7 Signs You Should Retire Earlier Than You Think, According to Humphrey Yang
Written by
Nicholas Morine
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Jenna Klaverweiden
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Financial guru and prominent YouTuber Humphrey Yang frequently dispenses sage advice on fiscal matters to his audience, and the concept of retirement is an attractive topic of discussion for Americans of any age.
In a recent video, Yang explained that many people can actually retire 10, 15 or even 20 years earlier than they might think and discussed a list of signs that one may (and should) be able to do so.
You Don’t Have a Mortgage Payment
Yang kicked things off by discussing the elephant in the room: the mortgage payment.
“For most people living in America, the largest single monthly expense that any family is going to have is … the mortgage payment. So, when that is fully paid off … your recurring cost to live monthly will shrink very quickly,” he said.
By the time you’re in your 50s, Yang continued, you want to make sure that you squash that payment by as much as possible. When it’s dealt with, you’ll be in a better position to consider retirement.
According to Charles Schwab, paying off your mortgage ahead of retirement can make sense if you are trying to reduce expenses, want to save on interest or have a high mortgage rate. However, it may not make financial sense if you are behind on retirement savings or have high-interest debt.
You Understand Your Savings Rate vs. Your Nest Egg
Being cognizant of the difference between your savings rate — the percentage you continue to set aside strictly for retirement, assuming an 8% return — and your nest egg, which is the accumulation of your retirement savings in sum, is key.
By focusing more on one’s savings rate — Yang pointed to the average American savings rate of 4% to 5% as being less than ideal — you ensure you are familiar with living below your means, an important mentality to adopt when considering a financially stable retirement.
You Have Solid, Diversified Income Streams
Yang elaborated on the centrality of holding diversified, hopefully passive, income streams to enjoying an early and sustainable retirement.
“When you’ve built multiple revenue sources beyond your primary biweekly paycheck, you’re in a much stronger position to step away from traditional employment,” he said.
A side business, dividend-producing investments and ownership of rental property were given as examples. Ramsey Solutions also highlighted a few passive income streams in a recent article, including renting out certain items, starting a blog and creating an online course.
You Have 20x Your Annual Expenses Saved Up
Noting that traditional advice surrounding the 4% rule (withdrawing 4% of your investments annually to pay for expenses during retirement) holds that saving 25 times your annual expenses is the target, Yang instead stated that the author of this rule had since judged it overly conservative.
Instead, the YouTuber advised saving 20 times your expected annual expenses as being more prudent. Once you’ve done so, that’s a sign you may be ready to enjoy retirement.
Three Other Signs You Could Be Ready To Retire
Yang also laid out three other signs you may be exhibiting already in your day-to-day life that don’t have anything to do with your finances.
- You’re in good health and have a sense of fulfillment outside of work: If both of these conditions are true, you could be ready to “make the leap,” according to Yang.
- Work is increasingly stressful or unfulfilling: If you feel like your job is “sucking the soul out of your life,” maybe it’s time to head for the exit and enjoy your golden years.
- You’ve already reached all of the career goals you desired to hit: If you’re just working for the paycheck and missing out on life’s opportunities, it might be time to call it quits. At that time, “retiring on top is probably a pretty good feeling,” Yang said.
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