Eyes on the Prize: The Path to Early Retirement

Okay, so the fact that I’m writing this proves that I’m not really retired. But I am semi-retired, and that’s even better.

I graduated from college during the early 1980s, during an unemployment environment that by some measures was even tougher than today’s. Like many young people, I wasn’t wild about working, but being on my own and unemployed was even worse. A phrase occurred to me which I’ve remembered all this time: the only thing worse than being employed is being unemployed.

Flash forward 30 years: After having found a great career in the investment business, I am semi-retired. It’s a wonderful situation. I work from home, have a flexible schedule, and only take on work that I enjoy. If neither employment nor unemployment is the ideal lifestyle, then perhaps semi-retirement is.

I’m now in my early 50s, and I’ve been working like this for over five years. How did I get here? The details of the path will be different depending on what career you choose, but there are five pieces of advice I can give for anyone who’d like to retire, or semi-retire, at an early age:

1. Jump into your career with both feet. This may seem counter-intuitive when the idea is to stop working at an early age, but having a strong work ethic is critical. The truth is, I didn’t start out looking to retire early. My initial goal was just to achieve financial independence at an early age. When I was young, I saw too many people in their 50s who needed money and had a hard time finding work, and I wasn’t going to let that happen to me. So, I made a huge commitment of time and energy to my first career, and it paid off. Think of it this way: if you want to have a shorter career, then plan on it being a more intense career.
2. Don’t keep up with the Joneses. In my late 20s and early 30s, even as things were going well for us financially, my wife and I stayed in our $60,000 house, and drove used or economy cars. As our friends became successful, we saw them buy nicer houses and better cars, but we never felt jealous. Everyone makes their own choices as to what they spend their money on. By choosing to save more, we were making a down payment on the future rather than buying more at the time.
3. Share your goal with your spouse. If you are married, the two things I’ve mentioned so far take some sacrifice and depend on a team effort. That sacrifice becomes easier when you both see it as working towards a shared vision of the future.
4. Being over-prepared helps protect against uncertainty. All retirement planning is based on assumptions about the future. Even your life span is an assumption which is subject to great variability – and retirement planning is the one field in which longevity is actually a form or risk. For example, by retiring in my mid-40s, I have to plan for a retirement period of about 40 years. Over the last 40 years, inflation has caused a five-fold increase in consumer prices, so I have to plan on something similar for the next 40 years. However, if inflation is even higher, or if I live longer than expected, then I’ll need even more money. Saving more than you expect to need is one way to deal with that uncertainty.
5. Have a second act in mind. I love my freedom and independence, but I’m geared towards being productive. I had planned to write after I retired from the investment business, and I’ve been able to parley that into a second career where the work is steady, but not overwhelming. The point is, I don’t think too many people are geared towards doing little or nothing for 30 or 40 years, so have a second act in mind for after you retire from your primary career. For me, when I was young I had time on my hands but no money. Once my career got started, I had money but no time. Now, for once I have both time and money, and using that time productively makes it especially rewarding.

For all the common sense I think my wife and I have shown over the years, I also have to acknowledge that I’ve been very lucky. I joined a great firm at the right time, and was able to grow my career along with that company. Since leaving the investment business, I’ve been lucky enough to find interesting work with smart people.

In short, whether or not other people are able to retire early depends largely on the opportunities that come their way. Still, I think if you keep the above five points in mind, you’ll be able to make the most of those opportunities.