Last October, my wife, Laura, retired from her job as an air traffic controller on her 50th birthday. It was a day of great celebration that had years of planning behind it. People are always amazed when Laura tells them she’s retired. “How did you do it?!” everyone wants to know. So I thought I’d share with you how Laura did it. Your circumstances will be different, of course, but there are a few elements that are essential to early retirement, or retirement at any age, really.
First, I have to mention that Laura had some very financially favorable circumstances to work with – she had a well-paying job with great benefits, no children, and she lived in a reasonably affordable region of the country. While it’s not necessary that you have all three of those things going for you, if you’ve got them all working against you (low paying job, lots of kids, living in an expensive city) then your chances of retiring early aren’t great. Just remember that two of those things you have control over – how much you earn and where you live – so it’s worth considering making a change if early retirement is a truly important goal.
Now, let’s look at those key things Laura did that enabled her to retire early:
1. Save for Your Retirement – This is mandatory. There is no way you can retire early (or ever!) if you skip this step. From the first day that she got hired by the FAA, Laura contributed to her TSP retirement account (like a 401K for government workers). In fact, she contributed the maximum amount she could for the entire 25 years she worked there. It was tough in the beginning for her to see such a large sum deducted from her paychecks, but once she got used to living on that income, things only got easier as she progressed in her career and got pay raises every few years.
At the very least, you need to be maximizing contributions to an IRA account, and if you work for an employer with a 401K or similar program, you need to contribute at least the amount that your employer will match – it’s free money!
2. Get Out of Debt – This started out to be a huge obstacle for Laura. When I met her, she was 34 years old and had around $30,000 in credit card debt and owned a property that was worth half what she had paid for it. We spent the next seven years living on a tight budget, sacrificing a lot of “fun” so that Laura could get out from underneath this huge financial burden. It wasn’t easy. There were some tough conversations and moments of disappointment, but we also learned one of the most valuable lessons in life – how to be happy with what we had and live within our means.
3. Live Within Your Means – Actually, if you’re saving for an early retirement, you technically must live beneath your means, spending far less than you take home. From a purely financial perspective, this is what living a Well Curated Life is all about. You make decisions every day about what is most important to you – what is necessary, or what adds the most value to your life – and you spend your money only on those things. You’re content to live without the rest. You take a step back from all of the trappings of life and you realize that you don’t need most of it.
Of course, there is still room for pleasure! But you realize that pleasure doesn’t come from the daily bombardment of the senses. Having every material thing you desire; dining out many times per week; traveling whenever and wherever you fancy – these things sound appealing, but if you’ve ever spent any length of time in this pleasure trap, then you learned that those experiences become less and less fulfilling the more often you have them. But plan a special night out, or a nice vacation once every couple of years, or save up to buy that new gadget you’ve had your eye on for some time, and the joy you get from that is truly great.
Laura has had the same couch and chair for twenty years. They are old and worn and a little ugly, but they’re comfortable and still functional. We’ve considered buying new furniture many times, but each time we ultimately decided that it could wait. I know that one day, getting new living room furniture will add tremendous value to our lives. And when that day comes, we’ll go shopping.
4. Practice Your Retirement Before You Take the Plunge – This is the last piece of the puzzle and it’s a big one! Two years prior to her retirement, Laura and I began living on what we’d estimated our combined income would be once she retired. This allowed us to really determine whether we could live on that sum, and more importantly, whether we wanted to. It turned out, we didn’t have to give up anything important to us, we simply cut out more of those things that weren’t adding much value to our lives. Doing this last step gave Laura the confidence to retire as early as she could. It also came with the added bonus of padding our savings – for two years, we socked away the income she was earning above and beyond what her retirement income would be.
I should mention here that we were only able to live comfortably on that income because we had downsized from a large house on acreage in the exurbs to a 1,000 square-foot condo in the city. Not everyone has to live in a tiny house or in a city, of course, but for us there were some key financial benefits to doing so. First, our mortgage payments were cut nearly in half. Second, we spend far less on maintenance and upkeep now than we did in the big house (even when our association dues are factored in). Finally, we spend much less on auto expenses now, because eighty percent of the time, we walk or bike to stores, restaurants, the gym, etc. We might even sell our car soon and rely only on public transportation, further reducing our monthly expenditures.
In the end, whether you are able to retire early will depend on many factors, but the biggest factor of all is how you choose to live: Being content with a smaller, simpler life can open up a world of freedom that many only dream of.