How to Retire Early

By Last Updated: June 15, 2023
retire early

How to Retire Early

Imagine being so financially independent that you can work only because you want to or even retire early. The reality is that less than 1% of Americans are able to retire before age 50 and around 25% don’t have any retirement savings. To make things worse, 50% of Americans over 65 have annual incomes lower than $25,000. America is one of the wealthiest nations and offers the most opportunity in the world; so, if there is a way to retire early, Americans should be able to achieve it. Retiring early takes planning and dedication. Dave Ramsey has a saying, “you have to live like no one else today, so you can live like no one else tomorrow.” There are no easy steps for retiring early, but you can create a path toward this goal and start working on it today.

Live Debt Free

Retirement at any age comes down to cash flow. If you reduce the amount going out of your bank account, you can live on less coming in. Credit cards, personal loans, car notes and mortgages must be gone by the time you are finished working. A debt elimination plan is the best way to start a path to financial success. Take a look at your budget, especially your recurring expenses and decide what can be paid off or eliminated the quickest.

Live Beneath Your Means

The fastest way out of debt and toward building savings is to live below your income level. This is easier said than done in our materialistic world. Large mortgages, car loans and living expenses will detract from your ability to save for an early retirement. Driving an older model car that is paid off and living in a smaller house are some way that will allow you to save for your future self. Frugality can be hard work, but discipline will help you build wealth for an early retirement.

Plan with an Advisor

Once you eliminate debt and live beneath your means, wealth building can begin. Building wealth starts with a plan. Let’s say you are 25 years old and want to retire at age 50 and live on $50,000 a year. Not counting social security, a pension or any passive income, you need to accumulate $1,250,000 to generate $50,000 a year at a 4% withdrawal rate. To get to the $1.25 million portfolio (assuming a 6% growth rate over 25 years), you need to save $22,783 a year. This might be doable by maxing out a 401k plan at $19,500 a year, plus saving outside the plan or if your employer does a 401k match. It is also important to include a financial advisor in this process. An advisor can help you include inflation, social security, pensions, rental income and other passive income in an early retirement calculation. You should also prepare a retirement budget to know what amount you need to save.

Retiring at 50 or even age 55 is possible, you just have to be disciplined. Focus on the future by saving for tomorrow and your future self. Working with a financial planner can help you make your dream a reality. Give us a call or book an appointment today if you are interested in assistance with developing a financial plan.

Casey T. Smith

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