How to Retire Early
1. Pay Off All Debt
2. Decide How You Will Spend Your Time
2. Decide How You Will Spend Your Time
Debt creates additional risk of foreclosure and repossession.
When you pay off debt, you'll reduce your risk and will lighten the burden, giving you a great start to retirement.
2. Decide How You Will Spend Your Time
2. Decide How You Will Spend Your Time
2. Decide How You Will Spend Your Time
Retirement is a gift. You gain freedom and control of your time.
Don't just run from your job.
Figure out what you're running to.
Do you want to spend more time with family?
Do you want to pick up a hobby?
Do you want to travel?
3. Estimate Your Annual Expenses
2. Decide How You Will Spend Your Time
4. Calculate How Much You Need in Investments
Before saying "bye" to your regular income, you must determine how much money you need to live on.
Depending on how you answered #2, estimate the costs of your retirement expenses including what you spend today.
Don't forget the annual costs like insurance, taxes, and gifts.
Make sure to include additional costs for health insurance.
4. Calculate How Much You Need in Investments
5. Determine the Non-retirement vs. Retirement Split
4. Calculate How Much You Need in Investments
The 4% rule says you can withdraw 4% of your total investment balance and won't run out of money, if the investment averages 8%-10%.
For example, if your estimated expenses are $50K per year (including taxes), you'll need to have a balance of $1.25M.
$50K / 4% = $1.25M
Remember, you don't have to contribute $1.25M.
You'll use compounding to grow your balance over time.
5. Determine the Non-retirement vs. Retirement Split
5. Determine the Non-retirement vs. Retirement Split
5. Determine the Non-retirement vs. Retirement Split
Depending on what age you plan to retire,
you'll need investments outside of retirement accounts.
You can use multiple methods to calculate how much you'll need to cover the gap between your working years and access to your retirement funds,
but the most conversative is to take the number of years multiplied times your annual expenses plus
Depending on what age you plan to retire,
you'll need investments outside of retirement accounts.
You can use multiple methods to calculate how much you'll need to cover the gap between your working years and access to your retirement funds,
but the most conversative is to take the number of years multiplied times your annual expenses plus tax.
For example, if you need $50K per year and plan to retire 10 years prior to having access to retirement funds:
$50K * 10 years = $500K
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