Right now I have years of work ahead of me, but I know that I don’t have to work together, and you don’t either. I have not even entered the work force yet. I have an idea of what I am going to do as a career but that can and almost certainly will change. But I have already been thinking about my career path, up to and including retirement.
The Typical Path
The typical path for students is something like follows: graduate, get a job, work for forty years, retire at 65, enjoy retirement for twenty years. Sometimes you can add graduate school, or a bit of unemployment or a longer life, but it is pretty close to the template usually. The retire at 65 paradigm was set a long time ago and not many people question it. I have though.
Humans get about 80 years on this earth. Childhood is great, so the first 18 years are okay by me. Then most people will work until they are 65, with maybe four years of school.
The next 47 years are less than ideal unless you are one of the lucky handful who get to do what they love for a living.
Then the average person will be retired for about 15-20 years before they unfortunately pass away. Those years can be filled with happiness, which I hope is the case, but they can also be unhealthy or unhappy, which I would never wish for anyone.
38 years out of 85 are spent the way you want, with 47 in the middle determined most likely by your employer.
Avoid Working Forever by Being Strategic In Your Middle Years
Those middle years, you finally have money to do things you like, you have freedom of almost everything, and you have your health to have the ability for anything.
As a kid you can’t just up and go on a road trip across the country if you want to because you have school or your parents won’t allow it, and if you are like me you couldn’t afford it. After retirement you may not be able to fit it into your limited retirement budget, or your health will fail you. Maybe the dream of seeing the Rockies will be degraded by years of labour and toil.
Not Working Forever
Investing to Retire Early
If you did not have to work for so long, you could see the Rockies if you want. You could take up the guitar, or even simply sleep in on Mondays. Everything about retirement without so long of a wait. Sound good to you?
First of all, to retire early, you really NEED to be investing your money. So few people invest their money outside of retirement accounts, but I highly recommend it. I’ve discussed eToro before, but I’m a huge fan of eToro for investing because you don’t really need to know that much about investing to be a successful investor on eToro. You can literally copy other people’s portfolios if you invest with eToro – copy other people’s success and make lots of money in the process.
Rule of Thumb in Retiring
There is also a common rule of thumb that you can take out 4% of your savings every year of retirement without losing much of the money.
In theory you would only be using the interest of the investment, without using much of the principal. So to find how much you need you just multiply the amount of money you need in a year by 25. Use $25,000 per year? You need $625,000.
That sounds daunting but if you make $50,000 salary and only use $25,000, you would by default only have to work 25 years. Retire at 47 is a lot better than 65. If you can increase you income, or decrease your expenses, you can increase your savings rate, reducing your working time. Also, your money will be invested to hopefully gain interest and cut more time off your working life.
They Key to Retiring Early
The key to retiring early, or just being able to, is knowing that it is possible. It requires hard work, sacrifices and being unique and different. You may need to live in a smaller house than your neighbours.
You may need to buy used cars or not have a car at all. You may need to use the iPod you have until it breaks instead of buying the new model when it comes out. These sacrifices come with great rewards.
Imagine all the things you could do if you did not have to go to work every day. Or, you could get a lesser paying job that you enjoy more.
Saving as much as you can gives you freedom and options that other people do not have. I want to be able to be free of a job. It may turn out I do not want to retire early but I would like the option, which I get by saving as if I were going to retire early.
Retiring early is not complicated, but it can be hard work. You can retire early by investing, working hard, and saving smartly. Now that you heard it is a possibility you are on the right track. There are people out there who do this, you can too. You don’t have to work until you are 65, or even 55. You can set your retirement date. It is yours after all, so take control of your life if this sounds at all appealing.