Here’s How To Retire Early and Quit the Daily Grind

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Early retirement means different things to different people. Some consider it to be anything before age 62, the earliest date you can draw Social Security. More recently, the “Financial Independence, Retire Early,” or FIRE, movement has gained momentum, encouraging people to retire even in their 30s and 40s. One of the challenges is that most Americans don’t know how much they’ll need to have saved for retirement. But with dedication and planning, many people can retire early. Take a look at this overview of the process to start figuring out when you can retire. After all, the best retirement age is the one at which you can live comfortably and enjoy the fruits of your labor.

The Requirements for Early Retirement

Although retiring early sounds like a pipe dream for many, it can be done — but you’ll need to plan to make it a reality. Not everyone takes the same path to early retirement, but certain steps are common among people who manage to achieve it. You’ll likely have to consider at least some of these options to have a sustainable retirement lifestyle after you stop working.

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Lifestyle Changes

The bottom line is that the more money you save, the more likely you’ll be able to retire early. Making cuts to your lifestyle is one of the easiest ways to make sure that more of the money you earn goes into your savings. There are plenty of ways to cut spending, from the often-cited “giving up your daily latte” to the more substantial act of downsizing your home. The more you give up now, the more savings you’ll enjoy later.

Passive Income Streams

Lifestyle cuts are one way to help you save for early retirement, but there are some basic necessities you just can’t get around, such as food, housing and transportation expenses. The other part of the equation is to increase your income.

There are only so many hours in a day that you can work, so outside of getting a significant raise — a great strategy for those who can do it — cobbling together extra sources of passive income is the way to go. As the name implies, passive income, such as rental or investment income, flows into your account without you needing to be an active participant in its generation. Thus, you can have multiple passive income streams without any of them taking up significant amounts of your time.

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Financial Planning

Once you’re generating savings and earnings to get to early retirement, you’ll have to preserve that money to make it last for the rest of your life. Many financial advisors recommend an annual withdrawal rate of no more than 4% of your savings in order to preserve your nest egg. For example, if you’ve tucked away $1 million, you shouldn’t withdraw more than $40,000 per year.

But early retirees should consider adjusting that amount downward. Unlike a more traditional retirement, which might last just 20 to 30 years, you could potentially face 50 years or more in retirement. You might want to sit down with a financial planner or CPA to help determine your long-term path.

Learn: How To Find a Financial Advisor

Estimating Your Expenses in Retirement and How Much You Need To Save

To successfully plan out an early retirement lifestyle, you’ll need to make some pretty good estimates about your income and your expenses. Retirement income can be fairly easy to determine, based on your Social Security income, pension income and any side jobs you might still be working. Your expenses, on the other hand, can be harder to calculate.

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The Bureau of Labor Statistics provides data that shows how much a 65-year-old spends today compared with the average spending across the U.S. You can use this information as a guide for your own projected retirement spending, subject to tweaks that are specific to your own lifestyle. For example, if you’re planning to travel a lot in retirement, you’ll have to adjust the BLS figures upwards for that category.

Here’s a look at some of the BLS data on average spending in the U.S. for 65-year-olds vs. the national averages:

Average Spending for People Age 65 vs. National Averages
Expense Average for People Age 65 National Average
Food $6,326 $7,729
Shelter $9,270 $11,895
Cellular phone service $672 $1,118
Transportation $7,513 $9,576
Healthcare $6,620 $4,928
Entertainment $2,636 $3,203
Personal insurance and pensions $3,230 $6,771
Source: Bureau of Labor Statistics

Once you’ve locked down your projected expenses, focus on the income and savings side of the equation. No matter what you earn, you’ll need to save a lot if you want to retire early. Say, for example, you earn $30,000 per year and want to retire within 20 years. You’re not going to make it because you’ll need to save more every month than you bring home. But with an income of $60,000, early retirement is theoretically possible.

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Say you’re 25 years old with $20,000 in the bank, and you want to retire at age 45 with $2 million in the bank. If you earn a 6% return on your investments, you’ll need to save over $4,000 per month — about 81% of your income — to reach your goal. If your investments return 10%, that monthly figure drops to about $2,537, or about 51% of your income.

Where you live can also play a big role in how much you’ll need to save for early retirement. Here’s a look at how much money you’ll need to retire in each state at four different ages:

How Much Money You Need To Retire at Every Age
State You Can Retire by 35 If You Saved You Can Retire by 45 If You Saved You Can Retire by 55 If You Saved You Can Retire by 65 If You Saved
Alabama $1,546,362 $1,655,472 $1,455,373 $1,109,741
Alaska $2,252,234 $2,411,151 $2,119,712 $1,616,308
Arizona $1,689,607 $1,808,825 $1,590,190 $1,212,540
Arkansas $1,527,377 $1,635,148 $1,437,506 $1,096,117
California $2,367,866 $2,534,942 $2,228,540 $1,699,291
Colorado $1,851,837 $1,982,502 $1,742,874 $1,328,964
Connecticut $2,295,381 $2,457,341 $2,160,319 $1,647,272
Delaware $1,806,965 $1,934,463 $1,700,642 $1,296,762
Florida $1,710,317 $1,830,996 $1,609,681 $1,227,403
Georgia $1,580,879 $1,692,425 $1,487,859 $1,134,512
Hawaii $3,260,131 $3,490,164 $3,068,303 $2,339,621
Idaho $1,622,299 $1,736,768 $1,526,842 $1,164,237
Illinois $1,651,638 $1,768,177 $1,554,455 $1,185,292
Indiana $1,553,265 $1,662,863 $1,461,870 $1,114,695
Iowa $1,579,153 $1,690,577 $1,486,235 $1,133,273
Kansas $1,551,539 $1,661,015 $1,460,246 $1,113,456
Kentucky $1,639,558 $1,755,244 $1,543,085 $1,176,623
Louisiana $1,606,766 $1,720,139 $1,512,223 $1,153,090
Maine $2,000,260 $2,141,397 $1,882,564 $1,435,479
Maryland $2,231,524 $2,388,979 $2,100,220 $1,601,445
Massachusetts $2,229,798 $2,387,132 $2,098,596 $1,600,207
Michigan $1,556,717 $1,666,558 $1,465,119 $1,117,172
Minnesota $1,781,077 $1,906,749 $1,676,278 $1,278,184
Mississippi $1,491,134 $1,596,348 $1,403,395 $1,070,107
Missouri $1,529,103 $1,636,996 $1,439,130 $1,097,355
Montana $1,827,675 $1,956,635 $1,720,134 $1,311,624
Nebraska $1,636,106 $1,751,549 $1,539,836 $1,174,145
Nevada $1,877,725 $2,010,216 $1,767,238 $1,347,542
New Hampshire $1,839,756 $1,969,568 $1,731,504 $1,320,294
New Jersey $2,110,715 $2,259,645 $1,986,519 $1,514,747
New Mexico $1,579,153 $1,690,577 $1,486,235 $1,133,273
New York $2,312,639 $2,475,818 $2,176,562 $1,659,657
North Carolina $1,630,928 $1,746,006 $1,534,964 $1,170,430
North Dakota $1,718,947 $1,840,235 $1,617,803 $1,233,596
Ohio $1,605,041 $1,718,291 $1,510,599 $1,151,852
Oklahoma $1,503,215 $1,609,281 $1,414,765 $1,078,777
Oregon $2,233,250 $2,390,827 $2,101,844 $1,602,684
Pennsylvania $1,698,236 $1,818,063 $1,598,311 $1,218,733
Rhode Island $2,084,827 $2,231,931 $1,962,154 $1,496,168
South Carolina $1,687,881 $1,806,977 $1,588,565 $1,211,302
South Dakota $1,691,333 $1,810,673 $1,591,814 $1,213,779
Tennessee $1,542,910 $1,651,777 $1,452,124 $1,107,264
Texas $1,577,427 $1,688,729 $1,484,610 $1,132,035
Utah $1,725,850 $1,847,625 $1,624,300 $1,238,550
Vermont $2,022,696 $2,165,417 $1,903,680 $1,451,581
Virginia $1,744,834 $1,867,949 $1,642,167 $1,252,174
Washington $1,886,354 $2,019,454 $1,775,360 $1,353,735
West Virginia $1,596,411 $1,709,053 $1,502,478 $1,145,659
Wisconsin $1,670,623 $1,788,501 $1,572,322 $1,198,916
Wyoming $1,537,732 $1,646,234 $1,447,251 $1,103,548

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Establishing Multiple Income Streams

Many Americans opt for partial retirement and continue to work at least part time. Earning extra income lets you stretch your savings so that it lasts through the several decades of retirement you’ll likely enjoy as an early retiree. Here are some common ways to do it:

Side Hustles

A side hustle is a way to generate income in addition to your regular job without formally working at a second job. For example, you might have a side hustle selling items on eBay, house-sitting or renting out your spare room.

Second Jobs

Getting a second job is a little more involved than working a side hustle, but it can result in much higher pay. If you can afford to work extra hours in the evening or on the weekends, you might be able to raise your income by 50% or more. Remote jobs are ideal if you can work according to a flexible schedule.

Passive Income Streams

Passive income streams allow you to earn additional income with limited or no active involvement. As mentioned previously, rental property and investing are two ways to bring a passive income stream into your early retirement plan.

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The Benefits of Early Retirement

Although it can be hard to structure a life that facilitates early retirement, the rewards you reap once you get there typically outweigh all of the struggles. Once you’re retired, your time is finally your own, and you are free to do what you want with it. Here are some of the things you can do with all that extra time:

Enjoy Hobbies

While you’re working, you probably feel like you never have enough time to enjoy your hobbies. Once you retire, you can fill your days with the things that bring you joy, whether it be playing golf or catching up on your reading.

Take Extended Vacations

Travel fans might wonder, “Who on earth can take 18-day cruises or visit the Amazon rainforest for three weeks?” Once you’re retired, the answer is simple: You.


One of the many reasons people give for not volunteering is that they don’t have enough time. Once you retire, giving back to your community will get a lot easier.

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Bond With Family and Friends

Sharing quality time with family and friends is one of the great joys in life. When you retire, you can visit friends and family more often and stay for longer visits.

The Early Retirement Pitfalls To Avoid

As great as the idea might sound, early retirement is not without drawbacks. In fact, some pundits say that early retirement is overrated. But the keys to avoiding the pitfalls seem to revolve around three main themes: pressure, money and boredom.


Many Americans live paycheck to paycheck, which can be stressful. Pressuring yourself to fit into an early retirement plan could add to the tension and prove counterproductive in the long run.

Not Enough Money

Without enough money, you won’t last very long in early retirement. The problem is, it can be hard to determine just how much is “enough” money to retire early. For years, $1 million was the standard goal, but that’s probably not going to cut it for a someone retiring at 40. Err on the side of having too much saved instead of too little.

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Not Enough Mental Stimulation

Without something to keep your mind occupied in early retirement, you might find yourself wishing for the good ol’ days when you had your job to go to every day. Sure, traveling around the world, hanging out with friends and catching up on your hobbies all sound exciting. But remember, retiring early means you could have 40 or 50 years to fill with activities. In addition to planning out your finances, it’s important to plan out how you’ll spend your time on a long-term basis.

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The Impact Early Retirement Has on Your Social Security

Early retirement won’t jeopardize your Social Security eligibility as long as you have at least 40 work credits — 10 years’ worth. But “early” retirement from the perspective of the Social Security Administration means age 62, and just because you can retire early and draw Social Security doesn’t mean you should.

For starters, Social Security might face reductions in payouts going forward. According to the SSA, the Social Security trust fund could be depleted by 2035. Although this doesn’t mean that Social Security will go away, barring any adjustments by the federal government, benefits could be reduced by about 25% from that year forward.

Another consideration is that your lifetime benefits might be lower than if you continued to work. Social Security payouts are based on the highest 35 years of your earnings. Retiring early could cause you to miss out on some of the highest-earning years of your life, meaning your lifetime earnings record, and therefore your Social Security payouts will be lower than they could have been.

Last, applying for Social Security early automatically triggers a lifetime reduction in benefits. The full retirement age for those born after 1960 is 67. Beginning payouts early, at age 62, will slash your monthly check by about 30%.

Read More: How Your Retirement Age Impacts Your Social Security Benefits

How Everyday People Have Retired Early

The internet is saturated with stories about people who saved 80% of their income, retired at age 40 and moved to Costa Rica. Although this is probably not feasible for everyone, the truth is that plenty of otherwise “average” people are retiring early and living this type of lifestyle.

Take the case of Grant Sabatier. It took just five years for Sabatier to go from being broke to being a millionaire. He knew he couldn’t do it just from his $50,000 salary, so he launched a plan full of side hustles to ramp up his income. By investing all of the extra proceeds, he amassed over $1 million before he was 30.

Sabatier is not alone in his success. Billy and Akaisha Kaderli achieved early retirement by setting a financial goal of $500,000 and planning out how to live on that amount. Through a combination of careful investing, cut-down spending and smart travel instincts, they’re able to live off their interest alone while living in various exotic locales.

Carl Jensen is another example of how it’s possible to retire early. Jensen decided at age 37 that he wanted to leave his job and retire early, but he knew he had to stash 60-70% of his income away to reach his goal of $1 million in savings. He downsized his home, tracked his spending and eventually reached his goal of early retirement at age 43.

How To Know If Early Retirement Is Right for You

The dream of early retirement appeals to most people, but if you’re seriously considering it, you’ll have to come to terms with the reality. The first question you should ask is if you even can retire early. Remember, if you’re looking to retire in 20 years, you might need to save 50% to 80% of your income along the way. This will necessarily result in some dramatic lifestyle changes, and they’re not for everyone.

So, the question you have to ask yourself is, how much are you willing to give up? If you don’t see yourself socking away such a large percentage of your income, one strategy would be to semi-retire at an early age and still take consulting or part-time gigs.

The next question you have to ask is, is it worth it? Yes, retiring early offers you the potential of a life with more free time and less stress. But you’ll be giving up things along the way, such as social outings, material goods and life experiences. And once you retire, you might be the only one you know with a surplus of free time, forcing you to fill your days with solo activities.

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Finally, consider what the trade-offs are. In addition to saving money and working hard, you’ll have to learn about finance, draft a sensible retirement plan, keep out of debt, find a cheaper way to live and give up certain things in your life that you may enjoy.

Ultimately, the goal is to retire early without sacrificing everything you love. If you can manage to do that, then early retirement might be an option for you.

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