Let’s be completely honest; planning for early retirement will require a large dose of sacrifice early in life, a time when most people are focused mainly on enjoying themselves. But if you get serious about saving for early retirement, the time will come when you won’t regret it. A little extra work and discipline now, will pay off in large dividends later.
You can never save too much money, or start saving too soon.
Here’s what I mean…
1. Early Retirement Will Mean Financial Freedom
The ability to quit your job to go live life any way you like at age 45, 50, or even 55, will see you leaving behind others at the same age who are busy ramping up their finances so that they’ll be able to do in 20 years what you’re doing now.
This is an extremely convenient time as well. Middle age is when people are often beginning to deal with the storms of life — divorce, career crisis, putting kids through college, and caring for aging parents. If you are able to retire at about the same time these problems begin to take hold, you’ll have the time and the finances to deal with them in a better way.
Middle age is also the time of the mid-life crisis, that time in life when people are often looking to make major changes to reaffirm themselves. Early retirement could be that much-needed reaffirmation, sparing you the psychological and emotional problems that a mid-life crisis brings.
2. Saving More Now, Means Saving Less Later
Planning for early retirement forces you to save more money earlier in your life. While that will require more sacrifice now, it’ll make your life a lot easier as time goes by. While others are frantically trying to play catch-up on their retirement savings in their 40s and 50s, you’ll already be in a very comfortable position.
Let’s demonstrate this with an example…
If you have already accumulated $100,000 in retirement savings at age 30 — in anticipation of early retirement — and you invest it at an average rate of return of 10% per year — but make no future contributions — your portfolio will grow to $672,750 by the time you turn 50.
By contrast, if starting at age 30 you save $10,000 per year, also invested at an average annual rate of 8%, for the next 20 years, you will have $603,320 at age 50.
Not only will having a large nest egg at age 30 leave you richer at 50 by nearly $70,000, but you’ll also have only half as much invested capital — $100,000 vs. $200,000 contributed by saving $10,000 per year for 20 years.
For the most part, saving big and saving early creates an insurmountable advantage, requiring you to save less money later, and less money overall.
3. Building Your Next Career Move
A lot of people prepare for early retirement, but never actually follow through with it — and that’s fine. The improved financial condition that will result from being prepared to retire early will serve you well no matter what you choose to do.
For a lot of people, middle age brings a desire to change careers more than to retire. If you have enough money saved that you could retire, then money would not be a factor in your career change. You can move onto the next career and be completely free of money related problems. That can even open up the door for you to go into creative capacities, like art, the performing arts, or music, that are more about passion then pay.
4. Not Worrying About Health Problems
Middle age is the time in life when many people realize that they have to make a priority of reversing negative health behaviors from the past. If that realization hits you, early retirement will make it a lot easier to pursue better health as a goal.
Stress is one of the major causes of degraded health, and since a lot of stress is related to career, simply being able to leave your job will be a big stress-buster. Plus, you’ll have the time to implement better nutritional options, as well as take on major exercise programs.
Early retirement might even free up your time to participate in long-term goals, such as running marathons, and other activities that you only dreamed of in the past.
5. Preparing for Family Obligations
We touched on this briefly in Reason #1 but it deserves a deeper discussion. Middle age is often the time in life when we have the largest number of people who are dependent upon us. The term sandwich generation comes to mind — middle-aged people “sandwiched” between taking care of elderly parents and still dependent children. Though this condition is widely associated with the Baby Boom generation, it can actually affect anyone in middle age.
Sometimes dependency creates an actual need for hands-on help — even beyond the need for financial assistance. Your services may be needed to physically assist your aging parents, or even help with the care of newborn grandchildren.
If you retire early, you’ll have the time that’s needed to devote to these efforts. And you won’t be feeling the pull of your career squeezing or limiting that time.
6. Not Relying on Social Security
There’s been a lot of speculation about the long-term health of the Social Security system. While it’s unlikely that Social Security will completely disappear, we should fully expect that it will provide far less in benefits in the future.
But if you have prepared yourself for early retirement, you’ll be less dependent upon Social Security income in the first place. Your early retirement provisions may enable you to watch the future Social Security crisis as a spectator, rather than as a victimized participant.
7. Gearing Up for Big Changes in Your Life
Apart from predictable transitions that middle age brings, your early retirement may actually be the catalyst that drives the changes in your life.
That’s hardly a stretch. If you suddenly find yourself with time on your hands — and enough money to live a comfortable life — what might you do with your time?
The possibilities are endless. And from where you sit right now, you may have no idea how it will all play out. But if you’re 45 or 50 years old, and suddenly in a position where you don’t have to worry about money or working for it, all kinds of exciting opportunities are likely to develop.
It’s been said that luck is what happens when preparation meets opportunity; if you retire early you’ll very like set yourself up for both.
Imagine the possibilities…