As we get older, we start to think about retirement more seriously than when we were young. No more early-morning commutes in rush-hour traffic; no more office politics; no more working long hours in pursuit of the almighty dollar.

Sixty-five is the age we all shoot to retire at because of our ability to draw social-security benefits and cash out of 401(k) and IRA funds without penalty.

But who wants to wait that long?

Retiring at an earlier age allows living a more active life spent doing the things we want, such as:

  • Traveling
  • Reading
  • Gardening
  • Spending time with family

Retiring young is a possibility, but it takes years of planning and executing, along with a real determination to see the whole thing through.

These six early retirement tips will guide you in the right direction toward hanging it up before 65 and getting to the part of life where you can rest, relax and follow your passions.

1. Decide how you want to live in retirement

What your life will be like can be a tough question to answer when you are in your 20s or 30s. There is no perfect formula for predicting your behavior 20-40 years in the future. However, you need to pin down some basics at least, including:

  • What part of the country do you want to live in?
  • Do you want to live in a home? Apartment? Retirement community?
  • How will you pay for health insurance?
  • What age would you like to retire at?
  • What hobbies do you want to pursue in retirement (travel, opening your own business, volunteerism, etc.)

Your plan may change as you go, and that’s okay. Keep the plan in a safe place – on a computer flash drive, the cloud, or in a journal. Make sure to make the proper changes over time as your ideas change. This regular revisit of your plan will also remind you of your vision that you’re working towards.

2. Draw up a ‘future’ budget for your retirement years.

Again, this is a very preliminary document. We have no idea how future events might drive the cost of living up or down, so go with today’s prices and change the estimates as events dictate.

Think about every expense you have now that you’ll have then, adding or subtracting any that will change – such as the annual cost of using a toll road to commute to work. Essentials for this budget will include:

  • Mortgage/rent
  • Groceries
  • Insurance (health, auto, property)
  • Utility bills
  • Car payments/maintenance
  • Dining Out
  • Travel
  • Gifts / Expenditures on family members

Ideally, you want to work towards not having a mortgage or car payment in retirement, but it’s a solid foundation for what lies ahead.

Be as realistic as possible about what you want to do in your free years.

Most people seeking early retirement are going to want to have some wiggle room for outings and social events.

3. Get a handle on your current financial situation

It’s great that you want to retire to Tahiti, live in a pole house and spend the rest of your life getting tan and saltwater fishing.

Unfortunately, your current budget might be more in line with buying a fake palm tree and a kiddie pool for your backyard.

It’s time to get a hold of your current finances with a retirement calculator. There are plenty to choose from online, but we like the one from the AARP because it’s not affiliated with any financial plan or investment firm.

The quick survey will ask a  few questions about you (and your spouse) including age, salary, how much you’re saving, and what age you want to retire.

It will then construct a graph showing your minimum and ideal amounts necessary to retire at the age you desire.

It is a real eye-opener to people who might think early retirement is right around the corner, but it’s a realistic look at what you have and what you need.

4. Step Up Your Commitment To Future Financial Security 

It might require a few sacrifices now, but the older you will be thankful.

Here are 4 ways that you can commit to a secure future, now.

  1. Retire a little later than you’d like. It’s a real bummer, we know. But every year you push out your retirement date is that much more money in the bank. New technology is emerging in the healthcare industry each year; there’s a good chance you might be living longer than you expect. Every year working now will keep you financially sound later in life.
  2. Find unnecessary expenses to cut in your budget. If you plan on taking four vacations with your spouse every year, consider dropping the number to two to keep your expenses down.
  3. Find a fun second job or a side hustle. What? Work more?? We’re not asking you to come home from your 9-to-5 job and work all night as a security guard, but any additional income is more to invest for the future. Think creatively about something you enjoy or some variant of your current job. If everyone raves about your cupcakes, consider opening a small business that sells them and spends a few hours on the weekend filling orders. If you’re a business whiz, think about offering your skills as a consultant to startup firms.
  4. Get out of debt, immediately. Nothing makes you feel more powerless than watching your hard-earned dollars disappear to real estate lenders and credit card companies (with interest of course). The more debt you have, the more significant percentage of your weekly earnings needs to go to relieving that debt. Use that side hustle or the second job to make extra payments to your credit card or mortgage to pay down the principal more quickly. The faster you pay, the less interest you’ll accrue.

5. Invest, Invest, Invest

Once you’re out of debt, invest every extra dollar you can. Early retirement is only going to happen if you can grow your money beyond the actual amount you earn.

A good start would be using an online high yield interest account offered by banks like Barclays that can pay you every month for saving with them. This interest will compound over time and as interest rates rise, so will the rate they pay you.

Certificate of Deposits may pay higher interests rates than high yield savings accounts, but your money may be locked up for 1-5 years. If you have money you don’t need to access, this could be a safe choice to invest.

The more you can put in now, the more you’re likely to be able to take out when you reach your target retirement age.

6. Use a financial advisor

No matter how committed you are to making your early retirement dream come true, you have other things to think about as well – job, family, etc.

That’s why using a financial advisor could be a great option for the less savvy investor. They are professionals whose entire motivation is taking your money and helping you reach your retirement goals.

Plus, they’re on hand to give you financial advice anytime you need it. If you want to retire early, this is one expense that makes sense.

About the Author

Nikki is a CERTIFIED FINANCIAL PLANNER™ professional, and active stock market investor. She is the founder of She Talks Finance, a personal finance initiative for women. She also specializes in helping traders and investors improve their mental game.