How To Successfully Retire Early

 

 

 

 

 

 

Assuming you have a plan to overcome the dangers of retiring early discussed last week, then this tip is for you.  We asked Sydney Lagier to share her story and tips with our readers so that you too could achieve an early retirement.  Take it away Sydney!

I retired at 44, about two decades before “normal” retirement age.  No, I wasn’t a trust fund baby and I didn’t hit it big with stock options.  The simple truth is, the longer you work, the more money you’ll make.  The more money you make the more stuff you get to buy.  Whether your income is modest or whether it is six figures, there’s no getting around the fact that if you quit working 20 years early, you can’t spend all that money you would have earned.

There’s only one way to retire early:  you’ve got to give up something.

Lifestyle inflation:  Whether you landed a windfall or are just climbing the corporate ladder, the bottom line is the same:  you can’t let your lifestyle inflate with your income if you want to retire early.

Lifestyle choices:  I never heard that alarm of the biological clock.  There’s no denying that not having kids allowed me to cross the finish line earlier than if I had diapers and college educations to pay for.  For other people though, it might mean a smaller house or less frequent travel.  If you’re going to ditch the workforce early, you’ll have to scale your lifestyle choices accordingly.

Identity:  When you retire, you give up your work identity.  That can be a tough adjustment, one that many people find harder than living on less money.  Be sure you know what you’re retiring to, not just what you’re retiring from.

Ask Sydney your questions about ideas for early retirement.

Sydney Lagier is a former certified public accountant.  Since retiring in 2008 at the age of 44, she has been writing about the transition from productive member of society to gal of leisure at her blog, Retirement:  A Full-Time Job.

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4 Comments

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  • Tony,

    I agree with Syd. Many investors focus too much on what they have today, without doing a detailed analysis of what they need for tomorrow. Einstein’s law of relativity is powerful here. You need to first determine how much you need/want to withdraw from your investment/savings accounts, then determine how much you would need “TODAY” to make your savings & investments last.

    If you are looking for a modest retirement lifestyle, it sounds like you may be well on your way, but if you’re looking to travel, not worry about your finances, and support your children’s future education and well-being, why not continue to work (at-least part time) and continue to sock away the money?

    James Garvin
    FiGuide.com Co-Founder

  • Tony:

    There’s one key to figuring out how much you will need to retire and that’s how much you are going spend in retirement. Without knowing that number you’ll never be able to know if you have enough. The right nest egg for you depends on that one key factor, every retirement calculation hinges on that.

    Once you figure out how much of your expected living expenses will be that will be that will not be covered by other income sources (such as Social Security, pensions, or in your case, what you will net from your rental), you can crunch the numbers. For the details on how to do that, here are links to my posts on that:

    http://retiredsyd.typepad.com/retirement_a_fulltime_job/2010/08/how-much-money-will-you-need-to-retire.html

    http://retiredsyd.typepad.com/retirement_a_fulltime_job/2008/08/how-much-money-do-you-need-to-retire.html

    I also published a great series contributed by one of my readers on the same topic. To begin the series start here:

    http://retiredsyd.typepad.com/retirement_a_fulltime_job/2011/08/retirement-planning-for-beginners-part-one.html

    Kudos to you for your great savings habits! Sounds like you are well on your way to an early retirement.

    Syd

  • Hi Sydney,

    I google the question “How much should I have saved up in order to retire early?” quite a bit, and the answers are not really clear. I understand it depends on your lifestyle, but let me know if you think I can really retire at the age of 45 after reading my situation below.

    I’m currently 35, have a two family house which I live in one unit and rent out the other. My tenants receive disability and my rent is guaranteed and paid on time every month. They don’t plan on leaving anytime soon and I have lived there for 2 years now. I currently gross about $60000 with the rental income included. I can save about $26000 a year which I can put away and also have a 401 K from my employer where I have worked for 11 years. I own both my vehicles and have no debt besides my mortgage. I do have a daugher but I am not married. My savings is $20000 and I also have a HSA (Health Savings Account). In 10 years if I continue to ssave the amount I stated above and invest I should be very comfortable. I plan on paying my house off in the next 5 to 6 years. After which my rental income would be an annuity each month. Besides paying taxes I should be in a comfortable situation. I do not over induldge and pay for the bare minimums. I plan on opening a 529 account for my daughter’s college education as well. Let me know what your assemssment is!

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