2711: 3 Early Retirement Planning Ideas by Miranda Marquit of Good Financial Cents on Financial Independence

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[00:00:40] This is Optimal Finance Daily, Episode 2711, Three Early Retirement Planning Ideas by Miranda

[00:00:47] Marquitt with GoodFinancialSense.com and I'm your host and personal finance enthusiast,

[00:00:53] Diana Merriam. Now let's hear today's post as we optimize your life.

[00:01:02] Three Early Retirement Planning Ideas by Miranda Marquitt with GoodFinancialSense.com

[00:01:09] Dreaming of early retirement? Discover three practical ideas to help you reach that goal,

[00:01:15] from discipline saving and cultivating multiple income streams to embracing many retirements.

[00:01:21] These strategies offer a road back to achieving financial independence

[00:01:25] sooner than you might think. Early retirement is the dream of many.

[00:01:30] The idea of paying your dues, saving up, investing smart and retiring at some point

[00:01:36] before the traditional retirement age of 65 has a strong pull. For many, early retirement

[00:01:42] is something that might even happen in their 40s. If you're considering how you can retire

[00:01:47] early, here are three ideas that can help you reach an early retirement goal.

[00:01:53] Number one, discipline saving and investing. One way you can build up a sizable nest egg

[00:01:59] is to practice disciplined investing. Consider how much you'll need in your investment portfolio

[00:02:05] to create an income stream that you can live off of. You'll have to consider your age,

[00:02:10] how long you're likely to live, and the asset allocation you'll need to provide reasonable

[00:02:15] growth but not leave you overexposed to the volatility of the market. A long-term approach

[00:02:21] can help you. If you're 30 and plan to retire by age 50 or 55, you might be able to amass

[00:02:29] $522,063.08. If you start with $10,000 and invest $1,000 a month for 20 years, assuming

[00:02:39] a 6.5% return compounded quarterly on your portfolio. Note though that returns will

[00:02:46] vary according to market conditions and there's always the risk of loss.

[00:02:50] You can end up with more than a million if you double that to $2,000. When you start living off

[00:02:57] your retirement portfolio though, you'll need to make sure you're not withdrawing so much

[00:03:01] that your nest egg can't support you. You can maximize your efforts by investing in

[00:03:07] tax-advantaged accounts and making use of your employer's company match program.

[00:03:12] But you need a plan and you need to be disciplined enough to stick with it if

[00:03:16] you go this route. Number two, cultivate multiple income streams. Another idea for early

[00:03:23] retirement planning is to begin cultivating multiple income streams rather than relying

[00:03:29] solely on your ability to build up a massive nest egg to get you to retirement.

[00:03:34] Instead, make a plan to pay down your debt, including your mortgage,

[00:03:38] by your early retirement target date. Try to rid yourself of as many obligations as possible

[00:03:44] so that you'll have fewer expenses during retirement. Make a plan to pay down this debt

[00:03:49] while preparing for the future. Figure out how much money you'll need each month to support your

[00:03:54] retirement lifestyle and then begin cultivating different income streams to create that income.

[00:04:00] While there are rules that allow you to begin withdrawing from an IRA early,

[00:04:04] you likely won't have access to social security benefits during an early retirement.

[00:04:09] You can consider your early withdrawal from an IRA if you must,

[00:04:13] but consider other sources of revenue. You can establish a website that helps you earn residual

[00:04:19] income, write a book that results in royalties, start a business that can provide an income

[00:04:24] stream or even engage in income investing. It is of course possible to cultivate a number

[00:04:31] of income streams at once, diversifying your income sources. Start now to develop these

[00:04:36] streams so that they're established and mostly automatic by the time you're ready for early retirement.

[00:04:43] And number three, take many retirements. Tim Ferriss, author of the 4-Hour Work Week,

[00:04:50] made the idea of a mini-retirement somewhat popular. If you want to enjoy life now and

[00:04:55] aren't concerned about having a huge chunk of time to try and kill when you're older,

[00:04:59] you can plan to take many retirements, living in a different place for one to six months.

[00:05:05] You do have to be willing to quit a job and try to find a new one in some cases.

[00:05:10] An alternative that appeals to me is having a job you can do from anywhere.

[00:05:15] I work from home as a freelance writer, and I could actually whittle my workload down

[00:05:19] to a couple hours a day for a few months and take my job on the road.

[00:05:24] I'd be living in a state of almost retirement, and it would work as long as I had access

[00:05:29] to the internet. Consultants and other freelancers, as well as online entrepreneurs,

[00:05:34] could make this work. After all, if you can manage to work on reduced hours and have time

[00:05:39] to do what you want, you won't need the same size of large nest egg. Bottom line,

[00:05:46] there are even more paths to early retirement, and it might be that you combine different

[00:05:51] efforts to come up with a method that works well for you. The important thing is to decide

[00:05:56] what you want to do and then make a realistic plan to accomplish it.

[00:06:04] You just listened to the post titled, Three Early Retirement Planning Ideas by Miranda Marquitt

[00:06:09] with GoodFinancialSense.com, and I'll be right back with my commentary.

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[00:08:04] In my experience, early retirement is an agitating concept for most people because

[00:08:09] they assume that it's simply not possible. The word retirement typically is understood to

[00:08:15] mean not working and our culture glorifies work and productivity. So in many cases,

[00:08:20] retirement is also unappealing. But I think of retirement as an end point where your work

[00:08:27] is no longer dictated by your financial needs. For example, when Michael Jordan retired from

[00:08:32] basketball, no one expected him to sit around and do nothing. We all expected that he would

[00:08:37] do something after that and we should expect that from our own retirements as well.

[00:08:42] I retired from my corporate career, but I didn't sign a blood oath that I would never

[00:08:46] again make an income. Keep in mind that there are different flavors of fire.

[00:08:52] The one that I like the most is known as Coastfy. I basically front loaded my traditional

[00:08:57] retirement savings. If I don't touch what I have right now, even if I don't contribute

[00:09:02] one more dollar, it will grow through the power of compound interest to what I need in my

[00:09:08] sixties, which is when I'll probably start drawing down. This has allowed me to downshift

[00:09:13] much sooner than waiting until I have 25 times my yearly expenses, also known as my fine number.

[00:09:21] Also because my circumstances have changed so much over the eight years I've been pursuing

[00:09:26] Fi, my fine number continues to be a moving target. Coastfy allows me to gain all the

[00:09:32] benefits of traditional fire and that I have full autonomy over my time, but it maintains

[00:09:37] flexibility because my focus on self-employment provides me the ability to turn up or turn down

[00:09:43] my level of income as needed or desired. Even if you're in the large majority who aren't

[00:09:49] interested in early retirement, the way you get there is the way you get to any financial goal.

[00:09:55] Live below your means and invest the gap between your income and expenses.

[00:10:00] But that should do it for another edition of Optimal Finance Daily. I'll be back tomorrow

[00:10:05] as usual, so I'll see you there on the Friday show where your Optimal Life awaits.