Tips for Retiring Early that People Wish They Knew Earlier in Life

Statistically, less than 1% of Americans manage to retire before the age of 50 – the majority of Americans in the workforce spend almost two decades beyond the age of 50. In fact, 69% of Americans retire by the age of 66. Retirement is a very important decision to make throughout life and takes a significant amount of planning and consideration before making the leap.

Ultimately, people tend to make the decision to work now and retire and “live” later. What if I told you, though, that there are other options? The conversation of retirement has since shifted towards the perspective for people to retire early and spend more of their adult life enjoying the hobbies and activities that they prefer to spend time on.

Looking back, there is a significant amount of information that would’ve prepared young adults for early retirement – let’s take a look at the top 10 things that someone should know!

Determine how much income is necessary

Couple talking to a bank manager.
Image Credit: Shutterstock / Rido

One of the first things to think about when considering the possibility of retiring early is the question of how much money is necessary to live comfortably during the years that you will not be working. You’ll often hear that you need, at minimum, $1 million in investment accounts to live comfortably in retirement – that isn’t necessarily true.

Typically a good rule of thumb for retirement is that you will need roughly 80% of your pre-retirement income to maintain the same standard of living. Now, that is assuming that you expect to maintain the same standard of living; many people who retire do so with the understanding that they will need to downsize and reduce their standard of living slightly. Regardless of your plan, it is imperative that you determine how much income is necessary to live within the means that you desire during retirement.

Establish how much you’ll make monthly

Woman with a calculator and computer.
Image Credit: Shutterstock / Rido

When you’re considering retirement, you need to understand how much you will make from fixed, reliable sources each month. By doing this, you can compare your fixed income to the expected monthly costs that you will have and evaluate how much you will need to make in variable income each month!

Do not withdraw from retirement early

Couple holding a piggy bank.
Image Credit: Shutterstock / Prostock-studio

Ultimately, retiring early relies heavily on your commitment and dedication to a stringent routine and budget. Withdrawing from retirement accounts early is detrimental to long-term savings and will result in incurring fees and expenses that you otherwise would not like to spend.

The longer you keep your assets invested, the more gains you’ll recognize (especially compound growth). A lump sum withdrawal once retired might look appealing but it will be costly in terms of forgone growth as well as any penalty fees charged by the IRS.

Consider an HSA

HSA form
Image Credit: Shutterstock / J.J. Gouin

When individuals consider early retirement, the unknown of future healthcare costs and possible medical emergencies is typically a big concern. Before deciding to retire early, it is a good idea to consider investing into a Health Savings Account (HSA) to have as a backstop during your retired years for any healthcare costs.

The good news is that contributing to an HSA is tax free and allows the investment to grow with a tax-deferred status; you’re maximizing your retirement savings and building an account for future medical costs.

Invest for growth

Trees on a coin
Image Credit: Shutterstock / MEE KO DONG

By retiring early, you are ultimately cutting your savings period short and requiring the money accrued during that savings period to stretch out over a longer horizon. Consider investing for growth rather than maintaining a more conservative investment approach for your retirement account.

While your initial retirement portfolio should be pretty high risk and should pursue maximized returns, you should consider shifting some percentage of your portfolio towards a more risk-averse investment model as you near the last few years prior to retirement. This will create some stability in retirement funds while still giving you the opportunity to invest for growth.

Adjust your current living

Woman with groceries putting money in piggy bank.
Image Credit: Shutterstock / Alliance Images

At some point, you will need to sacrifice the present in order to plan for the future. Adjust your current living conditions to create more savings opportunities ahead of the early retirement plan. These lifestyle changes are subjective depending on the individual and how early they’re looking to retire. Regardless, though, you should consider reviewing your circumstances and adjust your current lifestyle.

Retirement does not mean stopping working

Man working on a beach.
Image Credit: Shutterstock / iVazoUSky

Retirement does not have to mean that you completely stop working. While you might take a step away from your career, there are a ton of retirees who decide to pursue side work and part-time jobs as a means of making some side money each month. Do not view retirement as an end to work entirely – consider pursuing something that you enjoy and making some side money through a hobby!

Be conservative in projections

Couple with a laptop
Image Credit: Shutterstock / fizkes

When it comes to planning for retirement (whether early or not), projections are everything. Your forecasting and projections will dictate the planning, spending and saving that you do both in the present and in the future.

Always, always, always be conservative in your projections. Economic conditions can change significantly over a multi-decade period; by being conservative in your projections, you are prepared and planned for the possibility of negative changes and impacts on your financial situation.

Budget, budget, budget

Couple making a budget.
Image Credit: Shutterstock / Prostock-studio

Being ready for early retirement depends heavily on your ability to budget. It is best to budget your existing living conditions and standard of living so that you can estimate and prepare for your future retirement.

Beyond budgeting in the present, though, it is important to budget once you actually reach that early retirement stage. Plan your monthly expenses and compare that to your monthly income – budget accordingly so that you can feel comfortable in your living standards.

Prepare for lifestyle changes

Group of women doing yoga.
Image Credit: Shutterstock / Monkey Business Images

At the end of the day, retirement comes with a change in lifestyle. Whether you’re retiring early or following the same general timeline as everyone else, you need to expect a lifestyle change and plan ahead for it.

Consider the possibility of making new friends, finding new hobbies and even potentially changing your spending habits.


Couple on a beach.
Image Credit: Shutterstock / Sumstudio

When it comes to retiring early, there is a lot of planning and preparation that becomes extremely important. Remember to consider the above 10 steps before you decide to retire early. If you follow them and incorporate them into your lifestyle, you’ll position yourself even better to retire early and live a comfortable life thereafter.

Braden Lohbusch

Author: Braden Lohbusch


Braden Lohbusch has a BS and MS in Finance and Financial Risk Management, and works as a Sr. Treasury Analyst within a top Fortune 500 firm.

Leave a Comment