Retiring early might seem like a pipe dream, but it’s not — if you know what steps you need to take, that is.
But don’t think you can work today and just retire tomorrow. Instead, implement the following tips to amp up your retirement savings, cut spending and find extra sources of income.
Click through for tips on how to retire early.
Last updated: April 11, 2019
1. Create an Early Retirement Plan
Free online tools and calculators can help you figure out what it will cost to retire at the age of your choosing and how much cash you will need to accumulate in order to live comfortably. A solid plan can help direct all your actions toward reaching the goal of an earlier retirement with less stress. Opening a joint bank account may also help you keep track of your retirement plans with your partner.
2. Redefine ‘Comfortable Retirement’
If you imagine a comfy retirement as a vacation home and monthly cruise ship trips, revisit that vision. Early retirement is more attainable when it involves less spending. Instead of two homes, for example, why not live in your favorite vacation destination and pocket the principal from selling your primary residence?
Create your retirement plan: 14 Completely Free, Easy-To-Use Budget Templates
3. Learn About Personal Finance
If you’re not sure where to start it’s time to start learning. Having a comprehensive understanding of personal finance, investing, saving and credit will help you avoid making mistakes with your money now and in the future.
Even if you have solid finance knowledge, there’s always more you can learn. Delve into blogs about retiring early. Another option is borrowing a personal finance book from your local library.
4. Don’t Stall
No matter what age you are, don’t wait to get started on saving for an early retirement. It’s easy to get caught up today and forget about what tomorrow brings. The longer you wait, the longer it will be until you can comfortably retire.
5. Live Below Your Means
Sorry, folks: Simply skipping that $4 coffee in the morning ain’t gonna cut it. It takes a much more committed approach to save the bigger amounts necessary to retire early.
“It’s amazing when I work through the numbers that some people think manicures, landscapers and maids are a need,” said Michael Chadwick, a certified financial planner and president and founder of Chadwick Financial Advisors in Unionville, Conn.
Take an honest look at your budget and start cutting unnecessary expenses. Put the money you would’ve spent on your monthly manicure towards your IRA, instead.
6. Pay Off All Your Debt
That’s right, all of it. First: Is it time to pay off your home? You might not have the resources now to plunk down one huge check, but consider switching from a 30-year to a 15-year mortgage to pay it off faster.
Do the same with loans and credit cards. High interest eats up income fast.
7. And Keep Avoiding Debt
Paying off debt doesn’t do any good if you just add it back into the mix. Don’t rely on credit to get by or use your credit card to splurge on an item you know you can’t really afford. If you overspend and carry a balance, you will be tied to paying off the debts plus interest when you could be saving that money for retirement instead.
8. Consider Overlooked Financial Resources
It’s risky to count on unknowns such as an inheritance, but you might have cash streams available outside the traditional retirement realm, said Jennifer Birchett, the principal wealth advisor with TrueWealth Management in Atlanta. “Understand your options with respect to any pensions you might be entitled to from current or previous employers,” she said. Also, be sure you keep track of any 401k plans from former employers and manage them properly, such as by rolling your 401k over to your new 401(k) or another retirement account.
9. Invest Early and Often
If you’re in your 20s and start investing now, you’re in luck, said Joseph Jennings Jr., investment director for PNC Wealth Management in Maryland.
“Due to the power of compounding, the first dollar saved is the most important, as it has the most growth potential over time,” he said. As an example, Jennings compared $10,000 saved at age 25 versus 60. “The 25-year-old has 40 years of growth potential at the average retirement age of 65, whereas $10,000 saved at age 60 only has five years of growth potential.”
10. Maximize 401(k) Matching With Your Spouse
The wisdom of taking advantage of a company match on the 401k is well established — but think about how that power is accelerated if a working couple does it with two such company matches.
“If your employer has a matching contribution inside of your company’s plan, make sure you always contribute at least enough to receive it,” said Kevin J. Meehan, the Chicago regional president of Wealth Enhancement Group. “You are essentially leaving money on the table if you don’t.” Be sure to get the full match from both spouse’s retirement plans.
11. Practice Sound Cash Flow Management
The methodology is simple, yet the results can be profound: Continuously save and invest money systematically during your working years.
“There’s no other element of investment planning or portfolio management more essential over the long term,” said Jesse Mackey, chief investment officer of 4Thought Financial Group in Syosset, N.Y.
12. Jump on Employer Stock Purchase Plans
How about some free money? The employee stock purchase plan, or ESPP, typically works by payroll deduction. The company then purchases stock for you at a discount, typically between 5 percent and 15 percent. Before you sign up, be sure you understand the tax ramifications and your company’s policies about selling the stock.
Take a Look: 30 Best Jobs If You Want to Retire Early
13. Start That Retirement Account Today
Whether you choose to open an IRA, Roth IRA, 401k or Roth 401(k), it’s important to choose a retirement vehicle that not only grows your savings but also provides tax benefits. Don’t just rely on a savings account.
Make the Choice: Roth IRA vs. Traditional IRA — Which Is Right for You?
14. Plan Smart Vacations
You’ll still want to enjoy your life on the way to early retirement. Consider ways to make your vacations smarter, and cheaper. Watch fare sales to get the cheapest airfares, and use online travel services to compare everything from hotel room rates to car rental costs. Save money on vacation rentals through Airbnb or HomeExchange.com.
15. Don’t Let Your Money Sit Idle
To get to an early retirement, you have to periodically review your IRA, 401(k) or other retirement accounts to make sure your money is still working for you. For example, the way your retirement account is diversified needs to be updated as market conditions change and your retirement gets closer. Rebalance your portfolio regularly. If that’s too scary, or too much work, put your portfolio on autopilot with target date style retirement funds that automatically adjust as you near the big day.
Related: What is a Roth 401(k)?
16. Hop Off the Spending Treadmill
You buy something expensive, feel excited and then scout for something else to purchase when the “new car smell” wears off. And it’s a huge trap if you want an early retirement, said Pete, the man behind the popular finance blog, Mr. Money Mustache, who retired in his 30s. Another advantage: “Here in the rich world,” he wrote, “the only widespread form of slavery is the economic type.”
17. Look for Other Sources of Income
Early retirement doesn’t necessarily mean retiring all of your income, especially if you find ways to bring in money passively. Investing in rental properties or running a small business are ways to keep some income flowing in without requiring work from you 40 hours a week. A part-time job might be just the thing, especially if it is fun or supports your retirement hobbies. For example, you can work as a campground host to earn extra cash, and a free spot for that RV you plan to drive all over the country.
Related: 101 Side Business Ideas
18. Find a Job With a Pension
Unfortunately, there aren’t many jobs with full pensions that still exist. The exception is government employment and the military. It sounds like a long-term commitment and it is, but if you serve 20 years in the military, the Postal Service or another Federal government job, you can retire early and still draw a large portion of your pay, for life. Some states offer a similar deal for their employees, but keep an eye on those, many are underfunded and getting into trouble.
19. Cook Rather Than Eat Out
Not only does eating out cost considerably more than cooking for yourself at home, it also tends to involve more calories, sodium and fat that do not contribute to your well-being. Instead, planning and creating batch-style, healthy meals can cut your costs and your waistline. Even creating a garden for some vegetables can help reduce your food bill, which means you should have more money to put in your retirement savings to help you retire early.
20. Take on DIY Projects
Although you might be busy, it can make more fiscal sense to do certain things around the home yourself. This means no maid service, gardener or pool technician. Paying for these services are convenient, but they might be draining you of potential retirement savings.
Look at what household expenses you could reasonably cut, and channel that money into your retirement fund. An added bonus: The skills you develop while doing it yourself might turn into income opportunities down the road, by hiring out your skills, or selling your creations.
21. Cancel the Overpriced Services
If you want to retire early, you need to cut back on some of your overpriced luxuries and services. Of course, it’s important to allow yourself a balanced life — making time for entertainment, exercise, friends, family and so on. However, there are things you can do to cut back on expensive monthly services, such as cable TV, internet and phone. Instead, look for alternatives like new on-demand streaming services and affordable mobile phone plans. But, beware, signing up for Hulu, Netflix, Apple Music, HBO GO, and an internet connection can cost more than just keeping a basic cable package. Do the math first.
22. Turn to Nature for Recreation
Instead of pursuing hobbies that cost a lot of money because they require lessons and a lot of equipment, stick to activities that nature provides for free — and put those savings toward your early retirement. Some popular outdoor activities that you can enjoy on the cheap include taking a walk, hiking or riding a bike. Or, go tent camping rather than taking an expensive vacation.
23. Ditch the Car You Don’t Need
Your car can cost a significant amount of money in terms of the gas and maintenance, as well as the initial investment and ongoing car payments. If you live in an area that allows you to depend less on a car, take advantage of it.
One option is to sell your car and put the money towards your retirement accounts. Then, find opportunities to walk or ride a bike. A monthly bus pass lets you travel for free, and several services let you have car transportation when you need it raging from by the minute car rentals like car2go, or getting a quick ride with Uber or Lyft.
24. Keep Your Goals in Mind
Get off the couch, and do things that remind you of your mission to retire early. Although you don’t want to waste money on activities you can do for free, you can splurge a little on certain excursions and lessons — especially if they keep you motivated to retire early. If you want to golf more in retirement, play a round of golf this weekend. Do what you can to remind yourself of the retirement you’ll soon enjoy without spending too much money.
25. Focus on the Positive
Many early retirees and successful people, in general, will tell you that staying positive helped keep them on the right track to accomplishing their goals. People who stay positive are also less likely to become ill and are better able to cope with hardship and stress, according to the Mayo Clinic.
As corny as it might sound, this positivity could keep you from overspending and help you stick to your early retirement goal.
26. Be Mindful
With each choice you make, ask yourself if your decision is a wise one both now, and for the future. Impulses can lead to poor choices and bad spending habits. So, always think about how your everyday decisions can impact your life goals.
27. Stop Spoiling Your Children
This might be a difficult task for some parents to follow, especially for those surrounded by other parents who buy their kids whatever they want. However, when you stop spoiling your kids, you’ll have more money to use for early retirement. You might also find some good opportunities to teach your children better spending habits.
28. Beware Your Child’s College Tuition
With tuition costing tens of thousands of dollars over four years, it can take a big chunk out of your early retirement savings fund. Instead, focus on saving for retirement first and help your kid apply for scholarships, grants, work-study and part-time jobs to help offset college costs. If you are going to help with college expenses, make it part of your early retirement plan. Open a 529 plan and contribute early and often, just like your retirement savings.
See Also: 27 Ugly Truths About Retirement
29. Downsize to a Cheaper Home
Some middle-aged people are selling the bulk of their possessions — including their homes — and moving into smaller, less expensive homes. Minimalism opens the door to a life of leisure travel and can eliminate major expenses, such as property taxes and mortgage payments. If a tiny home isn’t for you, you can still downsize from that big family house to a just for two home when you are ready. Roll that equity into your retirement savings. It’s often tax-free if you’ve lived there for more than five years.
30. Don’t Give Up
You might think that because you’ve hit a certain age, it’s too late to retire early. It doesn’t have to be. You just need to save bigger and faster. You can implement these tips at any point and start seeing the results. Even saving a little bit can start the momentum toward building wealth for your early retirement.
Click through to find out how to retire early without sacrificing everything.
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Brian Nelson contributed to the reporting for this article.
About the Author
Lou Carlozo is a Chicago-based writer specializing in personal finance and investment. An award-winning journalist with more than 25 years experience, his writing has appeared in publications including the Chicago Tribune (where he served on staff for 16 years) and AOL’s WalletPop (where he served as managing editor). His work has also appeared in Reuters Money; Reuters Small Business; U.S. News and World Report; H&R Block’s Block Talk; Entrepreneur magazine; and CURRENTS Magazine, published by the Council for Advancement and Support of Education.