I hear people talking frequently about early retirement and it got me thinking – just what is early retirement?
Well, let’s start with something not so ambiguous: what the government considers retirement. If we’re taking a look at Social Security, the minimum age you’re eligible for collecting is 62 – albeit with some penalties – with the “proper” age being 66. You’ll get more from Social Security if you hold off on it, with benefits increasing up until you’re 70.
With that in mind, anything before 62 could be considered “early”. But for the sake of dreaming (I don’t want to be working at a regular job in 30 years) let’s think about something a bit more extraordinary.
“Unnaturally Early” Retirement
Many people want to retired in their 30’s or 40’s, travel the world and devote time to things and people they love. For many, this is a pipe-dream at best. They may lack the discipline, lack the means, or have other circumstances come up that just prohibit them from achieving this. But for a few, ditching the rat race while they’re young has already happened. You can read about them everywhere – it’s the basis of a multitude of books and blogs. Some got rich from selling businesses, others from landing incredibly high-paying jobs and diligently saving and investing their money.
After reading story after story, something finally became apparent: many of these “early retirees” I read about still actually work. And, in my opinion, that’s fine. Many of them have what started as side jobs; some run blogs, some are landlords, others run consulting companies. Some are able to just live off of their interest and dividends – though this is much less common in my experience. Ultimately I think the goal for many pursuing an early retirement is not always retirement; it’s independence and freedom to do what you want, when you want. It’s working because you want to work (or not), as opposed to working because you need that pay check.
Decide What’s Right For You
Setting your sights on early retirement is easy to talk about, but when you get down to it, the details take more thought. If you want to pursue early retirement, the first step is to figure out specifically what retirement means to you.
For me, calling it quits on the 9-5 would entail a few things:
- Enough income each month to cover all of our regular expenses – an activity I’d want to keep up for a bit before flipping the switch
- I’m okay working odd jobs, consulting, and running a blog to help keep money coming in
- I’d devote time to a few volunteer projects
- Time and money to travel on a frequent basis
With that in mind, a few things immediately stand out. For starters, minimizing the amount of money we need to spend keeps the barrier to entry low. There are a ton of ways to do this, and as long as we don’t expect some vast increase of lifestyle it’s extremely doable.
Another way is to increase how much money you make. Whether it’s at your regular job or a side hustle (which I’d highly recommend…diversifying income streams is a great way to build wealth and protect yourself from a lay-off or other unfortunate situation), having more money coming in each month lets you not only get to retirement sooner, but helps you sustain your lifestyle more comfortably once you leave your “regular” job. Side-hustles or your own business have the added advantage of having no real upper limit on how much you can make, whereas saving money by cutting expenses gets increasingly more difficult as you cut more stuff, and could diminish your quality of life if you cut too deep.
After all, it all comes down to spending less than you earn and budgeting well. Even if you’re rich – especially if you’re rich – budgeting should be a MUST each and every month. Losing track of your income and your expenses is a quick way to financial chaos.
Do you want to retire early? What does early retirement look like for you? What would you need in order to comfortably quit your regular job?