Have you ever thought about early retirement, but then been brought back to reality? It’s not everyday that you meet someone who is able to retire at an early age, especially not someone at the age of 27. Part of that is probably due to the fact that retirement accounts either have penalties for early withdrawals or are not available until a certain age (like social security). Retiring before that standard age often means having enough cash on hand to be able to pay for all of your expenses. It’s only understandable why early retirement is so hard to achieve. It often leaves you wondering of whether early retirement is left to a select few. Can only the rich retire early?
It’s Not Always about Having Lots of Cash
While it may seem like only those who have millions in the bank are able to retire early, this isn’t the case at all. As I have talked about before, looking at cash flow from passive income can be a great alternative to a lump sum retirement plan. Instead of having a lump sum (which is ultimately broken down into annual income), cash flow can allow even those who don’t have a lot of cash in the bank to retire. By creating passive income, you can retire early without being wealthy.
Sometimes it’s not the wealthy who retire early
Another distinctive group of early retirees is not the wealthy, but the exact opposite – extreme frugality. In other words, those who often retire early are not those who make a lot of money. Instead, it is those who value their freedom more than a few extra dollars. In fact, it is often the top earners that have a harder time retiring early because they have more to give up. Earning a lot of money can lead to a life of comfort and it can be hard to give up. Whereas if you are living an “average” life and can learn how to life frugally, it is much easier to give up your day job salary because your time is not worth as much as the top earners. Having more free time and sacrificing some of the materialistic comforts is an easy sacrifice.
As I have discussed before, I don’t make a lot of money and it is therefore easy for me to plan my early retirement even at a young age. I am excited about the possibility of having more time to spend it how I want and not have to be worried about having enough time to visit family or take memorable trips with my wife. I want to be in charge of my life and the only way I can see to do that is to generate enough passive income.
The less expenses you have, the less you need to retire. That’s why I’m in favor of owning a home and paying it off before you retire. It drops your expenses by a huge chunk, and then you won’t have rent costs during retirement.
That’s a great point Money Beagle. I couldn’t agree more.
Money Beagle got to it before I did. It is more about expenses. Getting them down as low as possible makes early retirement much more possible.
I think retiring is all about the current lifestyle that you live. I know a couple people who would be able to retire by living on just $70,000 per year
I’ve always been a fan of early retirement, not that I’ve done anything to reach it, but still. Who really wants to bust their ass working until they’re old to enjoy life? Not me.
I plan to retire “early”. For me that means before 50 years old. My comfort level is driving me toward a plan for a 70/30 split between owned assets that I earn interest and that I draw from and passive income that just give that extra bit of cashflow during down market times.
I am hoping to retire early, but I really want to make sure I do it right. My cost of living is very low right now, but I have also maintained a student lifestyle in an effort to save up and pay off other expenses.
I can foresee my expenses increasing in the future, but not by a huge margin.
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