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3 Things You Need to Do to Retire Early

By Maurie Backman – Apr 5, 2020 at 10:39AM

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If you really want to bust out of the workforce ahead of your peers, be sure to stick to the following plan.

Many people dream of early retirement, but achieving that goal is easier said than done. If you're eager to leave the workforce well ahead of schedule, you'll need to do the following.

1. Live below your means

To retire early, you'll need to do a good job of building savings. And the best way to ensure that you stay on track is to make a point of living below your means -- spending less than what your earnings allow for.

The extent to which you're willing to do so could dictate not only how soon you leave the workforce, but how comfortable a lifestyle you lead once you do. Setting aside $700 a month for retirement over 30 years will leave you with a lot of money; setting aside $1,200 a month will leave you with even more. Decide how important early retirement is to you, and figure out what sacrifices are worth making while you're working to ensure that you're able to build the wealth you need.

Older man and woman on a boat out on the water


2. Stay debt-free

The more debt you carry, the more money you throw away on interest -- money that could otherwise be used to pad your savings and get you closer to your early retirement goal. While it's OK to carry a mortgage for a long time, because that's pretty much the healthiest type of debt you might have, aim to stay away from high-interest debt that can cost you a fortune over time -- namely, credit card debt.

3. Invest your savings aggressively

When you retire in your mid-to-late 60s, you need to plan on having your money last for a good 20 years. That's because the average 65-year-old man today can expect to live until age 64, according to the Social Security Administration, while the average 65-year-old woman can expect to live until 86 1/2.

When you retire early, you need extra savings to allow for added years of withdrawals. And that's where investing aggressively comes in handy. If you load up on stocks in your retirement portfolio, you're likely to see a 7% average annual return on your money over time, since that's a few percentage points below the stock market's average. With a conservative portfolio invested heavily in bonds, you may be looking at more like 4% over time (possibly less). Here's how that difference could play out:

Monthly Investment Over 30 Years

Ending Balance with Conservative Portfolio (Average Annual 4% Return)

Ending Balance with Aggressive Portfolio (Average Annual 7% Return)









$1.02 million



$1.27 million



$1.47 million


$1 million

$1.7 million


As such, it pays to take on more risk in your portfolio if you're aiming to retire early, especially earlier on in your career. You can shift toward safer investments as your target retirement date gets closer, but that way, you'll achieve the growth you need.

Retiring early may not come easily, but it's doable if you map out a plan and stick to it. That way, you'll get to enjoy your newfound freedom while you're relatively young and in a better position to make the most of it.

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