How to Take Early Retirement in 6 Steps

At the end of a career, most people dream of long vacations by the beach, waking up close to noon and going fishing or even just lazing on the couch watching your favorite movies all day long.

As you grow, these golden days are approaching.

Maybe you aren’t one who wants to wait until 60 or 70 to retire. In fact, you want to retire much sooner say around 40?

It’s certainly not out of the question. This is definitely possible especially for those who are smart with their money.

If you want to know how you can have your 45th birthday and retirement party on the same day, here are a few ways of getting there:

How to Take Early Retirement

1. Set a realistic goal

The term early retirement can vary from person to person – what is early for you?

On an average people retire around the age of 65 and even then have not saved sufficient to meet the horizon. This only suggests that you need to start planning for your retirement at the earliest.

Would you like to resign and walk out of office at the age of 55 or would you want personal financial freedom by your mid 30’s?

The goal you set will determine what you need to do to take early retirement.

2. Consider the whole enchilada

Early retirement is not only about the nest egg that you use to on a year-to-year basis. It’s a starting point, but it involves a lot more such as:

  • Health care

Working in a company at a young age means you get employer-provided health plans. Retirement doesn’t give you this frill.

Medicare only kicks in at 65. Until then?

An expensive part of retirement is health care, and with age, this cost goes up. It’s best to have a lifelong plan in place before retiring.

  • Social security

You will not get payment from social security until retirement age. 62 onwards, you can begin collecting your checks.

Those who retire early get lighter checks as you are paid based on your earnings in a lifetime. So take this into consideration as well when looking into ways how to take early retirement.

  • Taxes

Your retirement will include a few long-term investments. If you are not in any kind of tax-advantaged account, then your profits are taxable.

So don’t forget your debts that need to be paid to Uncle Sam every year.

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3. Create a comprehensive plan

A retirement plan is one such thing that cannot depend on future income, speculation or unproven assets.

You need to have the actual money in your bank account to meet your future needs, and that is when you can retire.

Hence, formulate a plan which is all-inclusive.

4. Figure out how much you will need

First, you need to ascertain what your financial goal is.

How much do you need to save to hit your retirement goal?

According to Millennial Money, you need to have 25-30 times your yearly expenses in your retirement fund.

Say you spend $50,000 a year. Then, you would need to save somewhere between $1.25 million and $1.5 million before you retire.

Of course, it varies. Do what works for you the best.

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5. Increase your savings

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Speaking generally, once you enter retirement nearly 70-80% of your current income needs to be replaced if you don’t change your standard of living.

This figure takes into account that you will no longer make contributions to your retirement account and there will be minor adjustments to your cash flow.

To start with, you need to set aside how much ever possible from your paycheck.

If you save enough and manage to get contributions to your retirement account close to 20% or 25% of your total income, then not only will you money compound but also grow your savings for retirement faster.

An added advantage is that you will land up spending less.

Keep in mind that retirement is when you have enough saved for all your needs for your entire life. If you have fewer needs yet a comfortable lifestyle, then it’s a win-win!

6. Stable financial products

No matter how much you love risk, counting solely on stocks or forms of income which are outside of your control, especially when you are looking how to take early retirement, is dangerous.

However, there are a few financial products which you can rely on and built into your portfolio for your retirement plan.

A few examples of reliable products that you can build your retirement around are annuities, certificates of deposit and treasury bonds.

Although their rate of return is as high, you can count on them. This makes complete sense when you reach the age of 55 and haven’t been employed for 20+ years. There are more conservative funds like ETFs and mutual funds which can play their part.

Do you really want to stand in line at Applebee’s and fill out applications because something went wrong with your savings?


At the end of the day, it’s a lifestyle change, not a one-time change.

On the daily, you need to make amends to contribute to your retirement fund.

Small savings, small investments, etc. can add up quickly. Even if you’ve achieved the big-picture of saving 20-25% of your income annually, you still need to think of about early retirement with every move you make.

If you really want to retire early, it needs to be a hobby and not just a goal. It’s something that you need to think about every day.

Life insurance for seniors is something you need to consider from an early age.

Paying attention to your retirement for a few minutes a day will take you a long way.

Suppose you are riding the subway and have a few minutes to spare. Instead of scrolling through a social media page, plan what you are going to do with that $10 extra that you saved.

Will you spend it or put it into your retirement fund?

Constantly think of how you can contribute to your retirement fund.

If you find that you have a spare $5 per day then add it to your account. That’s $150 in a month and $1825 a year!

If you are in your 20’s and invest wisely, you will have more than thousands of dollars in your name in a few decades! This is some food for thought!

Nonetheless, following these few simple steps will help you reach retirement early.

Stock Photo from WAYHOME studio @ Shutterstock

Want to retire much sooner, say around 40? That's possible if you're smart with your money. Here's how to take early retirement: