How to retire early: Early retirement by the numbers

How to retire early: Early retirement by the numbers

More and more, I'm meeting people who want to know how to retire early. There's been a lot of buzz in the media lately about early retirement, and that's led folks to wonder how much money they would need to quit their jobs — or if early retirement is even something they should consider.

Why retire early? Well, for most people a job is a necessary evil. We work because we have to. Early retirement gives us the flexibility to choose how we spend our time, whether that entails sitting on the beach drinking margaritas or it leads to new work that provides meaning and fulfillment.

Lots of us dream of leaving the workplace in our forties or fifties instead of sticking it out until age 65 — but we keep working to support the lifestyles to which we've become accustomed. We like our iPhones and Playstations and Priuses, so we surrender to the idea that we'll have fifty-year careers.

Still, there are a surprising number of folks who manage to retire young. In fact, the 2018 EBRI Retirement Confidence Survey found that 35% of retirees left the workforce before they turned 60. (Previous surveys have shown that 18% of people retire by age 55.)

These folks aren't lucky lottery winners, and most didn't have high-paying careers. In general, those who manage to retire early have opted to live with less when they're younger so they can obtain financial freedom before they're too old to enjoy it.

Early retirement is a fantastic goal, but it can be tough to achieve. Three major obstacles stand in your way:

  • You have less time to earn money. If you start working at 20 and retire at 65, you have 45 income-producing years. But if you retire at 45, you only have 25 income-producing years.
  • You spend more time living on your savings. Life expectancy for the average American is nearly 80 years. If you retire at 65, your savings will probably have to last only ten to twenty years; if you retire at 45, your savings may need to support you for thirty or forty years.
  • You don't enjoy traditional retirement benefits. If you retire young, you can't access Social Security or Medicare for several years — or decades. You also face penalties if you choose to access your retirement accounts before you reaching minimum age requirements. (I'm experiencing issues with this gap already!)

In short, early retirees have less time to make money, and that money has to last them longer. Even if you stay healthy and the economy cooperates, that's asking a lot.

That's not to say you shouldn't plan to retire early — it's a laudable goal, one that I encourage here at Get Rich Slowly — but if you're serious about doing so, you need to be diligent. You need to have a plan. And you need to understand the numbers.

Let's take a look at the basics of how to retire early — and why you might want to do so.

How to retire early

Why Retire Early?

Before we dive deep into the numbers, let's get a little philosophical. Why would somebody want to retire early in the first place?

Honestly, the reasons people pursue this goal are many and varied. The answers are as individual as we are. However, I've noticed some common themes.

Reading the financial independence forum on Reddit, you might think that most people want to retire early because they're trying to escape from something. They hate their jobs. They hate where they live. They hate their lives. And yes, there are plenty of people who are hoping early retirement will solve their problems. (Hot tip: It won't.)

I believe people are much more successful (and happier) if instead of running from something, they run toward a goal instead. In the case of early retirement, that means being motivated by a carrot instead of a stick.

Don't chase financial independence because you want out of a bad job. Chase it because you want to obtain something worthwhile. Here are a few of the many reasons people reach toward early retirement:

  • Fun. Traditionally, people have wanted to retire early so that they can enjoy life. They think they'll play golf or tennis. They think they'll buy a beach house and go fishing every day. They think they'll do whatever they want, whenever they want. (Fun can absolutely be a big part of early retirement, but most successful early retirees find they want more out of life.)

John Little and Prime Time

  • Freedom. If you're able to retire early, you have the freedom to pursue other passions. You can travel. You can volunteer. You can spend time with your family. You can even find work you were meant to instead of work you have to do. (Some folks argue that if you're working at all, you're not retired. They're wrong.)
  • Fulfillment. Many people — and I'm one of them — choose to retire early so that they can turn their attention to more fulfilling endeavors. What this means differs with each person. For some, fulfillment comes from being able to watch their children grow. For others, it comes from starting a business. And still others discover meaning in writing books, teaching classes, hiking across the country, and so on.

The bottom line is that the “why” doesn't really matter — as long as you have one. From what I've seen, you'll probably be happier (and more successful) if you're working toward something rather than trying to escape something. But even escape can be a valid reason to retire early.

The Extraordinary Power of Saving

Here's the fundamental thing you need to know about early retirement: The more you save, the sooner you can retire. Obvious, right? Maybe so, but just because it's obvious doesn't mean it's easy.

If you want to build wealth, it pays to earn more moneyMost financial advisers urge their clients to save around ten percent of their income for retirement. Bold advisers recommend saving as much as twenty percent. These numbers are safe. They'll get you to retirement at age 65 without making many sacrifices along the way. The downside, however, is that by saving only ten or twenty percent of your income, you're tacitly agreeing to spend forty or fifty years “working for the man”.

A growing number of people have realized that they don't want to work for fifty years. They want to trade the commute, the co-workers, and the hassle for something more meaningful. These folks have crunched the numbers and seen that if they're able to increase their saving rate, they can retire sooner.

Consider the following shockingly simple math:

  • With a 10% saving rate, you'll need to work 50 years before you've saved enough to retire. (If you start working at 21, you can be done by the time you're 71.)
  • With a 20% saving rate, you'll need to work 37 years before you've saved enough to retire. (If you start working at 21, you can be done by the time you're 58.)
  • With a 35% saving rate, you'll need to work 25 years before you've saved enough to retire. (If you start working at 21, you can be done by the time you're 46.)
  • With a 50% saving rate — if you save half of everything you earn — you'll only need to work for 17 years before you've saved enough to retire. (If you save half your income from age 21, you can retire by the time you're 38.)
  • If you're able to achieve a mind-boggling 70% saving rate — I know people who have done this! — you'll have enough saved to retire in less than nine years. (If you managed to do this from age 21, you could retire by 30.)

I'll be honest: I used to think numbers like this were crazy. I could barely save fifty bucks a month. How was I going to save half my income?

In the twelve years that I've been writing about money, I've come to understand that high saving rates aren't crazy — they're just rare. Over the years, I've talked with many people who purposefully seek high-paying jobs, find ways to slash costs, or (most often) do both. There are plenty of people who choose to forego the modern American lifestyle in order to achieve something more important.

My ex-wife, for instance, has always been a super saver, and is currently setting aside more than one-third of her income. She's not a tech bro. She started her career as a schoolteacher, and now she's a forensic chemist. She'll retire in a few years at age 52. I know another fellow who set a goal to retire by 40 — and did so. And I've met a few dedicated souls who saved so much so quickly that they achieved financial independence by the time they turned thirty.

For more early retirement stories, check out this Life magazine article from 1957 about what early retirement was like sixty years ago.

How to Save Half Your Income

According to the 2016 edition of the Retirement Confident Survey, 22% of workers save one-fifth of their household income for retirement. Four percent of workers save at least half their income.

If you believed the doom and gloom in the mass media, you'd think saving half your income was impossible. It's not. You probably know a dual-income couple who saves half what they earn (or close to it) by socking away one partner's paycheck. They live on one income and save the other for the future.

When I was younger, for instance, two of my close friends got married. He worked as an accountant; she taught grade school. From the start, they lived on only his paycheck. This put them in an excellent financial position when they decided to have a family. She was able to quit to become a full-time mother. Meanwhile, their spending was already comfortably within the husbands income.

If you'd like to boost your saving rate — whether it's to retire early or to obtain any other financial goal — I recommend a two-pronged attack.

First, minimize spending. Two expenses consume half of the average American budget. Pursue these first (and with greatest vigor).

The number one way to cut costs is to pay less for housing. The average American spends one-third of her budget on a place to live. But, as you've probably noticed, average Americans don't retire early. I urge folks to spend no more than 25% of their income on housing — and less is better. Choose a home in an area with a low cost of living.

Numbeo cost-of-living calculator

Reject the advice to “buy as much home as you can afford”. Buy as little as you need. Take out a small mortgage at a low interest rate. Repay it as quickly as possible. Lastly, don't be afraid to rent. Despite what you've heard, renting is not throwing your money away. Often it's a smart move!
Transportation is the second-largest expense for the average American. The more you can reduce your use of motor vehicles, the more money you'll save. Choose to live in a walkable neighborhood. (Before moving to our current house, I walked for 80% of my errands, which provided added health benefits.) If possible, bike to work. Use public transportation. Reject the notion that your car is a status symbol. When you buy, choose a fuel-efficient used model and drive it until it's dead.

Cutting costs on housing and transportation will have as much impact as everything else you do combined. Big wins are the cornerstone of financial freedom. Yes, it's great to clip coupons, to grow a vegetable garden, to shop at thrift stores, and so on. But recognize that these actions net you pennies at a time while tackling the two biggest items in your budget could yield hundreds (or thousands!) of dollars in one blow.

Many folks frown on this sort of frugality. They view it as sacrifice. They feel like they're depriving themselves. I disagree. Saving is not sacrifice. When I save for retirement, that money is still spent. But I'm choosing to spend it on freedom tomorrow instead of fun today.

The second piece of our two-pronged attack is perhaps most important: Maximize your income. It's great to cut expenses and develop thrifty habits, but there's only so much fat you can trim from your budget. In theory, there's no limit to how much you can earn. If you want to retire early, you'll probably want to make more money.

  • Your job is your most important asset. Treat it as such. Negotiate your salary, learn new skills, connect with colleagues, and actively manage your career.
  • Become better educated. In the U.S., education has a greater impact on lifetime earnings than any other demographic factor. Your age, race, gender, and location all influence what you earn, but nothing matters more than what you know.
  • Sell your stuff. It’ll improve both your mental and financial health.
  • Start a side gig. Make money from your hobby. Take a second job.

To be blunt, most people who read this article won't do any of these things. They won't look for a cheaper place to live, won't find ways to drive less, won't increase their income. They want easy, painless shortcuts, and that's fine. But they can't expect to have their cake and eat it too.

There are no easy, painless shortcuts to early retirement. If you want to quit working before you're old, you must boost your saving rate. There are only two ways to do that: earn more or spend less. That's the basic rule of personal finance.

However, a handful of readers will heed my advice. Maybe one of them is you!

You'll make some big changes to create a high saving rate. You'll learn how to invest wisely. You'll build a wealth snowball that grows faster and faster as you add to it, one that also gains momentum through compounding.

What about debt? If you follow this roadmap, you don't have to worry about it. Even if you start the journey owing money on college loans or credit cards, that debt will disappear. Debt reduction is a side effect of boosting your saving rate.

How to Retire Early

The Crossover PointAt some point, your wealth snowball will be so large that it can last the rest of your life. You’ll never have to work for money again unless you choose to. At this crossover point, your investment returns produce more than you spend.

Realistically speaking, it's important to have a margin of safety. To that end, I make the following assumptions when I calculate whether somebody is ready to retire:

  • You'll spend as much in the future as you do now. (About 38% of people spend more, 21% spend less, and 38% spend the same.)
  • If you withdraw about 4% from your savings each year, your wealth snowball will maintain its value against inflation. During market downturns, you might need to withdraw as little as 3%. During flush times, you might allow yourself 5%. But around 4% is generally safe.

Based on these assumptions, there's a quick way to check whether early retirement is within your reach.

Multiply your current annual expenses by 25. If the result is less than your savings, you've achieved financial independence — you can retire early. If the product is greater than your savings, you still have work to do. (If you're conservative and/or have low risk tolerance, multiply your annual expenses by 30. If you’re aggressive and/or willing to take on greater risk, multiply by 20.)

The numbers behind early retirement really are this basic. But, as I said earlier, just because the math is simple doesn't mean the goal is easy to reach. Smart money management is more about mastering your personal psychology and emotions than it is about undestanding a couple of formulas.

To build your wealth snowball, you need to learn to live by your values rather than the values of your friends and family. (Or, worse, the values portrayed in the media.) You need to decide what's important for you. If you remain focused on why you're choosing to live on less, the “how” becomes easier to see. (Here's how to write a personal mission statement.)

Yes, you can achieve early retirement. Others have done it, and you can too. The question is: What are you willing to do in order to reach that goal?

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dh
dh
1 year ago

I’ve read that FIRE should be changed to FIWYAOED (Financial Independence Working Your Ass Off Every Day), as that seems to be the reality for many FI people. This isn’t a bad thing, of course, as early retirement often times means an early death, alcoholism (or other bad addictions), depression, insane boredom. I think the main reason FIRE has caught on so much is because there was finally a new step to achieve and promote beyond Dave Ramsey’s classic baby steps: Baby Step 1 – $1,000 to start an Emergency Fund Baby Step 2 – Pay off all debt using… Read more »

dh
dh
1 year ago
Reply to  dh

In other words, the more you work on your “passion,” the more it just seems like any other job. I’m sure some of you have noticed this. 😉

IN
IN
1 year ago
Reply to  dh

I used a rough version of the baby steps after college and WOW, it really helped me get my life straightened out. The plan took longer than expected but I managed to knock out over $250,000 in debt over a 7 year period. If the was a debt a person could have, you name it, I had that debt. No more! No debts in almost 4 years with no plans to take on new debt by paying CASH for everything.

Two Lost Americans
Two Lost Americans
1 year ago
Reply to  dh

I agree. FIRE is just a cool new acronym for common sense strategies that have been around for ages. My partner and I did a version of FIRE that allowed us to travel around the world for two years.

We wrote about it here: https://www.twolostamericans.com/real-life-steps-to-financial-independence/

We’re still not truly retired, as we work remotely, but changing our spending habits has helped us to lead lives that are more in balance and definitely happier.

Adesh
Adesh
1 year ago
Reply to  dh

Yes, those are nice steps by Dave Ramsey for the average old guy (or trump supporter – those donald supporters really love this guy I hear) whose habits are so ingrained, they can’t handle the idea of FIRE, but several of Dave’s steps are wrong or in the wrong order for FIRE, and you got some stuff backwards if you want to compare to FIRE. FIRE is not the last step of that list, the ‘killing themselves early’ part is wrong, and the ‘going back to work’ part for a ‘passion that is not their passion’ is not correct. Please… Read more »

Okay.....
Okay.....
1 year ago
Reply to  Adesh

Have you looked at the cost of college today? Even taking inflation into account, the costs of skyrocketed. The only way to put yourself through college today is to have a full time job and go part time, which people do. Parents pretty much have to help their kids through college in order to give the kids a decent financial start in their adulthood. I know too many people in their 20’s and 30’s, who thought the way you do and those people are either living with their parents, stuck paying off student loans way larger than any I ever… Read more »

IN
IN
1 year ago

Unfortunately I know of hardly anyone that saves 35% or 50%. For most, 10% is even a big stretch. Then again they are the ones that tell me about their great vacations in Vegas and tropical places then complain about how long it will take to pay for the vacation that was put on the CC. Also the same ones that make CC payments in June for things they bought at X-mas

Travis
Travis
1 year ago
Reply to  IN

I currently save 55%, nice to meet you.

IN
IN
1 year ago
Reply to  Travis

Awesome Travis. That is great. I was just referring to what I see around me and that is that most people save very little to none at all. I am not just referring to people that make $20k a year but people that make over $200k a year. They have almost every toy imaginable and take crazy vacations but still barely have two wooden nickels to rub together.

Adesh
Adesh
1 year ago
Reply to  IN

Yes, most people are like what you describe. So the FIRE movement is to wake people up and help them move toward finding true happiness, and not fall into the same mistakes everyone else is doing. The younger generations, the same millennials that the older generation loves to criticize because they aren’t behaving like the older generation, are really catching on to this stuff – probably because they grew up watching the older generation do exactly what you just describe you see and witnessed first hand their miserable, fake, stressed out lives, having nothing to show when retirement comes –… Read more »

Steve
Steve
1 year ago
Reply to  IN

The last few years I’ve been saving 40-50% of my after tax income. I’m not making $200,000; I make about $100,000, which I know is still a lot for most people. As a senior level programmer it’s about average. Now I can retire a few years early, but not at 40 or 50. But, if you’re working a lower pay job it’s going to be hard to save anything.

saverguy
saverguy
1 year ago
Reply to  IN

>Unfortunately I know of hardly anyone that saves 35% or 50%.

My household saving rate is well over 50% post tax. Lots of us do this. It’s just our some of us have horrible families with horrible financial planning. While I have no problems telling relatives “No” if they ask for money I just don’t want to deal with it.

What do I gain by advertising I have high savings rates? Nothing. So a lot of us just don’t talk about it.

Regina
Regina
1 year ago

This is well written article and inspirational. I managed to retire at 47, this year, and I did it by saving almost 35% over the years from working at a job. Used public trasport, renting out rooms, home cooking etc. The percentages and formulas you state in your article are spot on for me although I live in the Middle East (UAE). I have a paid up home and infact had some surplus which I used to buy a small running business. I do not intend to dip into my retirement savings until after a decade (allowing it grow) and… Read more »

Joe
Joe
1 year ago

Retiring early at 38 from a job I didn’t like worked out very well for me. I became a SAHD/blogger and life has been great over the last 6 years. I think running from a bad situation is perfectly valid. Once you’re out, you’ll have time to figure out what to do next. You don’t need to have everything set up for the next phase in your life, you just need to know that you need to find something after retirement. Traveling and having fun isn’t enough for a fulfilling life. Anyway, this is a good comprehensive post. Early retirement… Read more »

Biff Hooper
Biff Hooper
1 year ago
Reply to  Joe

Thanks Joe for your comment. I am about 20 years behind your RE stage, and heading for “early” retirement next summer at age 58. I definitely agree that we don’t have to have it all figured out what we are planning to “Retire to…” before taking the plunge. For me, I also know that I am, against the standard guidance, “retiring from” a hated job, one that I think has over occupied my waking and resting thoughts for too many years, to the exclusion of all else, and I cannot say what I am retiring to. I think the expected… Read more »

Katelyn
Katelyn
1 year ago

From my experience, the more “walkable” a neighborhood is, the higher the cost of living. It *kinda* seems like you’re advising us to exchange one expense for another. I live in a “reasonably priced” Seattle neighborhood (as reasonably priced as Seattle neighborhoods go, that is) with a walk score of 99. I bus commute to work and run most of my errands on foot. However, I actually think I would have come out ahead if I lived in a suburb and had to drive everywhere. I don’t think the transportation costs I’ve saved come anywhere close to covering the elevated… Read more »

JC Webber III
JC Webber III
1 year ago

Achieving 25 x expenses in savings is NOT the 4% rule unless those savings are invested in at least a 60/40 asset allocation. Just saying…

If it is all saved in CDs or bonds, you will not maintain a robust enough portfolio for the 4% rule to work for you, statistically.

Ken
Ken
1 year ago
Reply to  JC Webber III

You are talking about long term investments here, a 60/40 asset allocation is a way to guarantee you will make below market average returns. Investing in all dividend paying equities in quality companies allows you to take out 3 to 4 percent in dividends annually while your underlying equities grow faster than any reasonable risk bond. A few simple rules work well: Positive and growing free cash flow, 10 year plus history of paying dividends and growing those dividends, relatively large cap., decent management who respect shareholders and customers, a balanced portfolio of 10 to 25 companies so you can… Read more »

Brandon
Brandon
1 year ago

Great roundup of articles and advice from the last few years. There’s so much being published in the echo chamber these days that it’s refreshing to read something that gets “back to the basics” of FI.

Jack
Jack
1 year ago

I get a kick out of folks wanting to retire early. I am 76 and a retired MD. I had more than 7 figures in our retirement accounts by the time I was 40. I had a wife and 4 kids also. A beautiful home in a lovely area, 2 nice cars, a summer cottage on a lake 2 hours from our home with a ski-boat, jet ski, 2 canoes and 2kayaks. It always had a full larder as well. It was the “go to” place for all the kids and friends well into college and even after. As a… Read more »

Ted S
Ted S
1 year ago
Reply to  Jack

^This guy^
Jack gave me a wake up smack I needed.

Overly self centered and seeking the good life through fantasy and detachment. Maybe there is a way to make what you have work in a more meaningful way. S

Doug
Doug
1 year ago

I was one of those: I saved half of my income. I lived alone or rented out an extra room. Had no telephone until age 25. Bought my first house at 19, by working THREE jobs (lab tech, gas station, union musician). No girlfriends. No college debt. Beat-up cars (usually a Volvo). Changed my own oil, brakes, clutches, carbs, exhaust. Maxed out IRA and 401(k) when it became available later. Didn’t need a hobby – too busy making money. Paid off my second house at age 33. Bought another – and another – and … wound up with a bunch… Read more »

Molly
Molly
1 year ago

Great article. I just wish it could apply to a school teacher living in Silicon Valley. It is so sad to teach all the affluent children of tech-rich families and not be appreciated with a proper income to afford to live. Forget about retirement. I’ll have to move somewhere very, very cheap. Our country should start appreciating the jobs people do because they care about people. Education is one of the most important gifts people can give. I am rewarded with this pride everyday in the students. The reality though is that most teachers cannot reach the “American Dream” of… Read more »

Matt
Matt
1 year ago
Reply to  Molly

So why not take action to change your situation?

Ted
Ted
1 year ago

Why is it all of these that are “retired” early are out blogging and doing side-hustles? YOU ARE NOT RETIRED, just self-employed running your own business. You all sound like the stick market advisers that are trying to tell us how to invest. If you really could read the market and knew how to invest you wouldn’t be telling anyone, you would be living on your yacht with the millions you had made.

Bryan
Bryan
1 year ago
Reply to  J.D. Roth

Well said JD. Most people I’ve met with planes and yachts are bored as hell, and gripe about how little time they spend on them. There is a surprising number of multi millionaires giving all of their money away, and keeping only what is essential to live. Why? Because they realized it didn’t make them happy being on a yacht. Great post.

Ross Williams
Ross Williams
1 year ago
Reply to  Bryan

“In 1952, with $13,000 in savings [$119,000 today], he quit, got married, and bought an orange grove near Phoenix. He remodeled a house, built five rentable apartments, tennis courts, and a swimming pool and settled into the family life he wanted to lead, teaching youngsters how to swim and play tennis and improving his property. He had special qualifications that pulled him past the critical point where many who try retirement give up and return to the beaten track. He was an expert do-it-yourselfer and a qualified athletic instructor. Still, he found decompression from high-pressure life hard to take. “I’d… Read more »

Wes
Wes
1 year ago

Jack, you are absolutely right. I retired at 65 and did not have to work for financial reasons. I was then asked by my former employer to return full time after one and a half years. I am energized to be back, train the next generation, and pass along decades of knowledge in my field. My family sees the positive change. It is better to be able to contribute to society and be in a position to help one’s family, than to worry about being a burden to them in one’s old age, if the calculation does not work out.… Read more »

Jack
Jack
1 year ago
Reply to  Wes

Thank you! I am right. I would have failed all of my mentors, all of my professors, all of my colleagues, all of my patients, and most of all, myself. I chose this field to help. God gave me a brain to use, not to collect rental receipts, watch the stock market, and travel.
I would have been deeply ashamed to have chosen FIRE as my goal and lifestyle.
BTW, at 77 my health is fine. I asked MY physician how I could live to “a ripe old age?” He said, “Don’t smoke and wear your seatbelt”. Done!

Jack
Jack
1 year ago
Reply to  Jack

My wife said my mind is slipping. I am only 76, not 77 (3 weeks to go).
Good thing I retired. LOL

jg
jg
1 year ago

This only works because few people do it. If everyone took this advice and tried it would crash the economy. Even a 1-2% uptick in savings and less application for credit wreaked havoc on our economy just a few years back. If every baby boomer had done this, well, they couldn’t have. There’s not enough money for all of them to save up a million dollars. If people stopped spending frivolously across the board then the sources of income would dry up, companies would close, pay would be cut etc. The only reason some people are able to do this… Read more »

JD
JD
1 year ago

This is one of the most ignorant post I have seen in a while! I am a social worker in Baltimore – I consider myself lucky and privileged that I have a roof over my head and the ability to save. Saving is a privilege, that no matter how many “expenses” someone cuts – isn’t feasible for everyone. Period. Post like these should come with a note that at least recognizes this disparity, followed up with links to resources for help (Gas and bill assistance, food banks, and shelters). Post like these also come off “preachy” – as if everyone… Read more »

JanBo
JanBo
1 year ago
Reply to  J.D. Roth

JD#1- do you even know JDRoth’s story? Here is another one—My husband grew up extremely poor. His parents grew their own food/3 kids in 750sq feet- poor. His grandparents were poor (lived in the railroad station where “mom” ran the window and “dad” fixed tracks.) My husband started delivered newspapers in the frozen mornings at 10 and working in potato fields at 12. My husband did not get a good primary or secondary education. Instead his mother supplied them with used encyclopedias and made them do extra at the table with her. He lived in the horrid side of town.… Read more »

Jared
Jared
1 year ago

I have 5 kids, and we started our family early (I was 24 when our first twins were born). We managed to save between 5-10% for earliest years of our marriage, thanks to 2nd-hand clothing sales, but we believe there’s an important balance between going ‘bare bones’ expenses and enjoying the time I have while my kids are living at home. Thanks to career and income advances, we save over 20% now, but the early years, we were saving just under 10%. For me, the extra years I will likely end up working due to not saving as aggressively in… Read more »

Suzy
Suzy
1 year ago

What about health insurance? How do you retire early, without the benefit and security of Medicare, and not risk loosing everything to health care?

JanBo
JanBo
1 year ago
Reply to  Suzy

As many of my friends who hit 59 and are given pink slips know–Health care becomes an expensive part of early retirement for many. It needs to be saved for and budgeted in.

Julie
Julie
1 year ago

I’m a CPA and I’ve been advising people for years to live within their means, set aside savings, etc. This all good advice. My only addition to your article is that my second largest expense is not transportation, it is health care. Health insurance alone, without paying a dime towards co-pays, deductibles, etc., is 19% of our expenses. Once I’ve paid for the out of pocket items, I’m closer to 25% of our expenses go to health care. I’d love to hear how people are cutting their health care costs while still maintaining health insurance.

Doug K
Doug K
1 year ago
Reply to  Julie

“My only addition to your article is that my second largest expense is not transportation, it is health care. ” a good point.. we saved hard and refinanced our house when rates got low, so #1 expense is health care. I pay $500 per month, my employer pays $1600. That’s $2100 per month for family health coverage, just for insurance. Plus of course the co-pays, a varying and changing percentage of all costs incurred, etc etc. Our FSA is $2400 per year and is usually exhausted by the middle of the year, so figure another $300 per month on payments… Read more »

John O.
John O.
1 year ago

Retired at 49. Federal Pension earning 72% of the average of my final 3 years of service. We “planned for my retirement 10 years out”. Every promotion or cost of living increase was placed in multiple areas of our portfolio (savings 1-2%, 98-99% into investment funds of each increase). We maintained a comfortable lifestyle on 70 percent of my income for years. Never living it up or increasing debt. Now, I choose to work after spending 18 months in full retirement. Save what you can as early as you can, pay yourself first by investing pre-tax monies, 100$ a month… Read more »

CM
CM
1 year ago

Some observations, comments: 1. More people are going to live to 100 than ever before. That means you need more money to make it that long. 2. Are you factoring inflation? On average, the cost of everything has doubled every 20 years since WWII. That means a person who retires today at age 50, then lives to 90 (conservative) will see the cost of everything quadruple by the time they die. How will their assets keep up? 3. What about taxes? If the current state of affairs continues (states making pension promises they cannot keep and the feds running at… Read more »

Cassandra Johnston
Cassandra Johnston
1 year ago

I found this article very inspiring! “Luck favors the prepared” as they say and it’s easier to keep on one’s toes when we don’t *count* on our plan but use it as a guideline and be *honest and *realistic. Being strict and sticking to it is the hard part. That and reforming ones habits and conscious choices. Thank you for sharing your techniques and ideas this info. really got me thinking and taking more seriously practicing comprehensive budgeting.

Doug K
Doug K
1 year ago

“shockingly simple math” The math holds up, but the assumptions are contradictory, and false. That’s usually the problem with math in the real world. From the link, 1. You can earn 5% investment returns after inflation during your saving years 2. You’ll live off of the “4% safe withdrawal rate” after retirement, with some flexibility in your spending during recessions. 3. you want your ‘Stash to last forever, you’ll only be touching the gains. Point 1 was possible for a short period in the late 20th century. It’s not possible now and hasn’t been during my 30 years of saving… Read more »

Steve
Steve
1 year ago

A lot of people would be bored retiring at 40 or 50, but….

If you make enough to retire at 40 or 50 you could spend that free time starting your own business, keep yourself mentally fulfilled, and in a few years probably be pulling down some nice money working for yourself. I never got to that point, but if I get bored in retirement I may give it a try. Some people can turn a retirement hobby into a business and that’s even better.

LinBro
LinBro
1 year ago

I retired at 60 (not too early, I know). I was a school teacher for 27 years in the U.S. so my teacher pension is not high, but I saved in a 403 (b) too. One perk from teaching is that my healthcare is covered until Medicare kicks in. I have horses and board is expensive so I moved from California to Oregon. I sold a pricey CA home for an inexpensive OR horse property with no mortgage and no horse boarding fees. To those who say it is better to rent, I would ask them how much equity they… Read more »

Sam
Sam
1 year ago

Thanks for the advice. I saved from a pension that I did not know I had from a large company so I withdrew it and invested in my own IRA and also received a huge amount from inheritance. I own three homes, and will be completely debt free this coming April, 2019. I am retiring and working at my home business. So So Excited.

Tina
Tina
1 year ago

I didn’t read every single comment, but of those I read, no one mentioned the cost of healthcare (nor did the author). At age 58, I’ve dropped to part-time work for the first time since college graduation, and I’m loving it. I’d like nothing more than to continue to work less than 5 days/week. However, our reality is this: at ages 58 and 62, open market insurance (residing in Michigan) premiums could be $21,600 for my husband and me, with a $13,400 deductible. If we make less than $65,000 (as a consultant and a farmer our income is unpredictable), our… Read more »

M.
M.
1 year ago

I’m 24 and looking in to what it will take for early retirement mostly because of medical reasons. Chronic illnesses makes it hard to work 40 hours, and when I was doing 60-80 hours I nearly died. I looked into SSDI, but you’re never allowed to have more than 2,000 dollars on hand in cash or assets, which seems more detrimental than the payments are helpful. I’m moving in with a group of friends, so at least three people bringing in income and two more to help care for the house, and I’ve been looking into mutual funds and various… Read more »

Alan
Alan
1 year ago

I early-retired at 50 involuntarily when my entire section of the Canadian federal civil service closed — they closed all 65 weather offices in Canada. I ended up on a 52 percent pension instead of the 70 percent one expects. But the pension is indexed and I paid extra deductions for that indexing. And, of course, the inflation rate during my 22 years of retirement has been much lower than was expected when they set the deduction rate for that inflation indexing. I loved my job. But we left an expensive, very cold, polluted, northern industrial city that my wife… Read more »

TP
TP
1 year ago

Several thoughts: Why do so many people assume they’d be bored if not for work? I have many interests and hobbies, and I have many plans for my early retirement! Since I’m only a few years away, I’ve already put some of them into place. I may choose to work seasonally (for example, I’m interested in being a summer tour guide at a national park — or I may consult in my current field), but I won’t HAVE TO work for money again. Personally, I’ve been saving for 26 years, and my pension + interest from savings will be almost… Read more »

CJ
CJ
1 year ago

I love this blog! Thank for for making me feel not weird! 🙂

edwin
edwin
1 year ago

We are not counting here the most important thing..luck…somepeople have it ..others not. ..let’s go back to 2010 ..you loose your job, loose your 401k, the bank foreclouse your almost paid home..and you end up renting a small apt. with your family and working at waltmart a part time….CAn you tell me how to save 15% ? ….we did not get a bail out like the big ones….luck my friend..you are just one of the lucky ones and should be grateful that the recession did not hurt you. .. What i would like is for you to tell me specifically… Read more »

Rudy Ferguson
Rudy Ferguson
1 year ago

Why not just join the military?? Twenty year retirement. Done. No brainer. And actually do something meaningful instead of fixing someone’s computer.

Cheryl
Cheryl
1 year ago

I don’t look at FIRE as early retirement but achieving financial independence so you can pursue “ikigai”.

ikigai: A combination of the Japanese words ‘iki’, which translates to ‘life,’ and ‘gai’, which is used to describe value or worth. Ikigai is all about finding joy in life through purpose. In other words, your ikigai is what gets you up every morning and keeps you going.

Tough to make a catch acronym out of that, though! maybe FIIG? 😉

Terry Critchley
Terry Critchley
1 year ago

Retirement is a featureless ocean of time with only one destination. Don’t do it. Die with your boots on. Retirement is the ultimate state of idleness (wall to wall holidays/vacations don’t count).

Ross Williams
Ross Williams
1 year ago

If we accept the idea of “psychological retirement” then early retirement is easy. You just decide you are retired. But for most people retirement means freedom from earning a living. For those people, early retirement means accepting a less expensive lifestyle than they would have had if they retired later. There is really no way around this, work longer, delay spending your savings and you will have more to spend. That is what really makes that “shockingly simple math” work. If you can live on 30% of what you are earning then in nine years if you save all the… Read more »

Daniel
Daniel
1 year ago

JD, quick question if you are still reading. I’m curious about your comment to repay your mortgage as quickly as possible. My wife and I have been on this journey for a few years (yay, over 50% of the the way there!), but we’ve gone for a 30 year, low interest mortgage, and thought that that way we could keep more cash in the market. Your thinking seems to be different on this, could you expand a little?

Financial Q
Financial Q
2 months ago

Whats the trade off? You work your hardest and waste your youth away? There has to be a balance right? You can not do a lot of the things you want to do when you are 50 years old or even 40 years old. Youth is limited and only happens once. Whats the point of having money if you have nowhere to spend it?

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