Early Retirement

Early Retirement – A Step by Step Process

Retirement used to be thought of as an age, such as age 65, for example.  But when you sit down and do the math, it becomes more of a number in terms of net worth.  Early retirement is becoming more and more common, due to more opportunities made available through modern technology and the internet.

So, how is one to achieve early retirement? We’ve provided a step by step process, along with a few tips to speed up your retirement savings.  Consider this your ultimate guide to saving enough to officially reach “early retirement.”

A Step by Step Process to Retire Early

It’s been said that managing processes rather than anything else, is the most efficient way to achieve a goal.  First you have to create a process, follow the plan and consistently manage it. And your goal becomes a quick reality.  Here’s the step by step process to begin your journey to early retirement:

1.      Determine Your Desired Retirement Income

The first step is determining how much you want to live on in retirement, and what type of lifestyle you wish to live.  Do you plan on traveling a lot? Do you plan on working part time? Or do you plan to live in a large home on a large property?  Will you have any debt in retirement, or do you plan on being debt free including your home?

Once you’ve answered questions of the like, you should have a decent idea of how much your income needs to be in order to pay for basic living expenses during retirement.  But that’s just the first part.  Now we need to know how much total savings we need, in order to provide us this pre-determined income for at least 30 years.

A general rule of thumb when planning for retirement is to withdraw just 4% of your total retirement savings each year to pay for your annual living expenses.  Chances are your invested retirement savings will get at least a 4% annual return or better, thus allowing your income to last indefinitely. Use the following mathematical equation to find your total retirement savings needed:

  • Desired annual income in retirement / 4% = Total savings needed to retire early
  • Example: $50,000 desired retirement income / 0.04 = $1,250,000 needed to retire early


2.      Analyze Your Current Financial Situation

After completing step one above, you should also know whether you plan on having any debt such as a mortgage, car loan, etc. in retirement.  Do you have any student loans, credit card debt, a mortgage, or any other types of loans or lines of credit?

If so, your plan will be based on one of two options:

  •  Plan to be debt free in retirement: your plan will be to save $1,250,000 plus pay off all remaining debt balances, if any (following the example from step one of a $50,000 annual retirement income).
  • Don’t plan to pay off debt: your desired retirement income should include enough to pay the debt payments and all the expenses of your desired retirement lifestyle. This may bump your desired income from $50,000 to $55,000 per year to account for debt expenses (again following the example from step one of a $50,000 annual retirement income).

The end result of both options mathematically will either be saving more money to pay off debt before retirement, or saving more money to pay off debt in retirement.

3.      Create A Savings & Investing Plan for Early Retirement

After analyzing your current financial situation, we need to create a play to save as much money as possible to reach our retirement savings goal as quick as possible.  If you haven’t created a budget yet, you should get one created before moving any further.

So, if your retirement savings goal is $1,250,000 and your current budget allows for saving $500 per month, you can figure out how long it will take you to reach your goal.  We’ll assume you’re investing your retirement savings in a basic S&P 500 index fund, that gets a 9% annual return on investment on average.

Using a financial calculator, we determine that if you invest $500 per month into the S&P 500 with a 9% annual return, it will take you approximately 399 months, or 33.25 years to reach $1,250,000.  Is that soon enough for you to retire early? For most of us, that’s no different than the traditional plan, which is work for 30-40 years then retire. Not necessarily your average “early retirement.”

What if we doubled our monthly investment to $1,000 per month, all else the same? It would still take about 26 years to save $1,250,000.  As you can see, early retirement is no cake walk. The next step is what makes all the difference…

4.      Grow Your Income with A Profitable Side Hustle

How soon is “early retirement” considered for you? Is it in the next 5, 10 or 15 years? Regardless, I think we can all agree that growing our income will make all the difference.  Retiring early for most people will require much more than your full-time income.

Thanks to modern technology and the internet, the options to make more money in your spare time are nearly endless.  Here are a few side hustle options to grow your income, along with their income potential:

  • Real Estate Rental Properties: Buy a condo or duplex, and rent it out. Your renters will pay you enough to pay the mortgage, and have additional savings on the side.
    • Monthly Net Income Potential: $500 – $3000+ depending on whether you have a mortgage or not.
  • Drive for Uber of Lyft: Uber and Lyft are ride sharing services. You can sign up to be a driver, and provide rides for local individuals and get paid as much as $15 per hour or more.
    • Monthly Income Potential: $500 – $1,000 depending on availability (work your own hours)
  • Create an Affiliate Marketing Website: Affiliate marketing allows you to promote company’s products on your website, and get paid a commission when you refer a sale.
    • Monthly Income Potential: $100 – $500+ during first year, and $1,000 – $5,000+ as your website grows.
  • Provide Freelance Work for Companies: If you’re an expert at a particular skill such as graphic design, writing, bookkeeping, etc., you can provide this work for companies in need at your own set rates and your own hours through websites like Upwork, Fiverr and Freelancer.com.
    • Monthly Income Potential: $500 – $5,000+


A Little More Saved Goes A Long Way

Early retirement is often dependent on your extra side hustle income.  To give you an idea, use the table below to see how extra income affects your plan:

Monthly SavingsAnnual Return5 Years10 Years15 Years

With just a little extra work for only a few hours per week, look how fast your early retirement plan can be achieved!