Is it Really Possible to Retire Early?

Many people, when they think about early retirement, think that it’s only an option for the ultra rich. I used to think that too, until a friend explained it to me this way.

“Think about it. Let’s say you need $4,000 in gross income per month to be able to retire. All you need to do is to own four rental properties that each net $1,000 a month.”

When my friend put early retirement in such simple terms, it got the wheels in my head spinning big time. I started to think about how early retirement could really be a possibility for Rick and I.

Your Early Retirement Plan

This friend/mentor of mine gave me some other tips for planning a route to early retirement too, and I’m going to share how we used his advice to make a plan – and how you can use his advice to make your own early retirement plan.

Any achievable goal has got to start with a step-by-step game plan to get you from where you are now to where you want to be. This is true with financial goals, fitness goals, relationship goals or any other goal you can think of.

So the first question you need to ask yourself if you want to retire early is:

When do I Want to Retire?

Early retirement means different things to different people. You can retire at 60 and be retired early. The general age of retirement is 65 and you can’t even collect Social Security benefits until 62, which means 60 is officially “early”.

Or maybe you want to retire at 55, 50 or 40. Whichever age you decide, you know that you’ve got the amount of years from your current age to your target early retirement age to work with. So if you’re 40 and want to retire at 50, you’ve got ten years to create and execute your early retirement plan.

Now that you’ve figured out how long you have to work with, you’ve got to create a plan by determining how much money you’ll need and how you’ll get that money.

How Much Money Do I Need for Early Retirement?

The answer to this question depends on a couple of things:

  1. What will your basic expenses be in early retirement?
  2. What kind of extras will you need to provide for in early retirement?

There are many things to consider as you search for answers to these questions. Things like: Will you still have kids to care for financially after you retire? Do you want to travel? Will you lead a simple life or an extravagant life?

Making a post-retirement budget is a great way to figure out how much money you’ll need per month in early retirement. Talk with your spouse if you’re married to make sure you’re on the same page regarding your post-retirement life.

Remember that you’ll be accounting for quite a few years of income needed if you plan on retiring early. Future potential medical expenses and other costs such as replacements for cars, etc. should be considered too as you decide on the appropriate amount of income and savings you’ll need.

Once you get a fairly clear estimate of how much money you’ll need, you need to figure out how you’ll get that money.

How Will I Get Enough Money to Retire Early?

If you read any of the early retirement blogs out there, you’ll find that most successful early retirees get their money from one or more of three different sources:

  • Investing in the stock market
  • Investing in real estate
  • Investing in or owning a business

Although there are other options, these three seem to be the most popular among successful early retirees. Your goal should be to research these three options  thoroughly and work to discover which one or combination of two or more is most suited to your personality, your risk tolerance and your interests.

That research obviously involves a whole lot more work than I could talk about in one article, but my friend and mentor that I mentioned earlier, Deacon Hayes, has just published a new book that outlines everything you need to know to determine the answer to that and other questions you might have about retiring early.

Recommended Reading: You CAN Retire Early: Everything You Need to Achieve Financial Independence When You Want it

I can personally vouch for the book that it really will tell you every single thing you need to know about gaining enough money and income to be able to be financially independent and retire early.

This book has become a financial tool that I refer to often as I look over the goals Rick and I have to obtain financial independence.

Note: As I mentioned there are other ways to amass wealth for financial independence than the three I mentioned above, but do be careful as many of the other ideas you’ll find on the Net and in books are very, very risky.

The three ways mentioned here are tried and true paths to wealth that experts such as Warren Buffett and many others have worked successfully.

Am I Willing to Make the Sacrifices Needed to Achieve Long Term Goals?

This is probably THE most important question you need to ask yourself as you plan a path to financial independence and early retirement.

Most of you will need ten years or longer to make your plan work. Are you ready to give up instant gratification spending for the sake of reaching that goal?

Are you willing to keep your nose to the grindstone day in and day out for ten years or more when those around you are buying new and shiny things and living large on credit?

Recommended Reading: How We Broke the New and Shiny Cycle

It’s not going to be easy. Temptations will come, especially as your income and net worth increase. The more money you amass as you work toward early retirement and financial independence, the more tempted you’ll be to start to coast in terms of saving and spending.

If you really want to retire early, you’re going to need to avoid those temptations like the plague. If you don’t, you won’t reach your goals.

The truth is that retirement isn’t an age, it’s a number. What number? The number of the amount of dollars you need to sustain your lifestyle for an indefinite amount of years.

For instance, if you need – like we will – $4,000 a month in gross income to survive on, and you have an investment account worth $1,000,000 that is earning a 5% return each year, you’ll make enough money to cover expenses and taxes for decades to come.

Now, saving that $1,000,000 or creating a rental property portfolio that earns you $4,000 a month isn’t going to be easy but it can be done.

With the right plan and the willingness to take the steps needed to reach your plan’s goals, you really can retire early.

Have you thought about early retirement? If so, have you made a plan to start reaching your goal? 

11 comments

  1. I think I learned about early retirement a few years ago and have become obsessed with the idea. While I was always a saver, I wasn’t a hardcore saver. Living in a high cost area doesn’t help. Also, not having a goal of early retirement to really push you and motivate you makes it tougher. My wife and I started increasing our retirement contributions and cutting out more fat from our budget. I’ve also recently gotten into real estate investing. Starting a business would be interesting but I don’t know what I could do and it’s hard to start one on the side while also working.

    • Laurie says:

      Hi Andrew!!! Yes, every option for post-retirement income isn’t for every person. Like you, we are leaning more toward real estate. It’s important to find out which options are best for you as an individual.

      As for you, I have no doubts you’ll reach your early retirement goals. 🙂

  2. Kathy says:

    While your friend is right from a pure financial point of view, I have to say that if you own rental property, you are not really retired. Unless you hire a management firm, which obviously eats into your profit, you are on call 24/7/365 when your tenants need a repair. But, yes, it is possible to retire early, if you count age 55 and 53 as early retirement. That was my husband’s and my ages when we retired 12 years ago. We were only able to do so because he had a very nice pension plus…..and this is the big one……he was able to keep his health insurance after retirement. Of course, we still pay our share but being able to keep it meant we didn’t have to work until Medicare kicked in. And because retirement was a priority for us, we made sure our house was paid off and we had zero debt. I know many people are not as fortunate as we were, but early retirement can be done.

    • Laurie says:

      Great advice, Kathy, and huge congrats on getting to retirement so early!! Yes, all of the options definitely have to be considered, and hiring a management firm is a definite “yes” if you don’t want to be involved in the day-to-day operations.

      Smart comments about being totally debt free and having a plan for health insurance too. All important considerations!!

  3. Mrs. Groovy says:

    Lots of great information here, Laurie!

    We can vouch for it being possible, since we did it, albeit at the “older” end of the spectrum. You know what they say about hindsight.

    An incredible way of viewing early retirement as an option is to ask yourself the question — how badly do I want to buy back decades of my life? Then you can figure out what you’re willing to give up for it.

    Also, there’s no universal definition of any part of FIRE — not the FI and not the RE. So all that matters is doing something that works for YOU.

    • Laurie says:

      True, Olivia!! The book talks a lot about that – about overestimating what you will need to account for future potential popups like inflation and health care. So important!

  4. That does make it sound super simple! This isn’t a goal of mine–there are some other things in my life I’m choosing to allot my time to that preclude me from working insane hours to get the income needed to pull this off. But I have mad crazy respect for those who are pursuing it.

    • Laurie says:

      I think the important part is that you’ve discovered your goals and are pursuing them, FF. What those goals are and how you get there should be different for everyone. Good for you for going for it!

Leave a Reply

Your email address will not be published. Required fields are marked *