Many of us may daydream about retiring early, and bidding our careers adieu in our 50s -- or even our 40s. But nearly everyone who transforms that vision into reality does so by making some significant sacrifices during their working years.
That's a point not lost on today's workers who want to retire ahead of their peers. In fact, according to a new FinanceBuzz survey, 36% of Americans say they'd be willing to spend two years without buying anything other than basic essentials, like food, to retire early. Meanwhile, 12% say they'd be willing to not have children, and 11% say they'd (gasp!) give up their pets. And while not as common an answer, 6% of those surveyed say they'd forgo a car.
Many of those intent on retiring early are also willing to sacrifice their free time to get there. Around one-third of respondents say they're willing to take on a second, or even a third, job to boost their savings so they could leave the workforce ahead of schedule.
If you're eager to retire early, you'll most certainly need to give up certain things to get there. But you may not need to go to some of the aforementioned extremes.
What does retirement mean to you?
While the traditional view of retirement was all or nothing -- you kept plugging along until you give work up completely -- many more people today take a shades-of-grey approach. A plan that involves you working in a limited capacity after you "retire" could well make it possible for you to leave your main career behind and enjoy a more laid-back lifestyle starting at 45 or 55, rather than 65.
For example, you might leave the workforce in your 50s, but then start a small, part-time business that dovetails with a passion of yours. At that point, you've got the best of both worlds: You're largely in control of your time in a way that you couldn't be while working for someone else, but you're also spending your days doing something meaningful that generates income. In fact, rather than forcing yourself to work two or three jobs today to retire early, you might consider working a bit more than expected later in life, but in a manner that's enjoyable and fulfilling.
What sort of business can you start in retirement? It depends on your interests and talents. If you're into crafting, you could make handbags and jewelry. If you love animals, start a pet care business. If you're talented in the kitchen, open a catering service. Only you can know which of the many, many choices will best suit you, but if you're willing to spend part of your time in retirement on activities that earn you some money, you can exit the full-time rat race early without having to sacrifice too many of the other joys in life (think children and pets).
Another key factor that will dictate how much advance effort it will take for you to leave the workforce early is the lifestyle you plan to have in retirement. If you're envisioning a simple life in which you buy mostly basics, live frugally, and enjoy free and lower-cost entertainment, then you might swing it without having to go to extremes like giving up a car.
Of course, another way to successfully retire early without sacrificing excessively is to start investing wisely at a young age. For example, if starting at 22, you were to route $500 a month into an investment portfolio that averages an 7% annual return -- which is actually a couple of percentage points below the stock market's average -- you'd amass about $380,000 by age 47. That's more than many of today's 60-somethings retire with. And if you were to keep that up for just five years more, until age 52, you'd have around $567,000.
Even if you take one of the less radical paths to get there, retiring early with financial security requires huge effort. But before you go to extremes, explore your options for putting yourself on course for that goal without losing the ability to enjoy the years that lead up to it. A few lifestyle tweaks, coupled with a smart savings and investment strategy, could get you to the early retirement you want without driving you crazy along the way.