The current retirement age in the US, for anyone born after 1960, is 67 and I wouldn’t be surprised if that increased by the time you or I reach that age. That means if you graduate college at age 22, you’ll have 45 years to work until you can enjoy your time off. Since at that point you’ll have to work double the years you’ve even been alive, the thought of spending that much time doing work you don’t love seems utterly depressing! There are two solutions to this problem. The first is to find work you love so that you don’t feel like you’re working at all, and the second is to gain your freedom by figuring out how you can retire early. This section of Planting Dollars is devoted to just that idea, which is very possible with the right attitude and plan. I’ll show you just how it can be done.
What Exactly is “Retiring Early?”
Retiring early does not mean you quit your job, or you stop working. It is simply the point in which your passive income streams are equal to or more than your expenses. It means you’re financially free and can choose to stop working if you wish.
Why Retire Early?
Early retirement is not about sitting around doing nothing, it’s about giving yourself freedom of choice in your life. If you want to spend three months wandering around southeast Asia, you can. If you want to join the peace corps, you can. If you want to help a family member who is ill or having a tough time, you can. By achieving the freedom of early retirement you open the door that more possibilities in your life. Early Retirement about taking control of the power in your own life and not having your fate tied to one person’s decision making on where your money comes from. If you’re not in the drivers seat of where your income comes from, you’re essentially a slave to those who write your paycheck. Pursuing early retirement is you taking back the power of your own life.
How Can You Retire Early?
Retiring Early is simply figuring out a basic math problem. How much income do you need to sustain the lifestyle you want to lead, then how much do you make in passive income streams? Much like a balancing scale you can either raise your passive income streams or lower your expenses to eventually meet what is known as the crossover point. If you make more money than you need, and you can project with a considerable margin of error then early retirement may be something you can consider. There are basically four ways of doing this:
- Unjobbing – This means focusing only on finding work you love to bring in income. The idea is that if you love what you do, it’s not really work. You can do this by lowering your expenses and doing whatever it takes to do work you love. This may be joining the peace corps, doing non-profit work or other low wage type work. You can also take this approach by finding freelance work or creating your own hobby related
- Intensive Saving – This approach entails saving a large chunk of your income, which means saving 50% or more for a pre-planned period of time until you reach the number you need in order to receive interest payments that are equal to your current expenses. This route is currently a bit of a challenge since interest rates are so low that you’ll have to save even more than in a high interest environment. Three great resources to learn more about this approach are:
- Your Money or Your Life – A book by a stockbroker who saved most of his income and retired young.
- Early Retirement Extreme – A blog by Jacob Lunk Fisker who lives off $7,000 a year and retired on $250,000 savings.
- Mr. Money Mustache – He retired by age 30 with his wife who saved over 50% of their income in their twenties.
My Personal Story With Early Retirement.
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
Ever since I learned about compound interest in high school I’ve been fascinated with the idea that your money can work for you and grow without you doing much of anything. The cliche idea of “making money while you sleep” was a great motivator. From that point on I had an insatiable appetite to learn about how passive income works. I read hundreds of books, but some of the most influential talked about passive income streams. That is, things that make you money whether or not you’re doing work. It’s a much better way to make money than simply trading your time for an hourly rate.
You can read my full story here, but essentially through real estate investments, building income producing websites, and investing in dividend stocks, I was able to easily reach my crossover point in which my passive income exceeded my expenses before the age of 30. It’s an amazing feeling knowing I don’t need to hold a job for the rest of my life, unless I choose to work, and something that has been worthwhile. The process took me eight years total, but for everyone it’s different.
Examples of People Who Have Retired Early
I’ve compiled a list of articles, blurbs and commentaries on folks around the world who have retired well before the standard age. I encourage you to read some of their stories and learn from them while becoming inspired to start your own journey towards early retirement.
4 people who retired early to travel the world.
Further Reading on Planting Dollars About Retiring Early
Recommended Books About Retiring Early
I’ve read hundreds of personal finance books and by far the one I most recommend with this concept is Your Money or Your Life. Joe Domingaz does an excellent job showing how he was able to retire early and explain the process in depth.
Another book I would encourage you to consider is Early Retirement Extreme. The content can get a bit dry, and the author does take his concept to the extreme bare minimum, but the principles are strong and lessons can be learned from the book. I believe the idea of early retirement sometimes is weighed heavier than other things that may be of value to the author, but in terms of learning the fundamentals and concepts, this is still a great read.
Have you retired early or are on your way? I’d love to hear your story, leave a comment below or contact me to share.