Who wouldn’t like to retire early? Do you want to keep working the same or more hours as you do now, for money that purchases less each year, without an end in sight?
If you’ve decided you want a different life, consider retiring early. “Sure, that sounds nice,” you might think, “but it’s not possible.” In fact, more and more people are retiring early each year. In 2017, approximately 16.2 million Americans 55 or younger considered themselves retired.
Remember, retirement means different things to different people. It likely doesn’t mean you’ll never work again. However, that’s probably a good thing. Countless studies have shown that people who stop working suffer from a wide range of health consequences, so you’ll want to be doing some work in your retirement.
Your early retirement might happen in stages. Perhaps you’ll first move somewhere cheaper than where you live now so that you can save more money towards the next phase in retirement. Or you’ll work fewer hours each year, or transition from the work you do now to work you’re more passionate about. You might be in an office today and offering scuba lessons tomorrow.
Unlike most things in this world, early retirement is under YOUR control. You get to create a plan and execute it. You’ll design a life that requires less time doing things you don’t want to, doesn’t cost as much, and you can start working towards it today. Sound impossible? Below we’ll get into 20 ways you can make it a reality. Let’s explore:
- Gathering Resources and Organizing for Early Retirement
- Saving Money for Early Retirement
- Inexpensive Places to Retire Early (or Work Towards it
- Investing for Early Retirement
Gathering Resources and Organizing for Early Retirement
- 1) Planning: No one is going to grant you an early retirement. If you want one, you’ll need to put the pieces together to make it happen. Saving money is important (more on that later), but you’ll need to do much more to save to make your dreams of early retirement a reality. Any plan will require a timeline until you can retire, an amount of money you’ll need to have to retire, and assets, investments, or other streams of income that can sustain you once you retire.
- 2) Earning Extra Income: If you want to retire early, it’ll help to earn as much money as you can now. Any surplus income you can add above your expenses can be squirreled away to help sustain you in retirement. This can mean taking on an extra job, making investments with guaranteed yields, selling things you don’t need, and anything you can do that guarantees extra income.
- 3) Working After Retiring: This might seem counterintuitive, but retirement is in the eye of the tiki drinker. No matter what you save, you’ll likely need to earn money at some point. The key is doing work that doesn’t FEEL like work. Perhaps you could teach lessons in something you love, do remote work, or anything else that gives you some income after you retire.
- 4) Hitting a Magic Number: You need to figure out how much you’d need to live on a year in retirement, then figure out approximately how many years you’d be retired and have to pony up that sum. However, no matter how much you save, it’s unlikely it will be enough to sustain you forever. That’s OK. You don’t need all of the money retirement would require before it begins. However, having a giant lump sum, investments that will mature during retirement, and a plan to earn more money once you’re retired is crucial.
- 5) Managing Expectations: Retirement won’t be easy. If you want to make it work, balance your desires with what you can realistically provide. Frugality will help you get to retirement but also maintain it. Figuring out what you can live without is a great way to extend your funds into an early retirement.
Saving Money for Early Retirement
- 6) Discipline: Reducing your expenses is the name of the game. If you can pay less for housing, entertainment, food, travel, whatever eats up a significant amount of your budget: do it. Every dollar saved counts, and you can save more money by cutting down on expenses. Remember: once you’re retired you’ll thank yourself for being a puritan about money.
- 7) Automatic Savings: Don’t rely on your willpower alone to save money. You can automatically put a preset amount of money away from your paycheck each month into a savings account that you let blossom until you’re ready to retire.
- 8) Track Your Spending: Saving effectively is a function of understanding your spending. Until you know exactly where all of your money is going each month, you’ll struggle to control, eliminate, and redirect your funds towards retirement.
- 9) Consolidate Debt: Most people have debt of some kind. By working with a financial advisor, you might find lower interest options and ways to organize and gather disparate debts into one place you can pay off for a lower monthly amount.
- 10) Set Milestones: Make and hit savings goals. Aim for monthly, yearly, and multi-year benchmarks that are realistic, and that will fit into the overall number you’ll need to begin your retirement.
Inexpensive Places to Retire Early (or Work Towards it)
- 11) Tulsa, Oklahoma: If you’ll continue to work remotely, want to retire in America (or at least work towards retirement in America), and want $10,000 to help consider applying to the Tulsa Remote program. You’ll have opportunities for furnished housing, discounted rent and free utilities for months, and $10k if you stay for a year.
- 12) Vermont: Similar to the Tulsa opportunity, Vermont has launched a program to pay remote workers $10,000. In Vermont’s case, it will be a reimbursement of $5,000 a year for two years. Like Tulsa, you might find expenses in Vermont are far cheaper than where you live, helping you save money towards the next stage in retirement.
- 13) Malaysia: If you want retirement to include beautiful beaches, extremely affordable expenses, and an incredibly safe foreign country, Malaysia is a great option. You can opt for a “Malaysia My Second Home” visa which will give you ten years of residency if you meet its requirements.
- 14) Costa Rica: Another excellent option in this vein is Costa Rica. It’s not too far from America, has excellent healthcare, incredible biodiversity, and much more. It also has a benefits package that is specifically targeted at ex-pat retirees. You can stay longterm with a Pensionado visa if you have $1,000 a month in qualified pension income.
- 15) Uruguay: Finally, we have Uruguay. South America’s second-smallest country offers quality nationalized health care to everyone, including foreign residents. The climate is mild, the economy is stable, and you can apply for several visas that offer the same rights as any other resident of the country.
Investing for Early Retirement
- 16) Stock Market Index Funds: Historically, the stock market has gone up approximately 12% annually. If you invest in an index fund and leave your money in it, you can expect predictable growth year in, year out.
- 17) Tax Exempt Bonds: With market investments you’ll have to worry about capital gains taxes. However, tax-exempt securities like state and municipal bonds are exempt from federal taxes. If you invest in municipal bonds in the state where you reside, you can avoid federal and state taxes.
- 18) U.S. Treasuries: While the yields aren’t as bountiful as with some investments, you can guarantee you’ll receive x amount of money in y amount of time while enjoying federal and state tax advantages.
- 19) Real Estate: This might not be an option for everyone given prohibitive costs of entry, but there are many ways to get into investment real estate. The U.S. tax code allows homeowners and investors to write off considerable portions of rental income, and most homeowners can avoid capital gains taxes if they sell their residences. If you get the right property, the monthly income from it might sustain an early retirement as well.
- 20) Invest in a Side Hustle: As we’ve said, you’ll likely need to do some work even during “retirement” to sustain your new life. You can build towards that right now by investing in something you’d love to do, that pays you but requires less total hours of work than you’re currently responsible for. Build a business, hustle, or ongoing freelance opportunity for yourself that will continue to pay dividends.