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Early retirement is not defined as when you stop working forever, but as having the freedom and flexibility that saving up enough money can give you if you want to leave a job.
The idea that when you retire, you are done working is an old school idea. Working is actually good for you. People that altogether quit working start losing their mental faculties and may die sooner.
A good early retirement strategy is built on maximizing three aspects: Income, expenses, and savings.
To build your early retirement strategy, you need to determine your retire early or financial independence (FI) number. It is the amount of money you need for work to become optional. Be aware that the number will (and should) change as you change, and your desired lifestyle evolves.
Based on a series of papers known as the Trinity Studies, you need to save 25-30 times your expected annual expenses to have enough money to last you for the rest of your life.
This multiple is based on the percentage of your investment growth that you would be able to withdraw per year. A safe early retirement withdrawal percentage is between 3%-4%.
Cut back on your three biggest expenses.
Go out and try to make more money. Start by optimizing your full-time job and starting a side hustle.
Most of the retirement calculators come out with a number you will need to "retire" based on your inputs and current progression. The numbers are so large that they seem impossible to reach and consequently discourage saving.
However, a daily goal is much easier to consider. If you need to get to $1,250,000 over a 30 year period, you can wrap your mind around saving $50 a day with an expected 5% annual compounding rate.
A good early retirement investing strategy should be simple, focused on stocks, bonds, and real estate, and be executed consistently.
Deposit as much money as possible into your investment accounts every day, even if it is only $5. If you get a bonus, invest it. If you make extra money on a side hustle, invest it.
Try to deposit $5/day and then increase it $1/week. You will probably not miss the extra dollar.
The two most important numbers to track your early retirement strategy are:
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