Category Archives: Retire Early

7 Tips to Help You Achieve Early Retirement

Retire Early, Retirement Plan,

 

This article was contributed to Leisure Freak by freelance writer Tracie Johnson. is it still possible in today’s world to achieve early retirement? Knowledge and planning are key. These tips can get the ball rolling.

Planning for retirement is tricky, especially when you want to stop working years before you need to. But with a little bit of strategy and discipline, it is possible to retire years before your expected retirement age. Check below some guidelines to successfully retire early.

7 Tips to Help You Achieve Early RetirementImage Source: Pexels

1. Pick a Retirement Plan

The first step to planning for early retirement is to decide what you want in your life. It may be hard to make decisions when all your resources are concentrated on paying off debts and building up savings.

To hop into retirement early, pick out a suitable retirement plan. This plan will depend on your situation, and it will help you start growing your savings as soon as possible to facilitate an early exit.

 

2. Automate Your Savings

Automating your savings can help you achieve early retirement goals faster. If you can have automatic monthly transfers to your savings, it will become like another bill you pay without thinking. Additionally, as you prepare for early retirement, you can sell some of the assets you do not need anymore or will not use after retirement.

 

You can check the value of these assets to see how much they can add to your savings so that you can retire soon. For instance, if you have a car and a truck, you may only need the truck after you have retired from your projects in the countryside. Hence you can use an automotive valuation tool to find out the worth of your car to sell it immediately after retirement.

 

3. Hire a Financial Advisor

Early retirement means less saving time but more spending time in retirement. Therefore, you need to hire a financial advisor who will help you devise the best plan to save and invest your money. An established financial advisor enables you to develop an effective investment strategy to aid you in achieving your retirement goals and manage your income and investment once you retire.

 

Create numerous passive income streams. The financial advisor should be someone you are comfortable with since it will be a decades contract. An advisor must know where the money you sweated for is coming from and going.

 

4. Create Multiple Passive income Streams

The retirement period is the perfect time to pursue your passion, especially when you retire early. Working on a passion is flexible since you can work on it while on vacation, at night, or in your spare time. Create numerous passive income streams.

 

You can invest in dividends, the stock exchange market, and real estate that will turn into liquid assets after some period. Such passive income sources will cover your monthly burn and grow your net worth. This will ensure you attain an early retirement.

 

5. Crunch the Current Budget

When you start planning for early retirement, spend more time researching investment strategies than planning your actual budget. Apply a minimalistic approach by focusing on what you value and need and cease consuming and maintaining stuff you do not utilize or need.

Create a sound budget to understand where your money is spent and which expenses you can cut back. The more you spend impulsively, the more you save, and it determines how soon you can quit your job.

 

6. Have a Reliable Back-up Plan

It is essential to have a reliable backup plan since any plan is good until a crisis arrives. Consider a possibility of a problem, for example, a natural calamity or an economy tank. Run through potential worst-case scenarios and include a plan B. You can develop a backup plan with the help of your financial advisor since they understand the world of finance and the economy best.

 

7. Pay Off and Avoid Debts

If you have debts, a mortgage, or anything else, you need to pay these off before retiring. It is terrible to be an early retiree with debt because it will take much of your time and energy to clear the debt and pay off your creditors.

 

The long-term loan you take can jeopardize assets you could utilize for retirement devotions. Moreover, you may use a more significant part of your savings to pay debts hindering your planned investments.

 

Conclusion

Early retirement is all about planning and being disciplined. You can achieve your early retirement as long as you carefully plan and think ahead of the game. Integrate these tips into your plan to realize your dreams of exiting early.

Thank you Tracie Johnson for sharing these tips to achieve early retirement in a time when many people are exploring ways of taking a different path in life.

Best Financial Advice for Recent College GradsAuthor bio:

Tracie Johnson is a New Jersey native and an alum of Penn State University. Tracie is passionate about writing, reading, and living a healthy lifestyle. She feels happiest when around a campfire surrounded by friends, family, and her Dachshund named Rufus. 

 

Is The Market Drop and Inflation Crushing Early Retirement Dreams? It doesn’t have to

Financial Plan, Retire Early, Retirement Doubt,

I am starting to think that the recent investment market drop along with inflation are crushing early retirement dreams. That thinking is based on the questions I get and the change in certain Leisure Freak site page visits. There are certainly valid retirement fear-inducing concerns. I’m reminded of my own crushed early retirement dream in June 2008 when the great recession was doing its damage. Just as I was ready to take the leap, the world decidedly shifted against me. The world today has certainly shifted and any early retirement plan needs to shift too. Here’s what I did back then and what we’re doing today. 

Is The Market Drop and Inflation Crushing Early Retirement Dreams? It doesn’t have to

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Should The Double Whammy Of A Market Drop and Inflation Be Crushing Early Retirement Dreams? Not Necessarily

For anyone who has been working and saving for their early retirement goals, this new environment has to feel like a kick to the groin. That’s how I felt 14 years ago too. Conditions were different but just as challenging to one’s psyche. 

For those who recently pulled the retirement trigger, sleepless nights and visits to a trusted retirement calculator may become frequent. We’ve all heard the cautions of how detrimental a market correction during the first years of retirement can have on portfolio longevity survival. Inflation just adds to it.

I’m not a financial planner nor pretend to be one. I’m sure my own CFP will have plenty to say in our next meeting based on historical and technical data. What I’m sharing is what worked and works for us in hopes of adding a little calm to an otherwise difficult period in an early retirement dreamer’s timeline.

Pulling The Retirement Trigger When Things Looks Bleak

Just as when I reached my planned early retirement at age 50 in 2008, there was no real indication of a market bottom or economic certainty in sight. Yes, it was crushing early retirement dreams, but not totally. It only changed my plan. 

The new economic conditions were beyond my control. The first step was getting myself over the disappointment and setting my head right. It takes a clear mind to realize and accept that the long-time plan based on before times economics was over. Then setting into action a new plan. 

Count my blessings – 

As today, there was a lot to be economically ticked off about. My portfolio was heavily diminished, my job was a daily soul crushing grind, and I worked hard over many years to ditch the rat race on my terms. The new terms then weren’t great, but I was still very blessed. 

  • A life that prioritizes family.
  • I still had an income source. 
  • Portfolio to replan upon and build on.
  • Zero debt.
  • Known lifestyle budget, roof over my head, and food on the table.
  • Still able to influence my own destiny.
Keep my mouth shut – 

I decided that my best course of action was not to show any of my cards. Keep quiet and leverage income, working conditions, and departure timeline to my advantage. The goal was to retire young for more freedom and purpose on my terms regardless of the economic challenges. I did delay my early retirement by a year and a few months. 

Restructure finances – 

It was obvious that selling beaten down assets to fund retirement in the near term wasn’t going to be smart. Although I still invested in my stock and bond allocation to take advantage of cheap prices, I reduced the percentage and increased cash reserve allocations for short-term retirement funding needs. We also refinanced our modest mortgage to a slightly lower interest rate for the balance owed but re-extended out for 30 years to reduce monthly payment obligations. The thought was we could leverage lower monthly outpay obligations now to assist in increasing cash reserves. Then we would voluntarily increase mortgage payments when economic conditions improved.

Delay retirement, not cancel –

Most importantly to tame my disappointment, I was able to delay and not cancel my early retirement plans. I didn’t know when, but holding my future in my hands allowed me to mentally accept the conditions. As I became more comfortable with my new plan’s progress, I used my growing confidence to leverage concessions and pay increases from my employer during a time when they were used to brutally acting like they held all the cards.

Position For Retirement On A Fixed Income That’s Portfolio Fed

Now that we are again in a new economically challenging environment that appears to also be crushing early retirement dreams for some people, the actions taken when I retired early over a decade ago have smoothed some of the financial pain of today. However, it still needs work to fine-tune.

Get where I need to be – 

We use a portfolio bucket strategy to fund our early retirement. Because the memory of the recession burned deeply in my mind, I’ve always maintained a higher cash and near-cash bucket than most people to fund short-term retirement income needs. However, I did allow myself to reduce it in the past couple of years as we grew older and are closing in on Social Security and Medicare age. At this time we have redirected all dividends and interest to cash instead of a portion being used to reinvest. The goal is to avoid asset depletion until market conditions become more favorable or certain. That and fully bridge the gap to when we start collecting Social Security and when we can ditch my costly health insurance plan for Medicare.

Inflation – 

This has been an interesting mind warp. We were young parents during the go-go inflation of the early 80s. A lot of what we learned trying to save money and survive on a low income frugal budget then has come back easily today. Coupons, sales, discounts, purposeful essential spending, upgrading to a smart thermostat, decreased water heater temp, shorter showers, DIY repairs, frugal cell service, shopping used items at places like Goodwill, driving less-bicycle and walking more, etc. It all adds up and makes a difference. I actually enjoy saving money. 

Sell unneeded stuff –

I always find it amazing that some of what we have and don’t use is needed and valued by someone else. I have been using Craigslist to sell small things and although it isn’t a big cash influx, it does fill a gas tank now and then. 

Increase lifestyle funding – 

Our monthly IRA distributions have followed a modified version of the 4% rule. That rule allows for inflation adjustments, but in this 7% to 8% inflationary environment, does the market diminished portfolio agree? We did slightly bump up distribution amounts but less than the going inflation rate. The difference is made up in spending reductions and emergency fund cash savings when necessary. 

Earn income –

I’ve always believed that retirement is the absence of needing to work, not the absence of working. As of now, there is no job I am interested in learning or doing, unlike there was in my earlier years of retirement. I was a little too successful in working through my bucket list back then. What I do today is keep an open mind and ear. One never knows when a perfect opportunity will present itself. It takes being open to the idea so that I can see it when it comes.  

Realize we’re not alone, pay it forward and offer unwanted things for free – 

Most people are experiencing the pain of inflation and budget strain. In my search for things to sell-off I’ve also found things I just need or want gone and offer it as free. I see it as a trade. If you want or need it, come and get it at no cost. I in turn won’t have to pay for it to be hauled away or dumped. I also price my things to sell at a low cost. I’d rather sell something quickly to someone who can use it than to drag it out over a longer period of time or get into a trolling haggle. Everyone is looking for a deal to get by.  

Figuring our way through these economic headwinds isn’t easy, but nothing worthwhile ever is.

I don’t know when inflation will relax or when the market finds its bottom and stages a reality based comeback. I do know that it will happen at some point. Retirement means being in charge of our own finances and proactively doing what is necessary. 

My task is to stay calm and position myself the best I can to continue funding my early retirement freedom into and beyond our full blown old-fart retirement. This is all just another hiccup in the financial independence journey. The key for us is to maintain a lifestyle that is still enjoyable during this choppy economical episode of time.

Inflation and a dropping investment market is a challenging time. But completely crushing early retirement dreams doesn’t have to be accepted without a fight. We do have to understand our own risk tolerance and make decisions based on what we believe is the right move for us. The last thing someone should do is enter into retirement feeling they may have made a big mistake. 

The goal is to assess the current situation, make necessary adjustments, and move forward confident in our decisions. Then keeping an eye on conditions that necessitate path corrections going forward.

Retire early by saving time on habits

Non-financial Aspects of retirement, Retire Early,

 

This post was contributed to Leisure Freak by the accomplished entrepreneur and personal finance influencer Erik Bergman. 

When it comes to retiring early, it’s all about achieving financial freedom. But what many fail to recognize is that to achieve financial freedom, you have to change habits. Some habits work against your efforts to retire early. So by saving time on these habits, you are making it easier to do that.

Achieving financial freedom before retirement isn’t easy. Not only do you need to root out some habits to save time, but you also need to prepare mentally. While it’s easy to put off your retirement plan for another year or two down the line, imagine how different things would be if you had saved that time instead. So if you want to retire early, you need to act now and not in hindsight. With the help of our tips, you can do that. So without wasting too much of your time, let’s look at how to retire early by saving time on habits.

Retire early by saving time on habits

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Go To Bed Earlier

One of the most common bad habits we all do is not getting enough sleep. We are encouraged to get anywhere between seven and eight hours of sleep each night. Are you sure you’re getting enough sleep? Sleep is an important biological function that no one can survive without. Not only does sleeping help replenish energy, but it prepares you for the next day.

All successful people get enough sleep. So to do that, you need to start changing your bedtime habits. Are you going to bed at the right hour, or are you wasting time by scrolling through social media, watching TV, or playing games on your smartphone? If the answer is yes to any of these three, then you’re not getting enough sleep. In that case, the only way to get enough sleep is to wake up later in the day.

But morning is the most important part of the day. It prepares you for the day to come, and waking up earlier makes you fresher and more productive. My simple tip is to go to bed earlier by reducing screen time. On average, you will be saving more than ten hours a week. This is one of the four habits that save time and help you retire early.

Quit Poisoning Your Mind and Body

We have all kinds of habits that negatively impact both our minds and body. These habits make it difficult for you to function the next day. Even more so, they create a downward spiral that makes you less productive. In turn, the less productive you are during the week, the less work you’ll do. This negatively contributes to your goal to retire early.

The whole point of retiring earlier is to enjoy retirement more. So with every small action, you make that will negatively impact this goal, you are losing valuable time. People have all kinds of negative habits. But some hinder your ability to achieve financial freedom. Some are so harmful that they actively work against early retirement. Drinking is one of those harmful habits. The more you drink, the less productive you are. While you’re certainly not a stranger to the idea of alcohol, having too much of it can harm your mind and body.

If things spiral out of control, then you indeed lose all control. The habits become the norm. Every morning becomes a struggle to sober up and deal with hangovers. This hinders your personal and professional development. So, you need to start thinking about changes. One of the best changes is to replace the whiskey glass with dumbbells. Exercise is your best tool to help you deal with this problem.

Many people drink to stop depressive thoughts. According to this study, exercise is the best tool to combat depression and addiction.

Save Time By Preparing Easier Meals

Much like sleep, we depend on food for energy. Without eating, we wouldn’t be able to survive. So naturally, eating is something unavoidable. But you’ll be amazed to find out just how much time you’re losing every day preparing meals and thinking about what to eat.

Meal preparation takes, on average, one hour each day. You can spend that hour more productively elsewhere. But that doesn’t take into account the process of figuring out what you’ll be eating three times a day. So what’s the solution to this problem? Like in personal finance, planning is key. By planning what you’ll be eating for the whole week in advance, you’ll save valuable time grocery shopping, preparing, and cooking.

Make this a habit, and you’ll start realizing just how much time you’re saving on average. You can invest the time saved into planning for early retirement.

Stop Watching Television

The last habit is similar to the first but different in many ways. We mentioned that to prepare for early retirement, you need to prepare your body and mind for it. Everyone owns a television. And everyone has the same habit of watching TV when back from work. But what television does is it makes you a slave to it.

You watch more just to satisfy your need for daily entertainment. That could be watching a fun game show, TV series, or even watching the news. People watch the news to know what’s happening around the world and at home. But what happens around the world doesn’t really impact you or your day in any way. You’ll still go to work and come back tired.

So instead of watching television, try to do something else that will have a positive effect on your early retirement plan. On average, quitting television can save up to four hours each day.

This informative article was contributed to Leisure Freak by Erik Bergman. We all can find ways to be more productive in reaching our early retirement financial goals. A little self  analysis goes a long way and tweaking non productive habits costs little to nothing.

Retire early by saving time with better habits  Author Bio: Erik Bergman co-founded Catena Media and helped grow it to over 300 employees and a $200 million valuation before stepping away to start Great.com, an iGaming organization that donates 100% of its profits to environmental charities. In addition to running a successful online affiliate business, Erik also hosts the Becoming Great podcast, shares entrepreneurship tips with his more than 1 million social media followers, and contributes to sites like Entrepreneuer.com, Business Insider, Foundr, and Forbes.  

Pandemic, Inflation, Busted Supply Chain, Still A Great Time To Be On FIRE

Retire Early, Retirement Doubt, , ,

It’s no wonder that I run into people delaying their early retirement. But for anyone with personal financial discipline, this is still a great time to be on FIRE and pulling the retirement trigger. There is a lot of gloom and doom to go around. At least that’s what some people focus on and it sure makes for headlines. In these times we certainly have much to be concerned about with a pandemic, rising inflation, and the occasional shortages of things we want or need. There’s a lot that is and can go wrong. But for those striving for financial independence and early retirement who are stuck sitting on the fence because of everything going on, there’s no better place than FIRE to be in or making the moves necessary for being there.

Pandemic, Inflation, Busted Supply Chain, Still A Great Time To Be On FIRE

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Why This Is A Great Time To Be On FIRE

First off, I do think a lot of things are getting too expensive. However when I look around, for all the boo-hooing about gas prices and the high cost of goods, there has been no shortage of road traffic or store checkout lines. Apparently people are still willing to spend the money. The environment is so unlike the days of the great recession when I retired at the age 51. People then changed their spending and driving behavior. As long as there remains unbridled spending, it looks like things aren’t really as dire as some fear mongers hope to exploit or the fearful to allow to hold them back. Once consumers get to changing behavior, supply issues will change too. Here’s why it’s a great time to be on FIRE while things work out. 

Safety during a time of pandemic

In this strange new world, safety to the loudest among us seems to be defined only by a gaggle or person’s own perception. Whether it’s a workplace manager, co-worker, or some random person who shows up to express and inject themselves into everyone else’s life. 

When it comes to personal safety, people can believe what they want to believe. Smoking or riding a motorcycle without a helmet for instance. I happen to believe based on medical advice and something called scientific evidence that handling rattlesnakes is dangerous. I quietly live my life, keeping it to myself while avoiding contact with rattlesnakes. But in this new world if questioned or cornered and I mention that to a card carrying member of the religious serpent handlers, they just might loudly call me a godless heathen and angrily condemn me as sheep while trying to toss me a snake. 

During this pandemic, aside from those who we commend for choosing to because of their heightened sense of duty, many other folks were and are forced to endure unsafe conditions. Whether of their own desperate financial situation or bullied into it. 

  • Being on FIRE means being able to decide for yourself: When and where we go, what we do, and who we do it with. 
  • Being on FIRE means never having a need to yell and scream about our own safety decisions and viewpoints nor put up with anyone else’s efforts to force us to their “beliefs”. 
  • When on FIRE we’re able to tell someone demanding that we unsafely bend to their beliefs to piss off when necessary. We have the resources to live our lives without crying, pathetic whining, claiming victimhood, or blaming others for the consequences of our own decisions. We have what has been referred to as “F you money” and just don’t have to put up with unsafe conditions or other people’s BS.

Others can go ahead and feel free to handle all the rattlesnakes they desire. I’m on FIRE, so that’s a hard NO for me.

Spending relief in these inflationary times 

All the hand wringing about inflation has been more meh than a problem to our frugal lifestyle early retirement budget. Why? Because we have flexibility and time to manage it. FIRE takes having disciplined spending. It also requires patience and planning. All are great skills to have and use in these inflationary times. Taking the time to search out deals, alternatives, and of course just making due when things are tough to find or are too expensive. In retirement there’s time and usually no need to hurry. 

We refuse to blow money needlessly driving around. 

My wife and I enjoyed plenty of bicycling this summer that benefited both our wallets and health. We limited our driving and although fuel prices bite the big one, we just refused to buy a lot of it.

We set limits to what we are willing to pay for things. 

Nine years ago I paid $2,300 to have the exterior of my 2 story 15XX square foot house painted. When bids to repaint came in at $7,400 and $10,200 this past summer I just asked them to please leave. Their rebuttal, this the pandemic inflationary price reality that it now cost. Well here’s my reality, I’m not paying that. I just started painting it myself and staying the same colors. I painted a few hours a week in the final couple of warm months and will pick it up again in the spring to finish. This way I budget for both the cost of paint and not making it a giant PITA. 

If inflation is keeping anyone on the retirement fence, consider the possibility that these inflated prices are here to stay. 

Even when supply chain relief comes, nobody should assume business will lower prices. People have shown what they are willing to pay and continue to keep buying. When it comes to pricing, capitalism is sticky that way and instead of lowering prices they will likely pocket profits. Fence sitting hoping to wait out inflation means spending far more in time of a finite period called YOUR LIFE. 

There are lots of ways to save money on groceries and other necessities. Cutting the cord and moving to low cost wireless has never been easier and done without sacrifice. You also will have the time to learn and tackle DIY projects. 

FIRE portfolios are fat!

Even my less risk-averse investment portfolio is splitting the skinny jeans it was wearing. Prices are up and so are our long-term investment returns. We all know that a portfolio valuation today isn’t guaranteed to remain that way. That’s always a retiree’s focus when number crunching their long-term lifestyle funding needs. Having a fatter portfolio makes this a great time to be on FIRE because it provides options. 

If today’s economic challenges cause anyone retirement pause, maybe consider rebalancing or restructuring the portfolio. High inflation environments make holding too much cash a money loser as far as purchasing power over time. But cash still has its role. Consider establishing a portfolio bucket strategy to smooth concerns. Although cash earns very little in interest, you are locking into portfolio profits already earned. Look at cash as retirement funding insurance.

Plenty of paid work opportunities for a perfect retirement gig

I know that I am always preaching this, but retirement is the absence of needing to work, not the absence of work. When I ditched my career at the age of 51 in 2009, I fully intended to embrace that definition of retirement. I called it a retire early and often lifestyle. Even during the recession I was able to work in areas of interest and passion. Those retirement gigs were far more rewarding than my long career had ever been. 

There are many opportunities for those of FIRE to entertain and leverage to their advantage with today’s Great Resignation environment and an active Antiwork movement. It’s not just me seeing this. A trend has been seen of people unretiring. The perfect camouflage to cloak your retire early and often intentions while business is eager to hire. 

On the fence about pulling the early retirement trigger?Image Source

There’s always going to be craziness and uncertainty when it comes to early retirement.

What makes this a great time to be on FIRE is that it prepares us to handle it all. Personal finance patience and discipline that are learned on our FIRE journey are the necessary habits and skills to be successful. 

Hopefully I’ve provided some inspiration here for anyone struggling to decide on their next FIRE related steps. I don’t know what will happen in the future and I’m not a financial planner. Just someone who retired young during the great recession and shares my observations and tips based on my 12 years of early retirement experience. I do recommend that before you make any big financial or retirement decision, especially if unsure and still on the fence, check your numbers, and consult with a certified finance professional for advice. 

The Ultimate Definition of Early Retirement

Financial Independence, Retire Early

 

This informative article was contributed to Leisure Freak by the site Dividend Power.

There’s a lot of talk on investing and personal finance sites about what’s considered the definition of early retirement.

People get somewhat opinionated over whether someone should be considered retired if they still generate income through a side hustle or non-passive means.

Since a lot of my articles refer to financial independence and early retirement, I figured it would be good for me to further discuss the definition of early retirement.

The Ultimate Definition of Early Retirement

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Financial Independence

I consider financial independence to be a fairly straightforward concept. It’s the ability to live off passive income for a set period of time. It means you don’t need a job to maintain your lifestyle, or a side-hustle or any other means of generating labor-intensive income.

That financial independence could be based on a pile of cash that generates interest income, income from investments such as dividend growth stocks, or even social security or a pension. It could also be a combination of all of these. The extent to which your financial independence status lasts will be primarily based on the size of your savings and investments, the amount of risk you take (or don’t), and your lifestyle, which determines your spending.

Plan wisely, and you can hang on to that status almost indefinitely. Play it loose, and you could find yourself losing your financial independence and ability to stay retired early.

You can have a financially independent person with investable assets of $100K or one that requires $10 Million. It all depends on your circumstances and lifestyles.

If you’re still working a day job, or side hustling or running a business, you can still be considered financially independent. But only if the income from those activities is inconsequential to maintaining your lifestyle.

If you achieve financial independence, you can retire early. But this is only true if you do not need to work to maintain your lifestyle. However, you can be financially independent without retiring early.

Definition of Traditional Retirement

Traditional retirement is also a concept that’s understood by most. It usually means the end of one’s dependence on a conventional source of income from a W-2 or a 1099.

That source of income could have been a career, job, business, or even actively managing investments. It’s meant to be a transition. From spending most of your time on activities dictated by your income-producing commitments. To a period where you have the freedom to choose how your time is spent.

A precursor for retirement usually is financial independence, although it is clear many people are ill-prepared for that period of their life. Sometimes your exact retirement age is not planned due circumstances beyond your control. If we look at net worth targets by age, studies show that the median net worth of many in the 55 – 64 age bracket is only about $200K in 2019 dollars. This may not be enough depending on your lifestyle and spending.

In my opinion, you probably can’t be considered retired if you’re still actively generating income unless that income is not necessary to maintain your desired lifestyle. This means side hustles, part-time work, and similar income-producing activities are fair game in retirement provided that income is not necessary to maintain your lifestyle.

You can be retired and still generate income, as long as you’re financially independent.

What’s Considered Early Retirement

What distinguishes traditional retirement from early retirement is simply timing. I find this one relatively easy to define.

What we need is a proper and current baseline of when the majority of people retire. Thankfully the LIMRA Secure Retirement Institute has done all the hard work on what age most people retire in the US. This data will naturally continue to evolve over time as people live longer.

For now, LIMRA found that roughly 51% of Americans retire between the ages of 61 and 65, with 82% retiring after the age of 60.

Only 18% of individuals retire before the age of 60.

And only 5% of individuals retire before the age of 55.

What’s fascinating is that only 1% of individuals retire before the age of 50. That’s the type of 1%er many people want to be! On the other end of the spectrum only 7% retire after the age of 80 and only 2% at the age of 85+.

Based on this data, I would classify anyone retiring before the age of 60 as an early retiree. Those retiring before the age of 55 would be considered extremely early retirees and an outlier.

Those early retired folks are getting a considerable discount on their freedom, but they likely worked hard for it.

Like traditional retirement, you can be early retired and still generate income, as long as you’re financially independent. But again, you can be financially independent without being retired early.

Closing Thoughts on the Definition of Early Retirement

It’s no wonder there’s a bit of stigma associated with early retirees. Especially those under the age of 55. The chances that someone will ever meet or come across one of those individuals is rare.

This leads to quite a bit of ignorance around how most people have achieved such a significant accomplishment. And to a certain extent, maybe even some hostility. All you have to do is read through some of the comments on mainstream personal finance news outlets that highlight early retirees in a given article. Those comments are a window into how stigmatized this subject still is. Often people fail to realize though it is through hard work, paying off debt, saving at a high rate, and making smart decisions on investing in stocks or real estate.

Since I read and write about many people who have achieved FIRE, I’ve grown accustomed to learning about all sorts of people achieving financial independence and early retirement. As a result, the concept has become relatively normalized in my mind.

I’ve also realized that what many people are really chasing is financial independence at an early enough stage of their life to then do the things they want to in life. You can still choose to work but you can also choose not to. Early retirement will be a natural outcome once you hit that milestone of financial independence. Of course, many people want to claim their freedom as early as possible. Based on the data shared here, it seems like having the option to retire before the age of 50 would put most people in rarefied company.

Early retirement certainly comes in many flavors. Much thanks to Dividend Power for contributing this post. 

Author Bio: Dividend Power is a self-taught investor and blogger on dividend growth stocks and financial independence. Some of his writings can be found on Seeking Alpha, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial blogs. He also works as a part-time freelance equity analyst with a leading newsletter on dividend stocks. He was recently in the top 4% out of over 8,091 financial bloggers as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

 

 

FIRE Choke? How I Accounted For The Risks Of Early Retirement

Retire Early, Retirement Doubt, Risk Tolerance, ,

FIRE is hard to accomplish, not impossible. For many the dream of financial independence and retiring early is extremely alluring. Enough to motivate us to accomplish the necessary personal finance goals and overcome the hurdles of a system that wasn’t intended to allow escape from. It is something to be proud of and celebrated. Then just as it’s right in front of us we can find ourselves unable to pull the trigger, we FIRE choke. Fear of taking that last step is common. 

I wasn’t blind to the many risks of early retirement and covered it in my plan. Yet I still experienced anxiety from the enormity of my retirement move. It’s all too easy to focus on the celebrated sunny day images of early retirement and overlook or underestimate the probability of storms. That is until it’s all on the line at crunch time.

FIRE Choke? How I Accounted For The Risks Of Early Retirement

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Avoid FIRE Choke: Dealing With The Risks Of Early Retirement 

The risks of early retirement are real. They must be recognized and accounted for in any early retirement plan. Even if we’re fortunate enough to never actually experience them, without understanding how we would counter them can cause expending too much energy and time worrying about “what if”. 

I had delayed my early retirement by a year because the recession came right as I hit my goals. It ruthlessly moved my target further away from me and set me back. But later when all signs pointed to being good to go, my recent memory of the recession’s last minute target devastation caused me a little battle with FIRE choke. It would have been much more paralyzing had I not accounted for all the risks we’re warned about. 

Market Risk

Investing over the long-term usually favors the investor. Retiring early means relying on our portfolio over a much longer period of time. But using a retirement calculator that accounts for multiple historical return cycles isn’t a guarantee that we won’t enter a risky run at the wrong time or for a devastating prolonged period of time. It was something I had to mentally deal with.

My counter to relieve some of the market risks of early retirement was with diversification and rebalancing allocations as necessary. I had the stock to bond ratios to support my investment risk tolerance. Along with enough cash to get through any bumpy markets. After my recession experience I wanted a recession hardened portfolio. Now 11 years into my early retirement I have to say it has worked flawlessly. The portfolio also proved less worrisome when I saw during the pandemic market drop that my portfolio allocations did their job. 

My tip- To reduce the market risk worries of early retirement pick a portfolio allocation, diversification, and cash holding strategy within your risk tolerance that relies on data. Don’t bounce around based on emotions. Especially those driven by fear or greed. I’ve heard too many stories of folks jumping in and out of their strategy and causing damage to both their portfolio and retirement.

Health Insurance- Medical Costs

Medical cost is something that causes many to FIRE Choke. Retiring early before Medicare eligibility can make retirement healthcare pricey. I had earned a retirement health insurance benefit. My short-term healthcare was covered. But my company had been merged with those that had an adversarial attitude toward earlier earned benefit promises. Although benefit cuts made before I retired were worrisome enough, I had to counter concerns about how much worse it could get over time. I retired 14 years before I would be Medicare age. When I retired the ACA was being worked on, nowhere near passing into law. 

With my early retirement at the end of 2009 I had a monthly health insurance premium for my wife and I of $475 with $25 copays. Now in 2021 I pay $1472 with a midrange deductible before an 80/20 payout begins. If it becomes too unaffordable my “plan B” is to structure my income to use the ACA.

My tip- What I did to calm the risks of early retirement medical cost concerns was to double my medical budget of insurance premiums plus out of pocket costs when running my numbers through the retirement calculator. In hindsight my doubleling was not enough to cover my full pre-medicare 14 year period. I recommend using a projected budget that uses double current healthcare costs for the 1rst 7 years of early retirement. Then trippel it for any remaining years before Medicare. See how your retirement calculation works out for the years before Medicare and after.

Remember, it’s just long-term projections in a calculator

I had to plug in a higher withdrawal amount into the FIRECalc calculator than I was planning on using. What I was looking for was my retirement funding success rate. I ended up initially with a higher portfolio withdrawal rate than the recommended 4% but post Medicare it will be lower. 

No More Paychecks Syndrome

The one joy of employment is getting a paycheck. Then doing our thing of managing the budget plus putting some aside to pay ourselves. Knowing that paychecks end when we walk off the job can mess with our head. I planned to get around this by having my IRA account holder directly deposit a monthly check into my bank account. 

My tip- Create your own paycheck scheme. I went from bi-weekly work paychecks to once a month distributions for my bucket strategized IRA. I had the retirement distribution deposited into a savings account and I then make bi-monthly paycheck transfers from that. 

Thoughts Of Needing More Money

One of the risks of early retirement is not having enough money. Even when the numbers check out it’s easy to succumb to thinking to maybe playing it safe and accumulate even more. This is a common FIRE Choke. Putting retirement off for another year or longer of portfolio padding. Both the fear of running out of money or being greedy and thinking more is always better than anything else can cause us to choke and derail retirement plans at the last moment. 

My tip – Retiring on our terms means picking the day we toss the job for the adventure of retirement freedom and owning our own time. When the thoughts of needing more creeped into my mind, I reminded myself that time is finite and not guaranteed. My father in-law shared through his own experience that retiring early is like leaving the casino when ahead. I used that metaphor to quiet the more money seduction.

Be Mentally Ready

Most importantly is planning to be mentally ready to retire and walk away from the only life you have known. It might not be the life you enjoy, but it’s the devil you know. Even if all the other bases are covered, not being mentally ready means none of it will matter. FIRE Choke is then inevitable. Even if we were to power past that, there would be no mental peace about the decision to retire early if our head isn’t right. There are plenty of nonfinancial aspects that we need to account for to avoid mentally regretting our early retirement decision.

My tip- Plan to deal with separating your identity from what you did for a job, expanding your social life, defining an ever changing purpose, and transitioning from saver to spender of your portfolio. Much of this requires being aware of it before retirement. But most will have to be fine tuned on the fly after entering retirement. So finally, give yourself time to work through it. 

 

There are many reasons why we may question our decision to retire early once the goals have been met and our plan looks solid. Dealing with issues that range from fear to greed are common. We just need to be aware of them and address them logically. If we can’t account for them in a reasonable way and there’s still mental reluctance then maybe it really isn’t our time to take the leap. There’s no shame in that. Afterall, we’re the ones that have to live with ourselves and the outcome of our decisions. 

My Early Retirement Was Never About Retirement

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Sometimes we have to adapt to difficult and changing circumstances. As people are being forced to reevaluate their retirement plans and careers, it’s easy to get hung up on the perceived safety of coloring within the lines of traditional definitions and norms. For many it may look impossible to figure out a way to financial security. Maybe a mental shift is needed and perhaps my retirement story will provide ideas. Even though what I did was characterized as early retirement, my leaving my career at the age of 51 was never about retirement. 

Everyone has a mental picture of what retirement is. I had a retirement image too and I knew that someday I would reach an age that the traditional definition of retirement would materialize. But that vision of retirement was decades away. My early retirement wasn’t that. Not even close. I wouldn’t accept that there was just one way to go. 

My Early Retirement Was Never About Retirement

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I Retired Early But It Was Never About Retirement 

I do understand why I got the heat I did about my early retirement not being considered retired. I’ve gone with a different solution to counter the dregs of youthful work life. I wanted to ditch the rat race much earlier than waiting until a traditional retirement age. So I adopted a “retire early and often” mindset. I then created and executed a plan to achieve it. Taking a different direction where I wouldn’t have to wait until old age or having a million dollars in the bank. 

My Employment Liberation Motivation

After decades of relentless and unrewarding work, living under the threat of downsizing and the resulting financial ruin it could cause me and my family, I was motivated to reach a point of employment liberation. A financial condition where I never needed to kiss Corporate-keister or if forced into long-term unemployment have to rely on stingy safety nets to survive.

By the time I decided to work towards early retirement I had already made an interstate relocation to keep my job. Then came the long days in the office, 24X7 on-call duties, business travel, and constantly increasing workloads. There were harmful economic market bubbles and the recession that cruelly added more grief by providing easy excuses to further hammer workers. Sacrifices were made for the workplace promises of something better later. But as I and many people know, you can’t count on corporate world promises. 

What My Early Retirement Plan Targeted

I knew from day one of my financial plan that I was going to retire early and often. I later found a retirement definition that better captured that same mindset: Retirement is the absence of needing to work, not the absence of working.

It all came down to deciding that I’d commit to saving enough to cover living expenses and be free to pursue opportunities of interest and passions. I would welcome paid work in my early retirement but only on my terms. I’d only accept work that meets my criteria and always free to walk away at any time without threat of financial ruin.

What I Did To Reach Employment Liberation

Instead of trying to save a million dollars or more, which at my salary would take me well into old age if ever, I decided to go a different route: 

  • Create a sustainable happy lifestyle without wasteful spending. A frugal lifestyle that may not have included months of exotic travel, expensive cars, or second homes. But it also didn’t include feeling like we were living a deprived life. It was all about simpler living. 
  • Ramp up savings to save enough to cover that lifestyle in retirement. 
  • Maximize income with eyes wide open to leverage wins in the corporate world’s game. 
It started with cutting waste from our budget. 

We adopted a smart frugal and balanced lifestyle. It does take time and practice to figure out what a sustainable and happy frugal lifestyle is. We perfected it during our journey to early retirement. It was the lifestyle we wanted to live before and in retirement. 

Next was eliminating all non-mortgage debt. 

That effort further reduced our cost of living, that reduced our required budget, which equates to less needed saved for retirement to support it. 

Redirect excess income into savings.

It was then all about ramping up our savings to hit the portfolio target sooner than later. Once expenses are cut more money is freed up to invest. There was nothing extreme in my early retirement story. Just the same basic stuff everyone else in personal finance talks about. 

Always recognize opportunities to increase income and continually gain marketable skills. 

This is an effort that we all should do in our careers. Increased income results in more money to save. Increased skills adds to increased income opportunities now and after early retirement. 

My efforts also required me to better play the corporate world’s game. 

I focused on what management valued. They happily load us down with important but non-valued work. All the things we worked hard to do but meant nothing to management during our evaluations for raises and advancement. Tasks that management seldom loaded onto their pet employees. 

That stuff ate time. Usually eating into our personal time and always taking time away from game winning opportunities. I used their own values to decrease my efforts on that segment of responsibility and put all effort into their home run values. 

I then used their own values to challenge any of their objections to my work priorities. It was clear that the issue comes down to every personal success I could leverage into better raises for me equated to management taking some credit and reward too. 

How I Viewed My Portfolio

I did run my numbers through a retirement calculator to get a feel for my success chances. As for how much I saved, I didn’t have the luxury of shooting for a sizable portfolio that would perpetually generate enough passive income of dividends and interest to totally live off of. I knew I’d also spend down assets as part of my retirement funding bucket strategy. 

I simply thought of early retirement as a condition of unemployment. Whenever I saved money I thought in terms of how many days, weeks, months, and years of being unemployed would be covered. This thinking continued even when working in my targeted retirement gigs. I looked at my earnings that same way as I set the money aside to increase my net worth. 

I just had a different early retirement vision.

It was always my plan to retire early and then freely pursue opportunities of interest that were outside of what my first career allowed. Once that itch was scratched, I would then go on to the next one when the opportunity to do so presented itself. 

I was also content to sit out doing any paid work at all. It was an early retirement plan born of the hope for freedom through employment liberation. That and being shielded from the economic cycles and the corporate world decisions that seem to always mess with the working class. 

I didn’t have the luxury of a fat salary to pad a huge portfolio. 

Although it sounds wonderful if you have the bucks, I never even considered an early retirement of nothing but pure leisure and neverending travel. To tell the truth, that wouldn’t appeal to me regardless of money. We travel as much as we want to but enjoy where we live. I didn’t have to work in my early retirement to live our lifestyle. But I planned on being open to opportunities. Knowing I would most likely take on a paid gig at times. 

Wrapping up-

What having this mindset and plan did was allow me to take on rewarding work in retirement that I wanted to learn and do. Since I stayed on a budget funded by my portfolio, I funneled all earnings back into my net worth. After 11 years of portfolio funded early retirement, with a few working adventures thrown in, I now have a fatter portfolio to go along with my ability to live a better and freer lifestyle. 

Retiring young means still having all of the energy, spirit, and discipline that brought us success in life and career. I’ve found that we’re happiest when we can direct that energy towards something we value. I simply took what I had saved, created a way to access it to fund our frugal living lifestyle, and freed myself to accept opportunities when they were available to me. My early retirement was never about retirement as it’s hardly what many would call a retirement. Not unless the same retirement mindset that I have can be accepted. There’s always more than just one way. 

Celebrating My 11th Year Of Early Retirement, Although…

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Wow, today is my 11th early retirement anniversary from when I walked away from a long telecom career. It has been quite a ride, although I would be fibbing to say year eleven was a stellar year of early retirement living. I hope to soon look back and say at least I survived the pandemic of 2020. Not just the virus, but also the numerous other assaults on reason and humanity over the year. I will also look back knowing we did what we could to help others so it might be a little better. No, my 11th year of early retirement has nothing to brag about. There was a lot given up even within our frugal early retirement lifestyle. But with all of that, there are still some 11th year blessings to celebrate.

Celebrating My 11th Year Of Early Retirement, Although...

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It Wasn’t Great But I’m Still Celebrating My 11th Year Of Early Retirement

There are things that were cancelled or I had to stop doing this year. 

Hiking – 

We would hike the trails near our home 5 days a week. Just pick a path and go out for an hour or two. Normally we would see a handful of other hikers. But with lockdowns and the fortunate who could work from home, the trails were packed with people. Many without masks huffing and puffing. We grew tired of trying to avoid being too close to people and gave it up. 

Library – 

I really enjoy spending a little time at our library once a week. I had a routine to browse the DVD section for new movie releases and score a few for the week’s entertainment. First they were shut down and then once opened under restrictions I decided not to go back until vaccination. 

Social life – 

I missed my daily trip to the local coffee shop for a cup and social interaction. Once socially distanced indoor service opened up during the summer I would mask up and have a seat when there were few inside. A small taste of pre-pandemic life. But many times that meant going when nobody else was there for a break out of the house but not so social. Still, I wanted to continue supporting the business and when crowded I would simply settle for take out. 

Events – 

Our community has many free events. Concerts, car shows, Oktoberfest, art festivals, county fair, etc. I attend many and volunteer at some of them. It is one of the special things that make early retirement fun and a bonus for living here. This year they were all cancelled and a couple that went ahead were heavily limited and restricted.

Travel –

All of our travel was cancelled. Our yearly travel includes seeing extended family to stay connected. That really hurt. We did a few day trips June through September. Mostly to the mountains or small town destinations where we could sightsee and avoid crowds. For the most part we avoided going out and about anywhere public on these outings. 

Sit down restaurant eating, movies, and shopping –

Our last sit down restaurant meal was Valentine’s Day. Although we don’t typically eat out or go to movies all that much, we miss being able to freely do it. Occasional takeout was a less eventful substitute. Although we aren’t big shoppers, being able to just drop into grocery without much thought was missed. We’ve relied on online order and pickup and every trip into grocery for small needs took crowd analysis and run-ins with the infectious undead, I mean unmasked.

Lost friends –

I did lose people I knew or who were friends through death or beliefs. There were a couple of people who couldn’t accept my mask. My thought is that they were free to believe what they believe and to risk it all by having-at-it. But somehow my decisions to mask in public and heavily limit my social interactions were an affront to their existence, worth verbal attack and shunning. They at least gesture that I’m number 1 when they see me in town. 

There are plenty of reasons for me to celebrate early retirement year number eleven

No forced dangerous work –

I can imagine how things would have been had I still been in my first long career. A dark corporate mindset that loved to pick winners and losers based on measures other than performance or even job responsibility. Seemed I was constantly chosen for all the dangerous or less savorable duties. Sometimes under threat when challenged. I felt fortunate that I didn’t have to endure what many had to during this past year. Deciding between risking their health or losing their income. I feel for anyone whose work wouldn’t or couldn’t protect them from this plague. 

No threats to shelter and food –

Because of FIRE I never had to worry about making ends meet, unlike far too many others. Being debt free, frugal living, and having a long-term sustainable early retirement budget aligned with my savings meant uninterrupted sufficient income. 

Saved a lot in spending that allowed us to help our kids – 

Without travel or recreation this year we had extra room in our budget to help our kid’s families. They took income reductions and had added expenses when food and some service needs costs went up.

A couple of months working at my daughter’s new place –

My youngest daughter spent the lockdown with a teenager and two hounds in a 2 bedroom rented condo. That was enough for her to decide she wanted a home of her own. She was fortunate her lease was up and she jumped early after restrictions were eased to find a house. She scored an older home that needed some maintenance for a price within her budget. I was able to spend 2 or 3 days a week during August and September getting reacquainted with my tools, ladder, and old guy homeowner skills. It broke up the mononanty of pandemic life and helped her get to a good place. I also won the approval of her neighbors who were happy to see the place being fixed up. 

The ability to donate –

With so many in need we were able to up our donations for the socially oppressed and needy this year beyond our normal church and supported charities. We feel the unfairness of the power dynamics and the pandemic’s impacts. I’m still trying to grasp this crazy situation where those that work for a living get hit worse than the stock market. I get that the market looks ahead, but that doesn’t help those in the now. I don’t celebrate the situation but that we had the ability to do what we could. 

Freedom to believe in God, medical professionals, science, and decency –

This 11th year taught me a lot in how much freedom is within our own minds. I consider myself financially free but it means nothing without health, love, and life. How different my 11th year would have been had I been mentally imprisoned by conspiracy theories and idol worship. I’ve the freedom to not worry about what others do or believe, nor feel I’m a victim of “the others”. I’m the master of my own domain and don’t require anyone’s approval, acceptance, or membership. 

My 12th year early retirement planning

I don’t know what the future will bring. There is a lot quickly changing both near and far. I do know what I plan on doing at the most basic level. The rest will be a let’s see what happens first. If I’ve learned anything in these 11 years of retirement it’s the importance of embracing flexibility.

Vaccine –

I will freely choose to get the vaccine as soon as my number is called. I believe the rest of my year will bank on accomplishing that first. 

Masks –

Even after being vaccinated I plan that I will be wearing a mask until the 4th quarter when enough people have been vaccinated and COVID-19 trends look good. I’m hopeful events will start up again and I will happily attend them while being masked. The same goes with hiking, going to the library, shopping, and all the other little things that I enjoy doing. 

Limited travel to see extended family –

I am hopeful that I and my family will be vaccinated by this summer so that we can get together once again. Other than that I think we will wait for any other travel plans. I suspect as things safely open up that the overwhelming pent up travel demand will make things tough to get a decent deal anywhere. If I’m wrong about that then I will reconsider.

Hair –

I haven’t had a haircut since last February. It has gone far beyond shaggy to long and I’m reintroduced to my mid-1970s teenage long hair life. I fully embraced the bandanna headband, channeling my inner Tommy Chong while open top convertible cruising all summer. I see this next year going with more of a Viking look. Half up ponytail and maybe some micro braids. That is as long as my wife keeps her sense of humor. 

4th quarter normalcy – 

I am hoping for, thus planning for, pandemic numbers and facts to be great by 4th quarter 2021. Then full maskless life can once again safely make sense.

Continue my same asset allocation –

My portfolio asset allocation has been maintained through rebalancing and will continue doing so as needed. The market has escalated in hopes of a rebounding post vaccine economy, pent up demand, and a new presidential administration. Let’s hope it’s right.

 

Yes, my 11th year of early retirement was nothing fantastic. But I still feel blessed. I’m not planning on a fantastic 12th year either because of Rona and its damaging impacts are far from over. When I look back at this 11th year I will think about a mentality parallel between people ignoring pandemic safety recommendations and the basic FIRE principles that would better their lives. Basically you just can’t save everyone. And that’s OK. We all should have the freedom to choose our own path as long as we don’t drag others down with us if things don’t go our way or later cry about it. 

My early retirement journey was born of both crucible and hope. Something that this past year offered in abundance. Perhaps this pandemic and everything that has happened will cause us all to rethink our future and plan for a better life. Then do something to make it happen.

Is Early Retirement Lifestyle Inflation Ever Justified?

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There might be something wrong with me. I was given the green light to spend more money in my early retirement.  So I tried to do it but failed. Lifestyle inflation is a huge risk to avoid when saving for retirement and financial independence. It robs us of potential future investment income when money is spent unnecessarily for wants beyond needs. But once we are happily rat race free and living off of our portfolio, is early retirement lifestyle inflation ever justified? 

Is Early Retirement Lifestyle Inflation Ever Justified?

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Asking The Question: Is Deliberate Early Retirement Lifestyle Inflation Ever Justified?

The reason that I ask this question is due to events that began over a year ago. I was meeting with my CFP and he asks as he always does, what have you been up to and how are things going with cash flow? 

For years I’ve got the impression that he’s perplexed about our budget. We live in an above average cost region in a desirable and fast growing town on what most here would consider a small amount of money. He knows exactly what income I’m getting and living off of in early retirement. I explained everything was going well and that is when he dropped the unexpected: 

According to their analysis, I could increase my cash flow. They recommend upping the monthly distribution amount that I receive from my IRA. 

You’re suggesting that I take more money out of my portfolio to spend? How did this happen?

He presented graphs and analysis based on my portfolio, future Social Security income, tax considerations, and their Monte Carlo calculated results to support increasing my distribution amount. 

I never thought this would happen. I retired early at age 51 with less than a million dollar portfolio. Even so, did I still save too much? Over 10 years into this sweet early retirement ride I sometimes wonder if I could have retired much younger. 

On the other side of my ponder was the effect of my static withdrawal rate for the first 9 years of early retirement. It was in the upper 4% range, nearer 5%. My withdrawal amount never fluctuated with inflation. Inflation that was primarily associated with health insurance. This must have played into the current positive cash flow situation and supports recent talk that 4% withdrawal rate is too low.

This also shows the enormous positive long-term impact of a few short but enjoyable retirement gigs. I lived off of my portfolio 72t distributions and pumped any gig earnings back into my net worth. Simply put, I paid off my $100K mortgage and added a bit to the portfolio by taking advantage of 401K opportunities. Those unexpected and unplanned moves while simply living on budget allowed my eliminated mortgage payment to counter health insurance budget increases and added an offset to some of the portfolio withdrawals for a couple of years. 

At first I hesitated and even said no thanks, but then….

I started thinking that maybe he was right and we should cut loose a little more. YOLO, that great seducer came to mind while sitting there in his office and I agreed to the recommendation. With that my monthly distribution increased $800. A monthly raise anyone would love to get. I knew it could go to good use. It was certain that our health insurance premium would jump at the end of the year as it always does and I had some new expensive medication I had to now take. There are other things that we ditched long ago in our smart frugal budget and lifestyle that we can maybe look at again. 

I began to think that because this is a deliberate increase in spending based on financial data and complex calculations, it probably shouldn’t be considered early retirement lifestyle inflation. It’s easy to rationalize. A little too easy. However, a year later things have played out differently. 

There was a problem, there wasn’t anything I wanted to spend more money on.

I had created a sustainable and enjoyable smart frugal lifestyle. It seems when given the opportunity to open up spending there wasn’t anything wanted or needed above what our budget already allowed for. When it came down to it, there was nothing I felt deprived of having. We simply do everything that we want to do. We buy what we want and need to buy. 

Here’s what I think happens. FIRE minded folks think differently than most people. The desire to wastfully own wants and expand needs significantly decreases over time when we are FIRE aware. In my case it wasn’t reversible even with there being more money available to spend. Good financial and simpler living habits die hard too.  

What ended up happening with the increased income.

The extra monthly income easily covers my added medical expenses and the rest gets diverted to my bank savings and CDs. I’ve worked it into my increased retirement cash holdings strategy. Aside from that, it’s nice knowing that if I did have an unplanned expense or if something special came up that I have the cash to handle it. 

I did splurge and bought a long-time bucket list auto several months ago. Something that caused questions about my financial standing among friends and acquaintances. That social pop blew over quickly and I am really happy that I scratched that itch.

The extra cash has allowed us to assist our children during the pandemic as their income has decreased, causing them budget challenges. 

If the portfolio takes a dump it’s comforting to know I can use saved cash and easily reduce portfolio distributions.

The Takeaway

As hard as it is to initially set and keep to a budget, when done correctly it produces positive lifelong personal finance habits.

Creating a sustainable and enjoyable retirement lifestyle is the reward, not getting more money. Which is a reason why my retirement gigs ended as they did. Everyone is different, but we have landed in a lifestyle without feeling deprived and all our needs, even wants are met. Increasing our spending would feel forced and unnecessary. 

Even when retiring early without a million dollar portfolio, having a portfolio aligned budget and lifestyle can result in still having long-term financial security. 

Early spending discipline can result in better than expected long-term portfolio performance. That and simply keeping our eyes open to rewarding opportunities of interest and passions. FIRE naysayers are wrong, retiring early to a life of austerity is not a given. We can use our youth, energy, and health to our advantage in early retirement. 

The fear that the retirement calculator results could be wrong was unfounded. I constantly ran my numbers before ditching the rat race and they ended up right. At least to this point over a decade into this early retirement adventure. I am going to feel good about trusting the numbers my CFP is seeing now too.

 

Is early retirement lifestyle inflation ever justified? It certainly can be allowed from a numbers perspective if the portfolio has performed well enough and we age beyond any long-term tipping point. The issue is whether we are happy with our lifestyle and whether spending more will make any difference, either good or bad. With all the hellish news we hear today, hopefully this personal revelation brings a little thought provoking sunshine to anyone’s doubts when considering their retirement. 

Healthline Articles Of Interest To First Responders 

Healthline recognizes Seniors face a complex Medicare system. To help first responders have one less thing to worry about during this difficult time, Healthline experts created an easy to read guide outlining Medicare eligibility. They discuss the different parts of Medicare and what to do if you retire before 65.

Medicare for First Responders
Medicare Part C

Things I Did Wrong and Still Retired Early

Retire Early

If I listen to a lot of financial independence-retire early naysayers, it would have been a mistake for me to even think about an early retirement. Yet, according to common beliefs, there was a lot I did wrong and still retired early. I’m a FIRE living believer that the path isn’t limited to only the highly educated professional salaried group. Not that being in that group doesn’t help. Here’s a list of my life choices, mistakes, and circumstances that according to experts and naysayers should have made early retirement impossible to pull off.

Things I Did Wrong and Still Retired Early

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What I Seemingly Did Wrong and Still Retired Early

Maybe it’s all luck. I’ve been told that many times. I grew up low income, the oldest child of 4 to parents that never even attended high school. Although they encouraged me to graduate from high school, education wasn’t a family theme. Hard work and self reliance was preached. My father told me when I was a young teenager: 

Work hard or starve because this world would rather feed a stray dog than a man down on his luck. 

My dad was tired when he told me that. He worked 3 jobs. A full-time elementary school custodian, a part-time evening restaurant cook, and worked a part-time graveyard shift in a meat pie processing plant. He got to come home to sleep in his bed 2 nights a week. The other nights he slept in his truck at the next job location before reporting to work. He did that instead of wasting time driving home for only a couple of hours of sleep. The day he dropped that dire little nugget of life advice it scared the hell out of me. Now I see how that message and his example shaped me to be who I am. 

A lot of things considered wrong when it comes to reaching financial independence happened because I didn’t know any better. But I still found a way to FIRE once I became personal finance aware. Here’s a look at the bigger challenges that happen in life, but as I have proven can be overcome for early retirement success. 

I didn’t go to college after graduating from high school

College was pushed in the late 70s just as today. I really wanted to go and worked hard to get straight A’s and make the honor roll year after year knowing my only path was a scholarship. I remember the downer it was during my future education discussion with my high school counselor. Grades, check! Test scores, check! Scholarship, not a chance in hell. Guys like me were at the bottom of the list. My folks didn’t have any money and couldn’t/wouldn’t co-sign for a student loan, nor could I get one on my own. 

I married young

It was a couple of months before my 19th birthday when I tied the knot with my high school sweetheart. I was working full-time and she worked part-time on weekends as she went to community college. Marrying young is frowned upon today. A sign of hardship to come. Even back then we married earlier than most. 

Became a parent at a young age

At the age of 22 we welcomed our first of 3 children. All 2 years apart. A lot of people believe only the childless can pull off early retirement. Kids do cost a lot of money and we certainly went into a financial tailspin when ours were young.

Took on too much debt early in life

I couldn’t borrow money to go to college to be stuck with student loan debt like many young people today, but we still built huge personal debt. A major thing that we did wrong and yet eventually overcame to retire early. Childcare was too costly to make my wife’s returning to work worth it. She stayed home several years until the kids went to school. I worked 2 jobs. During this period we still didn’t make ends meet and relied on credit cards throughout the years to cover the monthly deficits. It piled up to an amount that was 44% my yearly salary before my wife could return to work. 

I was late to embrace 401K savings 

I was already 7 years into my career before the 401K was unenthusiastically rolled out. What fanfare there was didn’t light a fire under my keister. Money was already tight. I reluctantly signed up for the company’s match on a 3% savings rate. Age 27 is a late early retirement savings start.

I was too conservative in my investing

For many years the only 401K investment choice was company stock or guaranteed interest cash savings. Since the company match was 100% company stock I invested 100% in cash. I stuck to that even after I began to see the light of financial day and upped my 401K savings rate. When we began to get other investment options in the 401K program I was still too conservative in my investment allocation. My early retirement investment strategy didn’t shift until age 40 when I finally met with a financial planner. 

I believed in employment fairness until late in my career

I was naive about how the world of employment works. Falsely believing that hard work and measurable achievement alone was the path to career success. It wasn’t until 20 years into my career that I realized how ruthless the corporate world really was and the ways of corporate politics. Business exploits resources for the lowest cost possible to achieve maximum profits. We must actively leverage our skills and achievements for the highest possible pay. For all but the connected, personal success won’t just happen with hard work and waiting in an imaginary line for your turn. Years were wasted by solely waiting for better earnings based on recognized merit.

I actually trusted and believed in promises

One of the reasons I chose my career path was that it had great benefits. It included a pension and health insurance. But it came at the cost of a lower salary. Benefits were thrown in our face as why our sacrifice was worthy. We all fell for it. Then when everything shifted in the corporate world they just changed their minds. Many of us didn’t save as much because of lower pay and relying on having a pension. Once they could legally remove people from the pension plan or cut benefits there was no restitution for the decades of our reduced salary given up to pay for it. I failed to consider that long-term promises are high-risk and it set me back when they were broken.

Here’s The Point –

Life and work over the years seldom go perfectly. I did a lot wrong and still retired early. It wasn’t stupid mistakes, it was living an ordinary life. We learn as we gain experience. We can do the best we can with the circumstances we are handed, screw up in hindsight, and instead of doubling down and whining about it, admit it and make the necessary corrections to achieve our goals. It just takes longer than it would have if we had done things better. We shouldn’t allow anyone to say our so called personal finance no-nos will put early retirement completely out of reach. We get to decide that for ourselves. 

Even with the challenges I had and what I did wrong according to common early retirement norms, I retired from my telecom career at the age of 51 and never looked back. I feel like I could be the poster boy for recognizing and learning from life’s challenges and mistakes. Better late than never fits perfectly. Then I made what I learned pay off by taking corrective actions to achieve my FIRE goals.