There are many flavors of early retirement that people have found success with. The recipe usually starts with the same base ingredients. It begins with envisioning what our ideal retirement lifestyle would look like. Then it’s all about what it will cost, how much we need to save to pay for it, and what could actually be done to pull it off. But different people will add different favoring to the recipe. What works for them may not be appetizing to others. Based on what people believe about early retirement and the negative feedback that they enjoy sharing, I know that some of the flavors of early retirement that I found success with isn’t for everyone.

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The Flavors Of Early Retirement I Chose That Might Not Work For You

When I left the grind I didn’t really know anything about financial independence retire early (FIRE). I simply wanted to retire as young as I could and had to figure out what would work for me. I met with a financial planner, I would read books, and I researched the few online resources at that time to get real life early retirement success stories. All of this provided some great ideas and for various reasons there were many things that just wouldn’t realistically work for me. It’s the things that could work for me that mattered. That’s what I used to personalize my early retirement success strategy.

If you are on your early retirement journey then you are most likely doing the same kind of research and know exactly what I am talking about. Although there are many flavors used in my early retirement that are useful to a variety of people, here are a few that you may or may not like –

Early Retirement Allows For Paid Work

This is a flavor where a little goes a long way when added correctly. Even though “Retire Early and Often” is my tag line, my having worked some retirement gigs and a short encore career is the thing that I catch the most grief about from people who love to let me know the rules of retirement. I get it, traditional definitions of retirement means being done with working. It seems to be very hard for some people to let go of. This flavor of early retirement that I chose and live by spells it out this way: Retirement is the absence of NEEDING to work, not the absence of working.

I don’t need to work to live the lifestyle I want to live. But I certainly stay open to opportunities that I would be interested and passionate about doing. Months and years will and have separated my adventures in paid retirement gigs.

Many early retirees will engage in any number of paid endeavors both big and small.

This chosen flavor of early retirement is one where I live off of my portfolio and strategically add any salary I may earn back into my net worth. I’ve shared my experiences and how much it has benefited me. It isn’t a flavor for anyone who can’t shake loose of outdated retirement rules and accept that they just might one day WANT to re-enter some form of paid work as part of their retirement. After spending decades in the rat race, I’ve found it both exciting, enjoyable, and even somewhat liberating to take on an opportunity for just as long as it meets my interests, passions, and needs.

An Early Retirement Where The 4% Withdrawal Rate isn’t Gospel

I chose instead to flavor to taste. No matter what percent is used or believed as a safe withdrawal rate, my flavor of early retirement doesn’t believe in a static withdrawal rate that’s set at our retirement date. I see it as guidance, not gospel. Why? Because life will happen. Things will change as we age and through time in our retirement. There will be things we can and can’t possibly plan for or control, both good and bad. I believe in having a dynamic withdrawal rate with a heavy dash of lifestyle inflation control. A 4% withdrawal rate on the common early retirement benchmark of $1M sets it at $40K a year. That’s great if you can earn enough to save $1M or more. But for me and most people I know, accumulating a portfolio of that size would mean delaying retirement to old age, if ever.

I started with a withdrawal rate closer to 5.5%. But I also calculated in my expected Social Security income to start about 16 years later. My Social Security, even if reduced because of government inaction to shore it up, should lower my portfolio reliance by at least 50%. That’s one major reason my starting withdrawal rate wasn’t planned as static over my retirement. Therefore I chose to retire early with less than a million dollars and began the early retirement lifestyle I planned for.

My flavor or early retirement has a withdrawal rate based on retirement calculator results.

I didn’t start retirement funding with a percentage of my portfolio, I started with an amount I needed. I simply ran the needed funding numbers against my portfolio amount and plugged in my future Social Security. Now nine plus years into early retirement my withdrawal rate is 3.7%. That’s even with today’s higher than planned health insurance cost. I expect my withdrawal rate to significantly drop even more once my Social Security begins. Medicare is even closer for me to start. It will most likely further reduce my withdrawal amount because our health insurance represents a third of my current budget.

The way I retired early probably won’t work for those who only believe in a gospel of a static withdrawal rate plus inflation. My early retirement flavor is to have a flexible, dynamic, and realistic withdrawal rate. One backed up by Monte Carlo retirement calculation results.

Funding Early Retirement With Tax Deferred IRA & 401K First

Flavor sequence matters. The traditional way to sequence our retirement withdrawal sources was to use non-retirement assets first. Then look to tap into our tax deferred IRA and 401K. Any Roth accounts are then tapped last. The thought is it’s best to spend down non retirement accounts first. Reasoning it’s better to allow our tax deferred retirement assets to continue growing tax deferred. Our Roth IRA funds would then be left for late life tax-free withdrawals. It seems like sound advice and for many this is the default path of retirement funding sequence. But that didn’t taste right to me because it doesn’t fully consider the impact of taxes.

My funding sequence uses a different retirement withdrawal strategy that considers tax efficiency.

The strategy I use starts retirement funding by first withdrawing from my tax-deferred (401K/IRA) retirement accounts. Withdrawals were limited to stay below the upper threshold of the 15% tax bracket. Today with the new tax law the goal is now to always stay within the 12% bracket. I was in a higher tax bracket than that during my saving years in the trenches. Getting the higher tax benefit savings then and paying less taxes now on tax deferred savings is a welcome gain.

Before I reached the age of 59 ½ I used SEPP 72t to avoid the early withdrawal penalty to fund my early retirement from my IRA. With that now ended I still use my IRA first. My withdrawal strategy will only withdraw from my non-retirement account savings/investments if I ever need more than what the 12% tax bracket allows. Roth accounts are still sequenced to be used last, only after my other non-retirement account savings/investments are depleted. My Roth is not being held until my IRAs are dry. They will also be used when needed for tax rate management. This withdrawal strategy was found to add to portfolio longevity. I also believe in using this strategy to assist with managing Social Security’s taxability when I eventually begin it.

Anyone who believes in and prefers the more simplistic and commonly touted portfolio fund withdrawal strategy will not favor this flavor that I use.

Flavor Your Early Retirement To Your Taste

The above flavors I shared are just a few that I’ve used for my early retirement. There are all kinds of early retirement success stories to be inspired by. They range from extreme frugality to mega portfolio accumulation. They come from people who are Social Security believers to those who have given up on it and would never consider counting on it. We will always come across some of the touted early retirement flavors that won’t work for the unique blend we prefer, we can realistically reach, or that we can tolerate.

During my pre early retirement research I did run into ideas that I took in as workable. But there were others I just moved on from as not being for me. I understand why some of the ways I put together my success recipe for early retirement won’t be for everyone. Hopefully what I share about my early retirement experience provides some new ideas that can be turned into your own unique solutions. Wherever your early retirement research takes you, look for ideas that appeal to you, verify through calculation, and craft your own winning combination of early retirement flavors to use for your success plan.