Early Retirement Isn’t Out of Reach

For many people, the idea of exiting the workforce permanently and retiring seems like such a far away goal.  Imagine what they think about not just retiring but retiring early.

Leaving your job while still in your 50s sounds like something reserved only for the wealthy but increasingly we’re seeing individuals all across the wealth spectrum deciding to call it a career.  The one thing these folks have in common is that they’re willing to forgo some of the luxuries now in order to reap the benefits later.  Early retirement isn’t as out of reach as it may sound but it does require time, careful planning and, yes, sacrifice.


The other thing that it requires is money.  Typically, an individual has about a 40 year working career in order to accumulate enough money for retirement to carry them through roughly another 25 years after stop working.  Those who set out to retire early will need to squeeze all that saving into a shorter time frame and make it stretch out longer.  Early retirees may work only 30 years and need to stretch it out over 35 years or longer.  Saving more than the typical investor will be vitally important to even considering early retirement.

It’s estimated that if you wish to retire early (let’s say you want to retire at age 55 instead of 65), your savings rate will need to be about 50% greater than if you were to retire at the typical retirement age.  This also assumes that you’re starting in your mid 20s.  If you’re already a few years or more past your mid 20s, your savings rate will need to be that much greater to make up for the lost savings opportunities.  Again, it’s not insurmountable but it does carry an extra challenge.

That is unless you plan on cutting your spending in retirement.  Being able to balance your retirement budget requires considering both your saving and spending.  If you plan on travelling the world and dining out at fancy restaurants, you’ll need a bigger nest egg to fund these things.  Conversely though, if you don’t plan on moving to a warm weather climate or upgrading your house or lifestyle, you may be able to get away with saving less.  Here’s where a real honest assessment of what you want is helpful because the last thing you want is to say that you can live on less just to talk yourself into being able to retire early only to find that you don’t have the money to do what you really want.

Not retiring completely may be an option for you as well.  Millions of retirees have found that maintaining part time employment in their golden years not only helps pay some of those bills but it also fills a very important need for activity and sociability.  Many don’t realize that those hours that used to be spent at the office need to be spent on something else and doing something you enjoy can help fill that void.

Retiring while you’re still relatively young doesn’t have to be something that only other people can do.  You can too.  It just takes some extra planning and commitment to what will likely be some more aggressive saving and sacrificing.  However if you’re up for the challenge, the rewards can be great.

Photo credit: mikebaird

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Author Info

This post was written by David Dierking. David lives outside Milwaukee, Wisconsin and has been working in the financial services industry for over 13 years with a background in investments, accounting, and marketing. He earned his Chartered Financial Analyst designation from the CFA Institute in 2004 and was recently published in the Milwaukee Business Journal. You can also check him out at The Ultimate Fit Challenge

2 Responses to “Early Retirement Isn’t Out of Reach”

  1. tmgbooks.com |  Jan 28, 2011 at 10:05 am

    Two points:

    The concept of “saving for retirement” is outdated: One should never save for retirement.

    Instead, one should save to achieve “financial independence.”

    If you think about, “retirement” is something that people of a certain age do; financial independence can be achieved at any age.

    It is not financially prudent to be dependent on earned income any longer than is absolutely necessary.

    Second point: If you are working and drawing a pension, you are not “retired.”

    And although there is such a thing as “early” retirement, those who achieve financial independence before the traditional age of retirement, will almost never “retire.”

    Instead, they will change the way they work, usually shifting to part-time work–but they will not “retire.”

    It takes a tremendous amount of self-motivation and self-discipline to achieve a goal like financial independence and it will be those same traits that will drive a person to keep working even when there is no financial need to do so.

  2. Virtual office assistant |  Jan 29, 2011 at 12:27 am

    Hi David,

    I actually second the first comment. We should save for financial independence not for the retired life. I feel there is no retired life and we should look life in a different way after certain age limit thats all.