Do you daydream about leaving your nine-to-five sooner rather than later in life? Retiring early is becoming an extremely common financial goal. People want the freedom and flexibility well before their golden years. Others are simply striving for ultimate financial independence – working because they want to, not because they depend on the income. Traditional retirement takes a lot of advanced preparation and planning. Speeding up the process takes even more. But it can be done, and people are making it happen.
Understand that everyone’s financial situation is vastly different. Early retirement is simply not in the cards for most, and that’s perfectly okay. But if you ever wonder how some people make the numbers work, here are the five most common scenarios:
- Living well below their means: Many early retirees kept their housing small and drove their cars until the wheels fell off. They avoided lifestyle inflation even when their income increased and didn’t worry about trying to keep up with the spending habits of others. Instead, they spent a lot less money on daily purchases and big-ticket items and socked a lot more into their nest eggs in order to accelerate their retirement timeline.
- Successful business ownership: Being a business owner has the potential to offer a whole new path toward wealth accumulation. As businesses grow, the prospects for greater future financial independence rise too. Succeeding in business takes creativity, hard work, and even a bit of good luck. If all the cards fall into place, business ownership can be a solid avenue to early retirement for some.
- Savvy about inherited wealth: Inheriting significant funds from a loved one can accelerate the pace toward early financial independence. A lot of early retirees successfully managed inherited money, prioritizing the funds usage for future retirement rather than current expenses.
- Financial plan followers: Setting a projected year for early retirement as a financial goal and working diligently toward it gives people actionable steps to follow. There are a lot of moving pieces to consider with an early workforce exit, like bridging the gap until certain benefits kick in. Age restrictions on accessing retirement assets, Medicare, and social security payments make detailed number crunching a must-do. Early retirees were able to successfully follow their financial plan and make the projected numbers work in their favor.
- Investors for decades: Simply saving money is unlikely to cut it for most early retirement dreamers. In fact, inflation causes the purchasing power of cash to decrease over the years. Those who succeed in leaving the workforce early put their money to work in a diversified investment portfolio to make meaningful headway. By steadily adding significant funds to their investments and taking advantage of compounding interest, their nest egg grew consistently over the decades.
If you’d like any guidance on plotting your own path to financial independence, don’t hesitate to reach out to us. We’d be happy to chat. Initial consultations are always free.