5 key steps to retiring early


Have you ever wondered, “Would it really be possible for me to retire early?” The answer to that question in an absolute YES!

You might be under the impression that early retirement is only for the ultra-rich, but the truth of the matter is that nearly anyone ‘ regardless of their current income and debt situation ‘ can make early retirement happen.

Early retirement: How to make it happen

In my new book, You Can Retire Early, I outline the steps that the average man, woman or couple can take to create a financial situation that allows them to retire as early as 55, 45 or even 35 years of age.

In fact, one couple that I talk about in the book actually achieved early retirement at age 30.

So what will it take to create a financial picture that allows you to retire early?

Here are five of the ten steps I talk about in my book that can help you design a plan allowing you to retire long before the typical retirement age of sixty-five.

1. Start with your ‘why’

For any goal to have a chance of being accomplished, there needs to be a reason behind the work that goes into achieving that goal.

This reason is your “why”, and without a written why that you can refer back to in times of struggle, distraction or discouragement, you will likely find it very easy to fall into a variety of distractions created to keep you living the status quo life of non-early retirement.

Each person who wants reach the lofty goal of retiring early will have a different “why”, and you might have several “whys” on your list.

The goal is to make sure your retirement is a happy one. Some examples of typical whys for early retirement can include:

  • So I can spend more time with my family and friends
  • So I can trade in my current job for a career that I love
  • So I can go back to college
  • So I can live abroad
  • So I can travel more extensively
  • So that my time is my own
  • So that I can work in the mission field

As you can see, there is no shortage of reasons why early retirement is attractive to people. The thought of doing your own thing ‘ whatever that “thing” is ‘ and being accountable no longer to a boss but only to yourself and your (or your family’s) own time schedule and desires is a fantastic dream.

However, it doesn’t have to stay a dream. Here is second key step to help you achieve early retirement.

2. Develop a personalized plan

If you are serious about retiring early, you will need to develop a personalized plan. It’s important to know that while it’s okay to take pieces of other peoples’ plans ‘ plans you may find online or in books ‘ it’s equally important to not mimic someone else’s plan completely.

Since your why, your income, your risk tolerance level, and other aspects of your life are likely different from everyone else, your personalized plan should be a creation based on the individual aspects of your (and your spouse’s) personality, interests and financial situation.

The first step in developing that plan is to create a picture of what you want life as an early retiree to look like. It’s important to keep in mind that most of your family and friends will likely still be working after you retire early.

Therefore, you are going to need to have a purpose after you retire. You might imagine your life after early retirement as endless days of sleeping in, watching TV, traveling the world and just simply doing whatever it is you want to do.

It’s okay to have days like that, but the truth of the matter is that without a purpose your life of early retirement will get boring pretty fast.

If you are married, it’s important to develop that picture of what you want your retired life to look like together with your spouse.

You and your spouse may have different visions of what early retirement will look like, and it will be helpful to work together to design and modify what that life will consist of until you have created a design that is pleasing to both of you.

For instance, as a guy your goal in early retirement might be to spend your days working on your classic car or fishing all day.
However, your wife might have different plans, such as traveling frequently or going back to college.


As both of you work together to decide what your ideal early retirement life will look like, you can design a schedule that helps you determine the next step in creating your personalized plan: setting up a post-retirement budget.

A projected post-retirement budget is an important part of your personalized plan because that budget will help you identify how much money you need to have saved and invested by the time you retire.

A realistic post-retirement monthly budget, multiplied by the number of months and years you want to have enough money to stay retired for, will give you your target retirement savings amount.

It’s that number that will help you determine how many years you need to work until retirement.

As an example, let’s say you have created a specific early retirement budget and have decided that you need $4,000 per month to live on in early retirement.

If you plan on retiring at age fifty and want to have enough cash to stay retired for forty years, you’ll need to have savings and retirement assets totaling at least $1,200,000.

This amount is based on the four percent rule, which says that if you commit to only withdrawing four percent of your investment account to live on each year, and your investment account is earning four percent, your money will last nearly indefinitely.

Personally, I think using a three percent rule of thumb would put you in more of a secure place (to help account for inflation, market downturns and extra expenses), which would mean you would need to have a portfolio balance of $1,600,000.

You might be thinking at this point, “It will take me FOREVER to save up $1.6 million!” Luckily, thanks to compound interest, you can save up that kind of cash faster than you think.

3. Making the most of your income

How can you save up $1.6 million (or whatever amount you need) for early retirement? One way is to start depositing in an investment account.


Creating a budget with your current income that will allow you to maximize savings, and pairing that savings with compound interest from investing, can get you to that $1.6 million dollar mark.

Let’s look at a couple of examples of how compound interest can help you grow your money.

In this first example, if you start with an investment balance of zero dollars and contribute $2800 per month for twenty years, earning a very reasonable eight percent return (the historical average for the U.S. stock market is 11%) you can have $1.6 million saved in just twenty years.

However, if you bump that investment amount up to $4,800 per month you can retire in just fifteen years.

At this point, you might be thinking “That’s great, but how can I come up with an extra $4,800 per month?”

The answer to that question lies in making the most of your income. There are several ways you can make the most of your income. Some of them include:

  • Living off of one income and banking the rest if you are a two-income family
  • Taking on a second job in order to increase your income
  • Paying off debt that is hindering your ability to save
  • Selling some of the things you own in order to gain more cash and have a higher monthly surplus of money to invest

One of the reasons so many people are living paycheck to paycheck these days is that they don’t make the most of their money.
Instead, they spend the cash they earn on instant gratification purchases such as expensive cars and expensive houses. Or they live without a budget that helps them plan to spend on what is most important to them. If you haven’t created a plan to help you make the most of your income, you’ll likely spend much of it on purchases that don’t truly matter to you.

This kind of non-planning mindset will keep you in debt and destroy any plans you have to retire early.


4. How debt can kill your retirement plans

The reason debt is so disastrous to an early retirement plan is that those monthly payments you make — whether they’re car payments, house payments or credit card payments — eat up income you could be investing toward reaching early retirement.

Let me give you an example. Let’s say you have a total household take-home income of $8,000 a month between you and your spouse.

The “typical” family will spend that money by living on a level that is expected by most of society. They’ll have a $2500 house payment, two $500 car payments and $700 in student loans and credit card payments.

If you are facing those types of debt payments at that income level, that leaves about $4300 a month for you to spend on groceries, child care and rearing costs, utilities, insurance, entertainment and more.

And it leaves you very little money to save and invest.

However, if you were to commit to driving paid-for quality used cars, paying off your student loan and other debt, and moving to a house with a payment of $1,500 per month you would now have an extra $2,200 per month to save and invest.

An extra $2,200 a month in an investment account earning eight percent over a 15-year period would result in an investment account balance of nearly $750,000.

If you were to cut other expenditures out of your budget for a time, such as cable TV and eating out, you could increase your surplus income (and thus increase the amount you are saving and investing) even more.

Knowing that, you need to ask yourself what is more important to you: early retirement or instant gratification purchases such as a bigger house and fancier cars.

As you decide the answers to those questions you can help make the most of your income, having more to save, to invest and to retire early with.


5. Types of investments that will help you retire early

There are generally three types of investments that allow people to accumulate enough cash to retire early. We’ll talk about two of them here.

Stock market investing

Earlier I talked about the wonders of compound interest when it comes to investing over the long-term. Those who save and invest enough cash to retire early generally stick with tried-and-true investment strategies.

For instance, they’ll invest in low-cost index funds based on blue chip stocks. The goal is to take some risk with your investments in order to raise your return-on-investment (ROI) high enough that it will help you build wealth somewhat quickly.

Investing in higher risk strategies such as day trading or penny stocks however, is not recommended. You’re not looking to build wealth as fast as possible. That strategy comes with too much risk for total loss of investment.

Instead, you’re looking to create a balanced portfolio with risk levels that will help you grow your portfolio like the experts do.

Investment experts such as John Bogle and Warren Buffett practice a “set it and forget it” strategy. They choose stock shares in companies that have proven themselves over the years in the form of index and mutual funds.

This type of balanced risk portfolio has a proven history of solid gains over the long term.

Real estate investing

One of the other types of investments early retirees choose is real estate investing. The goal is to own enough rental properties that you earn enough money to accommodate your post-retirement income needs.

As with any investment, real estate investing comes with its own set of risks, and there are recommendations about which types of properties to buy and which to stay away from, and I talk about this in more detail in the book.

But for simplicity sake, let’s look at it like this:


If you can save enough money to purchase four single family rental properties producing $1,300 monthly rental income each, and then get those properties paid off over the course of 15 years or so, you’ve now got $4,000 a month in income (the other $300 a month from each property will be used to pay taxes and cover repairs) to fund your early retirement income needs.

This example gives you an idea of how real estate investing can help you get to early retirement.

There is much more you need to know in order to create a solid plan for retiring early.
If you’re interested in learning more, you can order my book, You Can Retire Early: Everything You Need to Achieve Financial Independence When You Want It.

Know that retiring early isn’t just for the wealthy: It’s for every person who is willing to work to achieve their early retirement goals.

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