What do you want to be when you grow up?
Most of us haven't had to seriously answer that question in a long time. We have the careers we have, and maybe we like them and maybe we don't, but in most cases, we’ll keep doing some variation of what we're doing now until we retire.
So let me put that question another way: What do you want to do when you retire?
If you're more than a couple of years from retirement, your vision of retired life is probably kind of fuzzy. Some travel, some time with family and friends, golf, reading ... whatever it is you like to do but feel you don't do enough of now.
But then what?
What if you could have any job you wanted? What if you could bag your current work life forever and spend your days working for social change, or guiding visitors through a museum you love, or building birdhouses or violins? What if you could teach sailing to young people, or fly fishing, or quilting? Write short stories, build houses with Habitat for Humanity, take a full-time role with your church, restore old cars?
What's your dream?
A survey I saw recently said that about half of working American adults would be interested in moving into an "encore career" -- a career focused on things other than making money. While the survey was specifically focused on jobs related to what it called "social change," I'm comfortable assuming that at least half of working Americans would like to be doing something else with their days -- if they could make the money work.
How about you? Have you ever thought of retiring early and making it happen?
Wait. How the heck do I retire early?
Early retirement isn't so far-fetched -- several of the Fool's discussion boards are devoted to early retirement, and they're full of success stories. (And no, those stories mostly don't involve buying dot-com-era darlings like Cisco Systems (NASDAQ:CSCO) or Amazon (NASDAQ:AMZN) or Qualcomm (NASDAQ:QCOM) in the mid-1990s and selling them right before the crash.)
It doesn't take crazy, speculative investing and a bucket of luck. What it does take is planning and discipline, and a determination to live below your means for an extended period of time. But it's within reach for plenty of us.
That last point -- living on less than you earn -- is the key. If you want to retire early, you have to be committed to saving right now, and possibly willing to live on less later on. How much less depends on how much you've saved, your age, and the income from your "dream job." All those factors need consideration as you think about when -- and if -- to do this.
But you can do this -- and depending on your current situation, the sacrifices might not be as bad as you think. Some popular ways to fund an early retirement include:
- Tap your IRA. While you can't make IRA withdrawals before age 59 1/2 without a hefty penalty under most circumstances, the law does provide a few ways around that. One, called the "Section 72(t) exception," allows you to withdraw "substantially equal periodic payments" (known as SEPPs) over time, under some conditions. You can also make penalty-free IRA withdrawals for educational expenses, which might be part of your new career plan, and of course your Roth IRA contributions can be withdrawn at any time with no taxes or penalties owed.
- Hold income-producing stocks. Stocks that pay a dividend aren't all clunky old relics. In fact, plenty of them, like pharma giant Merck (NYSE:MRK), cheese whiz Kraft Foods (NYSE:KFT), tool king Snap-On (NYSE:SNA), and office-furniture giant Steelcase (NYSE:SCS), are stocks you might want to consider for the large-cap portion of your portfolio wholly aside from their tasty dividends.
- Consider annuities. Most annuities are best avoided, thanks to their outrageous fees and iffy benefits, but well-chosen lifetime income annuities can be a key part of an early retirement strategy.
Most importantly, though, do your research. Talk to successful early retirees, in person or online. Talk to others who do the kind of work you want to do to set realistic expectations for yourself and learn about the financial challenges they've faced. Talking with these people will also help you see that it is possible to retire early and start a new work life ... and you might find yourself taking action sooner than you think.
Finally, take a look around the Fool's Rule Your Retirement newsletter area, where early retirement is a frequently discussed topic, complete with interviews with experts and how-to articles by successful early retirees. It's a paid service, but you can get full access with a 30-day free trial, so click with confidence.
