socially preparing as well.
Develop hobbies, invest in your friendships and learn what makes your heart sing now, don’t put it off until after you’re done working. There’s no retirement police. If you find yourself wanting to work part-time on a passion project or taking a job with your favorite nonprofit, do it.
The true beauty of early retirement is the freedom it grants while you’re still physically able to pursue your dreams. The freedom of not needing a high-paying salary to maintain your lifestyle opens up a world of possibilities.
When people talk about retiring early, they most often focus on the investment strategy known as FIRE: Financial Independence Retire Early. Outside of planning which retirement accounts and brokerage accounts to use and how much you need to save, you also need to think about:
It’s critical to start your retirement planning process with a clear vision of your life during retirement, says Jake Northrup, CFP, founder of Experience Your Wealth, LLC.
“I’ve found a lot of people say they want to retire early, but they don’t actually paint a picture of what early retirement looks like for them,” he says. “You don’t want to climb the retirement ladder and get to the top to realize it was leaning the wrong way.”
Phil Lubinski, CFP, co-founder of IncomeConductor, has found over his 30 years as a financial advisor that pre-retirees don’t measure their emotional readiness to retire.
“Fishing and golfing are great part-time activities, but what are investors going to do with the rest of their time?” says Lubinski. “They need to fill the 40 to 50 hours a week they were working with other activities.”
He also says that investors may not be prepared to replace the psychological and social benefits that their careers and work environments provided. That means thinking about the kind of part-time or volunteer work you might want to take on, the types of hobbies you want to pick up or the traveling you may like to do, among countless other goals.
Knowing your goals for your early retirement will also dictate how much you need to save for it.
