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how to retire early

How to Retire Early

In this article I am going to teach you practical steps for how to retire early and achieve financial independence, no matter your current financial status. If you are longing to know how to retire early, then this is the article for you!

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How to Retire Early: 11 Simple and Surefire Steps to Make the Dream a Reality!

The idea of being able to retire early is a truly awesome possibility to think about. It was actually reading a FIRE—which stands for Financial Independence, Retire Early—blog (and then several more FIRE blogs) that gave me the idea of blogging about personal finance in the first place. I can definitely appreciate the FIRE bloggers’ desire to retire early and, even more, to have financial freedom.

Since I’m already in my late 30s I learned about the FIRE movement a little late to be a super early achiever of FIRE, but I still plan to retire early—by 55 if possible, or even earlier than that if I can. If you too love the idea of retiring early, then the information below can help you reach that goal! Success to you! (And if you’re already on your way to retiring early, let me know in the comments below how you’re doing!)

Here are 11 simple steps for how you can retire early, even if you haven’t started saving for retirement yet!


1. Start investing for retirement as soon as possible in order to retire early—but get your financial house in order first.

Because of the amazing power of compound interest, you should start investing for retirement as soon as you possibly can—no matter what age you want to retire. But that is particularly true if you hope to be able to retire early.

There is a saying among financial experts that the best time to start investing was 20 years ago. But the next best time to start investing is today. So work to begin investing for retirement as quickly as possible.

But, so that you will be on solid financial footing, build up an emergency fund and pay off as much nonmortgage debt as quickly as possible first. Otherwise, when you have a financial setback (and statistically, it is a matter of when and not if that you will have financial hardships), you might have to pull money from your investment funds to pay for the emergency, and that is a bad idea because of the potential penalties and fees and the ability you then have lost for that money to grow.

You can learn how to create an emergency fund here and how to get out—and stay out—of debt here! And learn 5 simple steps to start investing here.

Once you begin investing for retirement (or if you already have), you should check out a great free app called Personal Capital in order to track your progress toward reaching your retirement and other financial goals. With Personal Capital, you can see not only all of your bank checking and savings accounts and even your credit cards and other finance accounts, but you can also link your retirement and regular nonretirement brokerage accounts.

This allows you to have a complete, overall picture of your current financial situation. And you can also view your account history to see how your accounts and overall portfolio have done over time. I love this very helpful tool and use it regularly! Sign up for your free Personal Capital account here.


2. Begin to save at least 10 to 15 percent of your income toward retirement (and then save even more when you can in order to retire early!).

As quickly as you can, arrange your monthly budget so that you can invest at least 10 percent of your income toward retirement (15 percent if you can). And if you are starting a little late saving for retirement or you want to have a more comfortable retirement given the many years you will likely live after you retire, and as your income increases over the years, you should strive to invest at least 15 percent of your income toward retirement. And then increase that amount as soon as you can to help you retire sooner!

To do that, continue to examine and adjust your budget (learn how to set up a simple budget here), and work to both cut your living expenses and increase your income.

As long as you are pretty young (say, mid-20s to early 30s), then if you want to retire by age 55 or so (and you expect to have about the same lifestyle as you have now), saving 15 percent of your income in a Roth 401(k) (or even traditional 401(k) if a Roth 401(k) isn’t available) and Roth IRA should get you there.

So, for example, if you are pretty early on in your career and you earn $50,000 a year and have saved $20,000 so far for retirement, if you invest 15 percent of your income every month from age 30 to age 55, you would have $1,460,005. If you will keep your money invested in good stock mutual funds throughout your retirement years, you will be able to earn enough to live on about 10 percent of your retirement fund (nest egg) and never touch the principal.

So you could live on about $140,000 per year, which even adjusted for inflation, should be enough for you to scrape by on. 🙂 And that’s if you never got a raise in that 25 years and therefore never increased your monthly retirement contribution amount.

And of course, you could choose to take out more and draw down the principal at some point, as well.

Also, as an important FYI, if you work for a company that offers a retirement account such as a 401(k), you can actually start pulling from your 401(k) at age 55, as well, penalty free—pretty awesome, right? Retiring at age 55 really is doable if you’re willing to sacrifice just a little bit to reduce your spending in other areas of your budget. And it’s even more possible if you’re willing to work to increase your income.



3. Determine roughly how much you will need to live comfortably when you retire.

As you are making your plans for how to retire early, calculate to the best of your ability how much you will need to save each month toward retirement. This number will likely get more accurate as you get closer to (early!) retirement age, but you can get a pretty good idea of what you will need to contribute by using this retirement savings calculator.


4. Be willing to work harder to increase your income, live on less in retirement, or else invest even more aggressively if you want to retire earlier than age 55.

If you want to retire earlier than age 55, then you can either reduce the amount you are willing to live on each month in retirement or increase the amount you invest each month.

This means you will either need to increase your income or reduce the amount you live on now. Or, for a double whammy, do both! To learn how others have been able to retire early, read this article on the fascinating FIRE—Financial Independence, Retire Early—movement.

If you could live on $70,000 per year in retirement (a little less than $6,000 per month), for instance, and keeping the rest of the numbers the same as our earlier example above, you could retire at age 49. And without any debt, if you own your own mortgage-free home, even adjusted for inflation (at an average rate of 3 percent per year), many people could get by fairly comfortably on the $40,000 worth of buying power that that amount of money would represent in 19 years. 

And if you are investing in a Roth 401(k) or Roth IRA, then the money would be tax free. That would mean you would have even more money available to you to live off of.

Note: If you’re going to retire before age 55, then you will probably want to do some investing outside of retirement accounts, in order to avoid the 10 percent penalty that you incur if you take money out of your retirement accounts before that age.

Or, as a possible alternative, you could also look at making use of the 72(t) tax rule, which allows you to use money from your retirement account if you choose to take out at least five “substantially equal periodic payments,” of an amount determined by your life expectancy, from your 401(k) and IRA accounts. Talk to your accountant if you have questions about this retirement strategy.

Now, going back to our example above, if in addition to being willing to live on $70,000 a year in retirement you were willing to invest $1,200 a month (about 29 percent of your income, in our example scenario above), then you could retire in 15 years, at the age of 45. Yes, that would require a lot of sacrifice, to save $1,200 a month—I don’t deny that. But you would also be retiring at 45 years old, and you would be accomplishing this amazing feat on an annual income of $50,000 per year! If you want to play with some numbers yourself, try this simple investment calculator. Fun times!

But let’s say you wanted to retire early—really early. And let’s pretend you had a higher-paying job, as most of the FIRE folks do, and you made $100,000 per year, or $8,333.33 per month. And let’s say you also started investing 36 percent of that great income, or $3,000 a month, at 25 years old after you earned your master’s degree in business administration (or information systems or another potentially high-paying field). If you did that, you would be able to retire at age 35! Amazing!

Yes, investing $3,000 a month even with that great income would likely still be a sacrifice, but you would be able to live on around $4,000 a month (depending on your tax bracket).

And that’s a good thing, because that’s also roughly what you would be living on, adjusted for inflation, later in your retirement. So I know that’s no caviar lifestyle, but millions of people and hundreds of thousands of families in America live on that much (or less) every month. And think of the reward for doing that! Retiring at age 35!

What do you think? Is it worth it to buy your financial independence—your financial freedom—so young in life? Leave a comment below and let me know your opinion!

Read this interesting article from Mr. Money Mustache to learn more about retiring early and how much you need to invest out of your income to retire after working for certain numbers of years.



5. Find ways to reduce your expenses in order to retire early.

As explained above, finding ways to reduce your expenses is a doubly effective way to help you retire early. By reducing your expenses you can save more each month for retirement, but by maintaining that lifestyle you also need less money to provide for your needs during early retirement.

You can probably reduce your spending for almost every item in your budget, if you become very intentional with your money. There are so many ways to reduce your spending, in fact, that I’m not going to list them all here because it’s enough great content to be an article (probably a book!) all on its own. For a great list of ways that you can start spending less money in different areas, read this article with more than 20 ideas on how to reduce your spending in various areas.

But here are just a few ideas to get you started:

Check out these related articles:


6. Work to increase your income to be able to better reach your early retirement goals.

As the examples above show, if you want to retire early the other important side of the financial equation opposite cutting expenses is to increase your income. There is only so much you can cut to reduce your expenses, but your ability and potential to increase your income is really almost limitless.

There are many, many ways that you can earn extra money, and many of them you can do right from home. Some of those include doing a side hustle to earn extra income, such as blogging (of course! my favorite :)), freelance writing or editing, proofreading, transcription, translation, doing work as a virtual assistant, bookkeeping, accounting, doing IT work, doing customer service, and more.

Here are some simple ideas for things you can do to make more money starting today:

  • Work overtime. If you have the opportunity to do so, working overtime is a great way to help you to save money quickly.
  • Ask for a raise or promotion. If it’s been a few years since you received a significant raise and you’ve been an exceptional employee at work, make a list of your contributions and your accomplishments, and schedule a meeting with your boss to request a raise or a promotion. Focus on ways that you’ve earned the company money or saved them money. If you learn that a raise or promotion isn’t going to happen right away, ask what specific steps you can take in the next year or two to make it a reality. Read this article for more information on how to seek a raise or promotion.
  • Do freelance work. If you work in a field that lends itself to doing freelance work, take advantage of that opportunity to earn extra income to help you save money fast! I have been doing freelance writing and editing since before I graduated from college with my English degree and editing minor, and doing freelance work has not only helped me gain experience in other areas besides what I do for my full-time job but has also at times (when I wanted to give the time to it) brought in significant additional income.
  • Do coaching or consulting. Similarly, if you have job experience or a skill that lends itself to coaching or consulting, put that skill to use! Popular areas for consulting include human resource (HR) consultant, public relations (PR) consultant, marketing consultant, business management consultant, and accounting consultant. Popular areas for coaching include financial coaching, job coaching, personal fitness coaching, and leadership coaching. Look for opportunities on indeed.com or your favorite job website.
  • Get a (second) job. If one spouse is available to get a second job in the evenings or on Saturday, for example, then this is another great potential way to earn additional income. And if you are a one-income family, or if one of you works only part-time, you might want to consider reentering the workforce or going full-time temporarily in order to save money more quickly.
  • Start a side hustle. If you would rather earn money without working another regular job, there are a lot of things you can do to earn a little extra income with a side hustle. Some ideas include starting your own small business where you turn a hobby into a money-maker, being a virtual assistant, or driving for Uber or Lyft. Learn how to start a side hustle and find out about many side hustles that you can explore.
  • Start a money-making blog. The potential for significant income is one of the reasons that I started this blog. If you love helping people and enjoy writing, being a blogger might be a great fit for you. In addition to great income potential (check out these amazing income reports of bloggers who make $10,000 to $100,000 or more per month!), there are many other benefits of being a blogger, such as being able to be your own boss and work on your own schedule. Learn how to start a blog for less than $5 a month.
  • Earn passive income. Some options for earning passive income are to create a product you have someone sell, write a book, create a money-making podcast or vlog, develop an online course, or participate in affiliate marketing. Read this article to learn more ideas for earning passive income.
  • Use rebate apps like Ibotta and Ebates. With rebate services such as Ebates and Ibotta, you can earn money by shopping for things and at places where you would shop anyway. With Ebates, you generally buy items through their website to save up to 40 percent on purchases. It is primarily an online service. Ibotta, on the other hand, is an app you use primarily after you make purchases at brick-and-mortar stores. Because of this, you can actually sign up for and use both apps to save on purchases. Sign up for a free Ebates account here, and sign up for a free Ibotta account here. You can literally sign up for both in just seconds and let the savings start stacking up.
  • Sell stuff on eBay or Amazon. If you have a good eye for a bargain, you can buy items at thrift stores or garage sales and sell them for a profit on eBayAmazonCraigslist, or your local online classifieds.
  • Sell your clothes to consignment shops. If you’re like most people, you probably have more clothes than you need. So use them to bring in some quick cash!
  • Have a garage sale. Declutter and earn money, all at the same time!

You can find even more ideas for increasing your income in this article.

And learn about side hustles you can do from home here.


7. Invest in tax-advantaged retirement accounts such as a traditional 401(k) or Roth 401(k) and traditional or Roth IRAs so that you can retire early.

One of the best things you can do to be able to retire early is to invest the money you put away for retirement in tax-advantaged accounts.

That is because federal income taxes take a big bite out of most people’s paychecks—anywhere from 10 percent to roughly 40 percent! If you are a younger worker (or your spouse is) and you make less money now than you likely will live on in retirement, then investing in a Roth 401(k) if available through your employer and also in a Roth IRA is a great way to go. (You can learn more about the differences between traditional retirement accounts and Roth retirement accounts here.)

On the other hand, if you are a high-income earner and plan to live on a lower percentage of your income during retirement (like many of the FIRE folks), then you will probably want to instead invest in traditional 401(k)s (or similar plans offered by your work) and traditional IRAs.

8. Invest wisely in good stock mutual funds to retire early.

Another important factor in being able to retire early is to choose wise investments. When it comes to choosing the funds to use to invest for retirement, you should look to good growth stock mutual funds that have been around for at least 5 years (and preferably 10 years or longer) so that you can see how they have performed during that time.

As you consider which mutual funds to invest in for your 401(k) or IRA, important factors to consider are the long-term rate of return, the expense ratio, the type of mutual fund (large cap, small cap, mid cap, and international), and the longevity of the current fund manager. If you would like to know how we choose the mutual funds we invest in for our Roth IRA, fill out the fields below, and I would be happy to share the information with you. No strings attached, and I don’t make any money or earn any kind of commission or affiliate income from sharing this information. It is simply the kind of information I really wish I had had when we first started investing for retirement over a decade ago.

9. Diversify your retirement portfolio.

To help ensure that you are able to retire early, it is important that you diversify your investment portfolio. Because stocks have historically outperformed bonds and many other kinds of investment options, I recommend that you invest in solid stock mutual funds for long-term financial success.

Though stocks have performed very well over time, no area of the stock market performs well all of the time, so it is important to have a well-diversified portfolio. The asset allocation that I recommend is investing 25 percent of your designated amount allotted for retirement investing in each of four mutual fund categories: large cap, mid cap, small cap, and international. You can learn more about this asset allocation model here.


10. Invest automatically in order to retire early.

One of the best ways to ensure that you invest the amount that you have planned to every month in order to retire early is by automating your finances as much as possible so that the money is transferred directly from your checking account to your Roth or traditional 401(k) or IRA before you have a chance to spend it on anything else. Many employers even have an automatic system set up where they can pull money directly from your paycheck and it gets invested in your retirement account before it even gets to your checking account.

This kind of automatic investing will help you keep on track to adequately fund your retirement and reach your early retirement goals. For more information about the power of automating your finances, I recommend the book The Automatic Millionaire by David Bach. It was one of the first personal finance books that I read many years ago, and it is still one of my favorites.


11. Regularly evaluate your progress, and adjust when needed.

Once you begin investing for retirement, though you can put your investing largely on autopilot (and you should so that you know it will happen regularly!) by taking advantage of automated investing, you should still review your retirement accounts at least quarterly to make sure your funds are performing as expected and to rebalance your investment portfolio as needed so that it stays in line with where you want it to be.

Sign up for a free Personal Capital account to be able to track how your investments are doing and also view your account history to see how your accounts and overall portfolio have done over time. Because you can link your checking and savings account, credit card accounts, and investment accounts, it’s a great way to see your overall financial picture. I love using this very helpful personal finance tool. Sign up for your free Personal Capital account here.

You can find more information on investing for retirement here.



If you want to retire early, you really can do it if you are willing to work hard and smart and to sacrifice some of your current wants in exchange for your (early) financial freedom. Regularly studying and learning more about how to retire early will help ensure that it happens.

By starting early, reducing your living expenses, investing a significant amount of your income, and choosing wise investments, you can retire years or even decades earlier than the average person.

If you are serious about retiring early then start investing as much as you can today! And let me know your progress—I would love to cheer you on!


What did you find most helpful in this article about how to retire early? Do you aspire for FIRE? What other tips do you have for how to retire early? Leave a comment below and let me know your thoughts!


how to retire early

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