Could You Afford to Retire Early?


The idea of taking early retirement is certainly a tempting one. After several decades of hard work and a regular routine, many people would like to enjoy a more relaxed way of living. In fact, recent studies have shown that over 50% of workers aged 30 to 50 hope to stop working early.

Of course, for most people the biggest stumbling block to retiring early is money. So, how can you work out whether it is possible for you to retire when you would like to?

Your Regular Income

If you have a pension plan, rental income or some other source of regular income then this is going to be vital in helping you to plan your early retirement. It is usually said that when we retire we start to spend about 80% of what we did when we were working. This might sound like a high figure to you but you don’t want to be left short once you have given up your job by working on a lower amount. These days people are retired for longer than ever before, due mainly to advances in medicine. This means that you need to be sure that you are going to have enough income to support you all through these days. For example, if someone retires now at 50 it is not unreasonable to think that they could be retired for around 30 years, which might be almost as long as they worked for. Perhaps you will want to take on a part time job once you retire in order to keep your income ticking over.

Your Outgoings

As we have seen, you can expect your normal outgoings to drop by about 20%. Is there anything you can do to push your expenses down even lower? Maybe you could pay off a loan or a mortgage, downgrade your car, grow your own food, use solar energy, get cheaper insurance or find some other way of living less expensively. A lot of the ways of reducing your outgoings involve an initial expense, so it is best to do this while you are still working and leave the savings for when you really need them. Of course, it is important to not overestimate the savings you might make.

Your Savings

Assuming that your outgoings are around about the level of your expected income you should be able to live comfortably most months. However, without regular wages coming in you might struggle to pay unexpected bills, repair problems in the house or treat yourself to the odd trip. This is where a good level of savings will come in handy; to cover the occasional shortfall in your monthly income. A lot of new retirees go for a safe and steady option such as a bank account, in order to avoid risking their life savings. If you have enough savings to potentially generate an income then this is something worth considering. Maybe you could buy a property and let it out or start up a business which someone else runs but which gives you additional income. It is essential that you make the most of your savings, as they could potentially have to last you a few decades.

Your Expectations

Finally, perhaps the most important point of all is around your expectations. If you are going to be happy enjoying a relaxed retirement working in the garden, looking after grandchildren and reading books then you won’t have such pressure on you to have big savings or a strong income stream. However, if you hope to take advantage of these years to do the things you couldn’t do while you were at work then you might find that you need even more money than you did when you had a job.

14 Responses to Could You Afford to Retire Early?

  1. Hey Robert, thanks for the great read. I would love to retire early, but I don’t think I’ll be able to. I’m sure I’ll have enough money, but I enjoy blogging. So, even through retirement, I’m going to be working to an extent. Also, I never thought that I would need more money after I retire to do the things I couldn’t do. Now that I think about it, that makes a lot of sense, thanks for the great read!

  2. I don’t think at this point I could say if i could retire early because I am so early in my career. Even though we have no debt or mortgage (not on paper yet) I still would want to work as long as I could just because I studied so hard for what I am doing. I don’t know maybe my opinion will change in 10 or 20 years lol. If i had millions I might consider it but I’d certainly say that rental income is something I’m thinking about though.

  3. Mark Ross says:

    For me, I think I could retire early because I really want to, that’s the reason why I started early and decided to look for things that can help my finances as I move on forward in my life.

  4. Regardless if you plan on retiring early or not, paying off you mortgage and other debts before retiring is crucial. Freeing up roughly $1,000/mo will go a long way in helping you to be able to live comfortably in retirement.

  5. I want to retire early. Not crazy early like 30 or anything. But maybe sometime around 50. I don’t know if my dreams will become a reality, though; I work in a good field that I love that has pretty good retirement benefits, but it’s not especially lucrative to be able to set aside too large a portion of my paycheck in order to grow my money quickly enough.

  6. Love what you have here, especially about knowing your expectations. That, to me, is just as important as the monetary numbers. The last thing one would want to do is to get to retirement and not have the funds to do what they want to do, or to retire much later than they needed to because they “oversaved”.

  7. robert says:

    Thanks Laurie, I would like a retirement with money to do things but realize not everyone wants the same

  8. S. B. says:

    Retiring early has been a goal of mine for some time. It looks like I’m getting there eventually, but it’s taking a whole lot longer than I originally thought. It is very difficult to accumulate so much money without an entire normal career timeline.

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