When Can You Retire? It Could Be Sooner Than You Think


Retiring early isn’t something that everyone can do. Sometimes, though, people can retire early but don’t realize they have that option! Don’t let that be you.

Let’s calculate what you’ll need for retirement, so then you can see how close you already are to your goal. From there you can see how long it will take you to retire, and hopefully it’s earlier than you thought.

Calculate Your Retirement Income

While it might sound odd to say “retirement income,” this simply means any guaranteed income stream like a pension, Social Security, property rental income, part time job, etc. This should be an amount that won’t change much and is in little danger of fluctuation. You want to calculate the total after paying taxes.

Okay, now let’s look at an example:

Joe worked at Coca-Cola for 35 years, so he’s expecting a pension of $3,000 a month. He also has a house he rents out that he is able to collect $500 a month. We’re not including Social Security because you can’t receive that until you are 62 years old at least. We’ll calculate without it for right now, and then when Joe can take advantage of it, it’ll help offset inflation.

He totals $3,500 a month in steady retirement income.

Map Out Your Monthly Spending

The next step towards retiring early is figuring out how much money you will need each month in retirement. This amount should cover food, drink, travel, mortgage if you haven’t paid it off yet, etc.

You want to calculate how to live comfortably and enjoy the retirement you have been looking forward to, but it’s good to remember that in my research for my book, You Can Retire Sooner Than You Think  – The 5 Money Secrets of the Happiest Retirees, I found that the happiest retirees live in the middle rather than a VIP lifestyle.

If you are interested in retiring early and happy, it’s best to stop worrying about the Joneses.

If you’d like some help with this, you can try the Capital Investment Advisor’s Retirement Calculator.

Joe’s monthly expenses include $2,000 a month for both mortgages, $1,200 for house and health insurance, $1,200 for food and entertainment and $1,000 to miscellaneous bills. He also wants an extra $2,000 a month so he can travel.

These all total up to $7,400 a month in expenses.

Find the Gap

It’s okay if your retirement income is a little less than what you need for your monthly spending. That is why you’ve been saving for retirement for so many years!

The gap between your steady income sources and your monthly spending is the perpetual gap you will need to fill, and is also an amount that will need to be adjusted higher over time due to inflation.


Joe needs $7,400 a month to be comfortable, but he currently just has $3,500 a month in income. That leaves him with a gap of $3,900.

Fill the Gap

Filling the gap is the corner stone in all my retirement planning strategies. This is how I help retirees every day feel confident in their lifestyle and investments.

In retirement, you want to find a way to structure your nest egg to generate a steady income stream that can fill this gap without actually having to use the money in your investments.

Think of it like having a chicken that produces eggs. By only eating the eggs and not the chicken, you’ll have food for a long time!

Crunch Your Numbers

You can make money in two ways with your investments.

The first option is through appreciation. This means if you buy a stock at $10 it can appreciate over 10 years to become $20, for example.

The second option is through income. You can buy another stock at $10 that pays you a dividend of $1 per year, and you can reinvest the dividend and 10 years later you would still end up with $20.

Both ways of making money from your investments work.

Dividends and interest are things that come regularly from owning a dividend specific exchange traded fund (ETF), or stock, or bond, or even a pipeline company. With just that part of the equation on your investments, you should be able to get a 3.5, 4, or 4.5% yield alone, which is just the actual cash flow percentage that is paid out to you or added to your account. That sounds like a pretty sweet deal, right?

Now you probably need more than that to fill your gap, though, so that’s where the other part to this equation comes into play — growth, otherwise known as appreciation.

In my example above, over 10 years there was a 100% appreciation. The stock market unfortunately doesn’t work like that,  though. Appreciation is less predictable, relying to some extent on how well the stock market and economy fare in any given year. While you can’t rely on steady growth for appreciation, on average I aim to gain an additional 2 to 4% a year from this part of the equation.


Ultimately, we are trying to get to 6.5 to 7.5% a year in returns on your investments when you combine the amount you have gained with both the appreciation in your investments as well as the dividends and interest. This percentage is what you can use to fill your income gap without actually using our savings.

Joe needs to cover $3,900 a month from his retirement savings. That means he needs to have about $800,000 in retirement savings to retire today and live comfortably if he’s able to get 6.5% yield off his nest egg each year. 

So, Can You Retire Sooner Than You Thought?

You might have a higher or lower amount for your financial obligations each month than Joe. Don’t look at Joe’s income stream and say, “Oh darn, I don’t have a pension. I’ll be working forever to save up for retirement.”

Retirement is not a one size fits all approach. Look at your expenses and your income. If you have saved $600,000 for retirement, and only need $3,000 each month to enjoy the retirement you’ve been looking forward to your whole life, congratulations, you can retire early!

The point of this exercise is to take a real look at your retirement savings and your retirement plan, and figure out exactly what you need to be a happy retiree. For many people it is less than they might think. Once you’ve calculated your retirement goal, take a look at how long it will take you to save in your working years to get to that amount. I hope it’s sooner than you thought!

For more details, you can read my book, You Can Retire Sooner Than You Think  – The 5 Money Secrets of the Happiest Retirees.

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