by Have you ever sat in a team meeting, listening to colleagues discuss retirement, and felt a spark of possibility? That’s exactly what happened to me recently. As my coworkers debated the merits of traditional retirement, I found myself silently contemplating a different path—one that leads to financial independence and early retirement.
The Early Retirement Mindset
Early retirement isn’t about sitting on a porch and watching the world go by. It’s about freedom, purpose, and living life on your own terms. It’s a chance to reinvent yourself, pursue passions, and create a lifestyle that truly resonates with your values. More importantly, it’s about building what we like to call “FU money”—a cushion that gives you the power to say “no” to situations that don’t align with your goals and “yes” to opportunities that excite you.
When my wife and I embarked on our early retirement journey in 2012, we weren’t looking to escape work entirely. We were seeking the ability to choose how we spend our time, free from the constraints of a 9-to-5 job. By 2017, we achieved financial independence, and we’re on track to leave the corporate world behind in 2019.
Our 7-Step Blueprint to Early Retirement
Based on our experience, we’ve developed a 7-step plan that can help you achieve early retirement too. Here’s how we’re making it happen:
- Craft Your Ideal Retirement Plan: Forget societal expectations. What does your perfect day look like? For us, it involves swimming, long beach walks, attending concerts, and building community relationships. Your plan should be uniquely yours. This step is crucial because it gives you a clear target to aim for and motivates you during the tough times.
- Calculate Your Financial Independence (FI) Number: We use the 25x rule: multiply your estimated annual expenses by 25. This gives you a target for your investment portfolio. Our average savings rate of 65% helped us reach our number in just three years after marriage. To calculate this accurately, start by meticulously tracking your current spending. We use Mint, but any consistent system will do. Remember, your future expenses may differ from your current ones, so project thoughtfully.
- Cut Spending: Focus on reducing costs in housing, food, and transportation. We downsized to one car and moved closer to work, significantly lowering our expenses. Consider creative solutions like house hacking—we know people who’ve lived for free by renting out parts of their homes. Every dollar you don’t spend is a dollar closer to freedom.
- Eliminate Consumer Debt: We prioritized paying off high-interest debt before investing heavily. It’s a guaranteed return on your money. Think of it this way: paying off a credit card with a 13% interest rate is equivalent to a guaranteed 13% return on investment. That’s hard to beat in the stock market!
- Invest Wisely: Keep it simple with low-cost index funds. We’ve seen our investments grow to make up 23% of our portfolio in ten years. It’s like getting paid for four days when you only worked three! Don’t overlook alternative investments, though. We’ve found success with real estate, owning a rental property that provides a minimum 10% return on investment.
- Minimize Taxes: We max out our 401(k)s and invest in Roth IRAs, saving at least $9,000 in taxes annually. Tax planning is crucial for wealth accumulation. Roth IRAs are particularly powerful for early retirees because you can withdraw contributions (but not earnings) at any time without penalty. This flexibility can be a lifesaver in the early years of retirement.
- Prepare to Retire: As your target date approaches, fine-tune your exit strategy. We’re focusing on our account drawdown strategy and ensuring our asset allocation aligns with our future needs. This step also involves emotional preparation. Quitting a job you’ve worked hard for can be challenging, and you might face skepticism from others. Remember, you’re not just retiring from something; you’re retiring to something—a life of purpose and freedom.
Real-Life Early Retirement Experiences
Throughout this journey, we’ve learned that early retirement isn’t just about the numbers—it’s about creating a life you love. For us, that means the flexibility to explore new places (we’re eyeing Punta Cana as our first early retirement home), the ability to spend quality time with family despite distances, and the freedom to pursue interests like blogging and teaching.
We’ve made mistakes along the way and learned from them. For instance, I bought a house while in debt before we were married. It was a valuable lesson that shaped our future financial decisions. Now, as we approach our early retirement goal, we’re more excited than ever about the possibilities that lie ahead.
It’s inspiring to see how other early retirees are living their dreams. Take Justin from Root of Good, for example. He retired at 33 and now lives in North Carolina with his family. When considering the pros and cons of retiring abroad with children, Justin shared:
“For us, it makes a lot of sense to stay in Raleigh where we know how to navigate the school system and where high-quality schools are free. The cost of living is more than Mexico (a likely overseas retirement destination) yet not high compared to the rest of the US. An added benefit is having all of the kids’ friends here and all of our family here.”
On the other hand, Jeremy from Go Curry Cracker shows how early retirement can facilitate a nomadic lifestyle while maintaining strong family bonds:
“We are an International family at the core, with family spread across two continents. Combined with our nomadic lifestyle, it is impractical to spend a lot of time with all of our family members. So we focus on quality over quantity. … This concentrated quality time provides a strong environment for togetherness and bonding. There are no other responsibilities other than enjoying each other’s company.”
These stories show that early retirement can take many forms, depending on your personal goals and values.
The Emotional Journey
One aspect of early retirement that’s often overlooked is the emotional journey. As your financial independence grows, you might find yourself feeling more confident at work. That project that used to stress you out? It becomes easier to handle when you know you have options.
However, be prepared for pushback. Friends, family, and colleagues might not understand your goals. They might think you’re “crazy” for wanting to leave a successful career. Remember, this is your journey. Stay focused on your why—that vision of freedom and purpose that started you on this path.
Final Thoughts
Remember, early retirement isn’t about escaping life—it’s about having the freedom to fully embrace it. Whether that means traveling the world, starting a passion project, or simply having more time for loved ones, the choice is yours.
Are you ready to start your journey to financial independence and early retirement? What would your ideal retirement look like? Remember, the path isn’t always easy, but the destination—a life lived on your own terms—is worth every sacrifice along the way.
Start tracking your expenses today. Begin dreaming about your ideal life. Take that first step towards financial independence. Your future self will thank you.
Further Reading and Sources
For more inspiration and insights on the journey to financial independence and early retirement, check out these valuable resources:
- Root of Good – Justin’s blog on early retirement and financial independence:
- Go Curry Cracker – Jeremy’s blog on traveling the world in early retirement:
- Your Money or Your Life by Vicki Robin and Joe Dominguez – A foundational book on financial independence:
- Mr. Money Mustache – One of the pioneers of the FIRE movement:
- ChooseFI – A podcast and website dedicated to financial independence:
Remember, everyone’s path to financial independence and early retirement is unique. Use these resources as inspiration, but always tailor the advice to your own situation and goals.
