How To Retire Early: 19 Tips From People Who Really Know

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Editor's Note: This story originally appeared on NewRetirement.

Do you want to know how to retire early? How about how to retire early at 60? How to retire early at 55? What about how to retire early at 45 or earlier? It IS possible.

Don’t believe me? Get advice from three guys who really know:

  1. Chris Mamula writes for Can I Retire Yet. He retired at 41 after working 16 years as a physical therapist.
  2. Karsten Jeske writes Early Retirement Now and is the “go-to” guy if you want to know about safe withdrawal rates. He retired at 44. His last 10 years were spent working for a large asset manager.
  3. Fritz Gilbert is the author of the blog The Retirement Manifesto. He spent 30 years at a single company building a successful career before retiring at age 55.

They have all been featured on the NewRetirement Podcast and recently got together to discuss their first year in early retirement. So, here is their advice — 19 tips — for how to retire early.

1. Know the Basic Formula, but Beware

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The basic formula for an early retirement is to build up 25 times your annual expenses and then plan on drawing down no more than 4% of that value, every year. If you can afford to live on that, you should be good.

However, there are so many variables that can throw a wrench into or even improve that formula.

To get a more nuanced (and reliable) answer about retiring early, it is best to build your own financial plan for the future.

The NewRetirement Planner is a comprehensive system that puts the power of planning into your own hands. Input as much detail as possible and keep playing with your information until you come up with a plan that really works for you.

Rules of thumb are okay as a starting point, but a reliable retirement plan needs to be customized to you.

2. Focus on Defining the Lifestyle You Desire

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A lot of people could retire early if they were willing to dramatically curb their spending. Mamula wasn’t necessarily interested in that.

His approach was: “We just focused more on lifestyle design and how can we get everything we want without actually having all the stress that comes with traditional retirement. And that’s been our approach.”

Focusing on the life you want enables you to prioritize expenses and define exactly how much you are going to need for a secure future.

3. How To Retire Early? Budget!

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Knowing what you spend now and what you might spend in the future is critical for retirement and especially if you want to know how to retire early.

Gilbert recommended this: “We’ve never really been big budgeters. For a year, we tracked every single penny we spent because we wanted to know as realistically as we could, what our spending was. And then we adjusted it for how we thought things would change in retirement, etc.”

4. Sandbag Your Numbers

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You don’t want to get your numbers wrong and end up not having the retirement you want to have.

Gilbert recommends sandbagging your numbers — adding cushion into how much you think you are going to spend.

He says: “Be conservative in your estimates. I decided to use $2,500 for my health care expense, Karsten [Jeske] is at $2,000. So I tended to sandbag a lot of my numbers to the high side just to be safe.”

“I would just encourage people to focus on the numbers and really take some time to look at your spending.”

5. Give Yourself at Least 5-10 Years To Prepare

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While there is no hard and fast rule, Jeske suggests that you should prepare for an early retirement for at least five or 10 years.

An early retirement can not usually be had overnight. (But, even that could be possible if you know your numbers.)

6. Work One Extra Year for Extra Cushion but Not Another Year and Another and Another

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Jeske felt like he could retire a year or two before he actually did. However, it is such a massive decision that he decided to work a little longer to give himself an extra cushion.

Gilbert also worked an extra year.

“I talked to my uncle, he retired early, and he said, ‘Let me just give you one piece of advice.’ He said, ‘If you’re not quite sure on the numbers, put in one more year.’ But, then he added: ‘Don’t put in one more year, and then one more year and then one more year.’ Right? Just put in one more year, pad the numbers because you’ll never make the kind of money you’re making now, right in the peak year career.”

However, Mamula likens the idea of working one more year to playing a game of chicken.

He said, “Are you going to run out of money or are you going to run out of life first? So you’re trading in this lifestyle that we didn’t like working all the time, for a different undesirable lifestyle where you’re constantly worried about money.”

Read this if you want to know what one more year might really mean to your future.

7. Make Trade-Offs

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So, do you want to work? Or, do you want to live?

The two options are not diametrically opposed for many of us. Lots of people enjoy their work. However, others are in the grind for the paycheck. (Explore 14 reasons why working a long time is a great idea.)

Fritz makes the point that earning money at work has risks too.

He says: “If you stay working, you’re risking giving up one more year of healthy life when you could be out living life instead of stuck in the cubicle or whatever. So just because you decided to work isn’t risk-free.”

Just be aware of your trade-offs.

8. How To Retire Early: Know Which Dials To Turn

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According to Jeske when it comes to figuring out if and when you can retire, there are two specific metrics to analyze.

He says: “So, in my personal view, obviously there are two dials that you can play with. One is what is your retirement budget? The other is what is your withdrawal rate?

“Say you have a $50,000 budget and you have a 4% withdrawal rate, then you multiply your $50,000 budget by 25, and that’s how much you need to have. So at some point, I looked at the numbers and the numbers became so ridiculous where I said, ‘Well, even with a 3% withdrawal rate and $100,000 budget, I can retire, what exactly am I waiting for?'”

9. Save 50% of Your Income

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Most people who want to retire early are saving at least 50% of their income. It is difficult but possible.

Here are over 20 ideas for boosting savings – big!

10. Beware Lifestyle Inflation: It’s Hard To Go Back

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Mamula feels like there is no way he could ever go back to a regular grind. He is so happy with the freedom his retired life gives him.

He says: “So my original plan was to just work, as a physical therapist, it’s pretty easy to get part-time work or to do a travel assignment. So that was my original approach. I was going to maybe work five, 10 hours a week just to keep my toes in it and have some income or work like one rotation a year.

“And then these opportunities to write came up. And I have to say now that I’ve had the freedom and I’ve left my career completely, it would be extremely hard to go back. I equate it to lifestyle inflation, it’s the ultimate lifestyle inflation once you experience this freedom.

“And yeah, I’m allergic to anything that’s a commitment to my time now. And I’ve always considered myself a hard worker, but it’d be really hard to go back to a regular job in a regular office.”

11. You Might Not Go Back to the Grind, but You Might Work

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Like Mamula, both Jeske and Gilbert are also maintaining side gigs or work that they enjoy.

As Gilbert said, “It’s interesting that even if you didn’t plan on earning any money, let’s face it, a lot of us that are in this F.I.R.E. community are pretty driven people who’re pretty successful. And there’s going to be opportunities, the difference is, the opportunities are doing something that you love.

“So, I think you’ll find that there is income even if you’re not planning for it. So don’t sacrifice all your life to continue working to get that withdrawal rate down to 3%, 2.5%.”

Learn about “How to Make Money in Retirement: 14 Real and Really Easy Ways to Boost Income.” Or, explore these passive income ideas.

12. The Early Retirement Mindset Is Different for Everyone

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Retiring early takes some sacrifice. The will to spend less and save a lot more can come from many different places.

Gilbert came from a family culture that was very anti-debt and frugal. His wife’s family had to file for bankruptcy while she was in college and she didn’t like that feeling of scarcity.

Mamula and his wife just started saving 50% of their salaries as a security blanket; they were not specifically trying to figure out how to retire early.

Your financial personality — developed over your lifetime — will play a part in determining whether or not you can retire early. Figuring out what motivates you and what is behind your money habits can be a useful part of figuring out how to retire early.

What is your money personality type?

13. The Courage To Leap Into Retirement Is Part Math, Part Overcoming the Fear of the Unknown

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Figuring out when you can retire can be a mathematical calculation, very much rooted in facts and figures.

However, actually deciding to quit work and live a different kind of life is a more difficult and very qualitative decision.

Gilbert described it this way, “In that last year that I was working, I was like, okay, the math is fine, the numbers are great. I quit worrying about money. I didn’t have the angst about the financial side, it was more like almost an obsessive curiosity about what is this life going to be like in retirement? And what am I going to do with myself? What’s my purpose going to be?”

Not sure about your purpose? Explore four ways to find meaning in retirement. Or, look at ways to overcome the terror of spending your nest egg.

14. Prepare for the Soft Side of Retirement

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Gilbert emphasized that it is really important for people to prepare for their life after early retirement, not just their financial life after early retirement.

He said, “It’s really important for people as they’re getting close to what I call the starting line, that they do really spend some introspective time talking about that or thinking about it, talking with their spouse. Because the research says, it’s the people that do the most amount of time planning for the soft side that have the best transitions into retirement.

“It’s been proven and the risk of depression goes up 40% in retirement, big numbers. But the way you avoid that is by increasing the amount of time that you prepare for it before retirement. And that’s really all the soft stuff. So that’s where our focus was and it worked out well for us.”

Learn more about retirement and depression.

15. Be Prepared To Change Your Mind About Goals and Interests

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While Mamula agrees that preparing for the soft side of retirement is important, he has also found that interests are likely to change and that you should be open to that change!

He said, “I put in a lot of thought on the softer side. But what I’ve found is, I don’t think I’m very good at predicting what I’m going to want and what’s going to make me happy. And I think like research shows that’s a pretty common thing actually, that the things that we think are going to make us happy once you achieve them, oftentimes they don’t.

“And so I think that’s just something to be aware of and to think about. And I think there’s a lot of value in planning and thinking about these things. But also you have to understand that, as things change, your perspectives change and you might be surprised by what you find on the other side.”

16. Have a Positive Attitude!

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Want to know how to retire early? A positive attitude is key! A positive attitude can get you through a lot of difficulties you might experience.

Gilbert noticed that almost everyone he knows who has retired early is positive.

He talked about this positivity, “I think it’s really important to focus on your attitude. Jeske’s like, ‘Hey, I’m fine winging it. I’m good with that.’ He has an attitude of positivity. And, Chris, I think you’ve got the attitude, where you’re receptive to try new things, ‘Hey, let’s move to Utah and climb mountains.’

“I think having a positive attitude and having a curious mindset is really the key.”

17. Take the Leap

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“At some point, you just got to say, ‘I’ve gotten enough, I’ve run all the different retirement calculators, including that awesome one over at NewRetirement. I know I can make it,’ and pull the plug and go. And life is going to work out okay,” said Gilbert.

He continued, “Once you know the numbers are good, don’t waste your life working. Get the courage to make the jump because it really is a numbers game. And once the numbers say that it’s okay to go, it becomes a mental game, not a numbers game.

“And there’s no reason to let the mental side of it block you from experiencing life post-F.I. because it’s really an enjoyable life. And I would encourage people to spend as much of their life in that environment as they possibly can. So that’s my recommendation.”

How to overcome the terror of spending your nest egg.

18. Be Ready for Freedom, Travel, and Time

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When asked about the best thing about their first year of an early retirement, everyone has answers related to freedom and travel.

“Freedom,” said Mamula. “Just having freedom with my time, I don’t think I’ve had freedom with my time since I was probably in the 11th grade. I don’t think I’ve ever had more than two weeks in a row where I didn’t either have school or work or most of the time for me it was both. And so just having that freedom, it’s unbelievable.”

Travel was what Gilbert and Jeske have been enjoying.

Fritz responded, “I think you instinctively go to travel, I don’t know why. But I think when most people think, ‘Oh, what are you doing in retirement?’ Your initial thoughts are travel. And I would say a year and a couple of months from now, probably one of our biggest enjoyments was, we did what I called the great American road trip, we did 10,000 miles with our RV, and took our time going cross country…”

And, Karsten really reveled in the relaxed nature of retirement travel. He spent seven months touring the world and enjoyed the open-ended, low-stress nature of his retirement journeys. Here are 20 great retirement travel tips.

19. Retire Early and Find Happiness

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All three early retirees mention that they are happy with their decision with very few regrets.

Are you ready? Find out how to retire early: Explore your plans now!

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