Do you have enough to Retire Early?
There are two ways to look at this question.
1) You’ll continue to work until you have enough money to live like you do now.
or
2) You will shape your lifestyle to the money you have.
So let’s unpack these answers.
Some folks will wait until they have enough money to continue their current lifestyle. Studies have shown that most people will need 75% of the income they had when they were working to maintain their current standard of living in retirement. Those folks want to continue to take a vacation or two a year, go out to dinner multiple times a week and buy a new car every few years. In addition, they will need the funds to fill their newfound time with hobbies and activities. More expenses require more funding.
I’ve often seen folks continue to work to normal retirement age and even beyond because they do not want to give up any part of their lifestyle. What they fail to see is that they might be giving up the most important thing that money cannot buy and that’s their freedom. Depending on your lifestyle, retiring early without sacrifices takes very detailed planning. If you find yourself living a lifestyle filled with all the luxuries that make you happy then prepare yourself to need more assets and income to get you to retirement.
Others will fit their lifestyle to fit their financial situation in order to retire earlier. Retiring at 50 or 55 might very well bring along a few sacrifices and that’s okay for many people. You might not have the money to buy a new car every few years or go out to dinner every night. Perhaps you need to sell your home or relocate to a less expensive area. There’s nothing wrong with that. You are gaining freedom.
Do you have enough to retire early? It comes down to the old argument of freedom versus money. A lot of people who are retiring earlier in life are arranging their lifestyle to fit the amount of assets and income they have. Remember, income can include a part time job.
An inexpensive lifestyle does not mean a boring lifestyle. Less expensive lifestyles are the new rage. You hear about simplified living and downsizing all over the internet and on TV. What may seem like sacrifices can be the path to happier living.
If you are someone that does not want to sacrifice your lifestyle and plans to continue working until your assets and income catch-up to your lifestyle, then you’re choosing money over freedom. Is that a problem? Not at all because it’s your choice. Just don’t complain about the lack of freedom when you work until you’re 68 or 72 years old.
If you are choosing money and lifestyle over earlier freedom, then start thinking about how long it is going to take for your assets and income to cover the lifestyle you desire.
If you are choosing freedom, then start thinking about the lifestyle you can live with the assets and income that you currently have. If you need to wait a bit to build your assets and income, then wait. Don’t wait to put a plan together though. Having your numbers in front of you will give you a clear idea of when you can retire with confidence.
Retiring early is not about having just X number of dollars invested and saved up. It’s more about how much income you have coming in, how much income you can create and how much your lifestyle is going to cost you.
What is driving you? Freedom or Money? It’s up to you, and to each, their own!
Live free my friends,
Eric Gaddy
