The American Way: work forever, retire and eat dog food in your sunset years. Did you know there is another, better, way? I didn’t until now. We are determined to end up differently. So can you!
If you read my previous post, you may now know that I’ve caught the early retirement bug. I’m not talking retirement at 60 or even 54. I’m talking retirement before we hit 40. If this sounds crazy, just hear me out. So, I’ve been perusing the interwebs learning about people who’ve managed to amass enough wealth to retire well before the 60 or 70 mark. Can you retire at the age of 30 or 40? Yes!
To clarify, when I say retirement, I mean that you are not working because you have to. You can be doing nothing or perhaps something really leisurely or hobby-like where the income you get, if any, is not needed cover your living expenses. In this retired state, you should have enough money and/or income producing assets to work for you and your family so you don’t have to.
If this is so very possible, why don’t more people do it? I think it’s a combination of the strong culture of consumerism here in the U.S., misinformation and tradition. If we could save 50% or more of our income, retirement could come much sooner than 67. But because the American Way is to borrow and buy more and more stuff, savings rates are low. To put it simply, too much money is spent in a lifetime, leaving little to invest. Without sufficient investments, you can’t live off the appreciation of your portfolio (not you, someone else of course 🙂 ) There’s not enough money to make money for you until much, much later in life- thus the late retirement age.
Then, there is the fact that so many people don’t understand how to amass income producing assets. Whether it’s a business, real estate or a stock portfolio, we all have to become familiar with ways to earn passive income or we’ll never beat the rat race. Finally, tradition dictates that we do what our forbearers did in the way of savings, investing and retirement. We saw our fathers, grandfathers and beyond work for many long years until they would retire around 70 and keel over a few years later. What a retirement that is!
We can change up this program for sure. If we learn to save and invest more of our income we can certainly retire well before our sixties. There is a new generation of financially savvy 20 and 30 somethings who’ve figured out that working and aggressively saving for 10 years is enough to fund retirement perpetually. That’s insane! Why on earth are we waiting until almost 70 years old to do this? This is not magic folks, it’s math and the numbers don’t lie. In fact, it’s the same numbers that help you get out of debt that can help you plan for an early retirement.
Personally, I’m still cracking the exact code, but I do know that saving and investing is a big part of this equation, so as I learn, discover and progress, I am hoping inspire those who may want to follow this same path.
In the meantime, checkout some folks who are living the life and telling people how they were able to reach financial independence at a relatively early age:
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We didn’t quite make it by 40, but we retired last year when my husband was 41 and I was 46. But you’re absolutely right, we did it by investing a large percentage of our income. I still regret that I wasn’t better about this in my twenties or we could have retired even earlier. Here’s how we did it, if you’re interested: http://lavidafrugal.com/how-we-made-the-early-retirement-leap/.
Great post and great advice, Aja!
That’s awesome, I am so glad to hear about others who “escaped the matrix!” I will check out your post for inspiration 🙂
My goal is to retire before we are in our 60s. We are currently working to pay off debt and save for a slight larger house (currently in under 900 square feet). After those two financial goals it is truly just saving and traveling on our financial to-do list. Hopefully we’ll be able to find an affordable health care solution to make early retirement a reality when the time comes.