Planning for Early Retirement

Many people seem to believe that early retirement is now an unachievable financial goal, but it can be possible.  Here’s a seven-step process to plan for early retirement: 

1. Assess finances.  Figure out your net worth by estimating the value of your home and adding the value of financial accounts, cars, jewelry, furniture, etc.
2. Track spending.  Start keeping track of every dollar you spend so you can discover where to reduce expenses.
3. Save!  As a guideline, saving 25 times your annual spending should be enough for investments to generate the right amount of income.
4. Invest wisely.  Consider index mutual funds for a reliable way to invest.
5. Resist pressure. Early retirees need to resist the pressure to budget for items such as replacement cars, roof repairs, and long-term-care costs.
6. Live simply.  Stop spending money on stuff and start using that money for experiences.
7. Don’t get sidetracked.  Don’t delay your retirement by overspending, ignoring your retirement funds, or succumbing to peer pressure.

See Andrea Coombes, 8 Secrets for Success from Early Retirees, Market Watch, Feb. 8, 2014.