15 Things to Do to Retire Early

There's a lot to like about an early retirement: For one thing, you'll be younger and probably healthier than you will be later, meaning you can enjoy a wider range of activities -- perhaps including hiking, scuba diving, biking, and/or spending hours meandering through museums.

Early retirements generally don't just happen, though -- most of us need to work toward them if we want them. Here are 15 steps you might take to get there.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

For starters, figure out whether you really want to retire early. It may sound great, but ask yourself how you'll spend your days. Many people find themselves bored or restless in retirement without the regular socializing that their job provided and with much less structure to their days. Make sure that an early retirement will suit you.

Next, spend some time figuring out whether you can retire early. Estimate as well as you can how much income you will need in retirement, and how much your savings and other income streams, such as Social Security, can provide. Estimate your future expenses, too, understanding that they can change throughout your retirement years: You might spend more on traveling and recreation in your early years and more on healthcare in later years.

If you want to make yourself financially healthy enough to retire early, you'll need to make sure you have paid off any high interest rate debt and have a plump emergency fund able to cover your living expenses for at least three to six months, if not more. Having those ducks in a row will put you in a great position to be saving and investing for retirement -- and, later, entering retirement.

ALSO READ: An Emergency Fund: Why You Need One and How to Make One

Living comfortably in retirement means having sufficient income streams to support you. These can take many forms. If you're among the lucky relative few with a generous pension coming to you, that might be all or much of what you need. Most of us will have some Social Security income in our futures. On top of that, you might buy a fixed annuity or two to generate regular, fairly dependable income. Or amass an investment portfolio full of stocks that pay regular dividends and/or bonds that generate interest payments. Or do several of these things. You might, for example, want $75,000 in annual income in retirement, which might be achieved with, say, $30,000 in Social Security income, $20,000 from annuities, and $25,000 from dividends.

Most of us will need to save aggressively if we want to retire early -- or even if we just want to retire in our mid to late 60s. The old rule of saving 10% of your income is likely to be far too little, especially if you haven't been saving since you were much younger. For many of us, saving 20% or more of our income makes more sense. See how much you can sock away -- and then see if you might be able to increase that amount.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

One way to get your spending under more control, and to be able to boost your savings, is to be sure that you're living below your means. In other words, all your spending, whether on rent or concerts or contributions to investment accounts, should be less than the income that's coming in. It can help to set up a budget to see where your money has been going and to better allocate where you want it to go.

ALSO READ: 10 Ways to Practice Living Below Your Means

Reining in your excess spending can only help you so much if you're trying to greatly increase your saving and investing. So consider boosting your income. This might be achieved in various ways, or a combination of ways. You might start by asking for a raise at work and then work toward advancing in your career, perhaps by making yourself more valuable via new credentials or skills. For some people, changing their career entirely might be a good move, depending on interests and earning potential. Consider taking on a side gig or two as well, for a short or long period. Find some side gigs that are enjoyable for you, such as perhaps making and selling crafts online or giving music or language lessons.

As you plan and save and invest for your future, be sure that you're planning conservatively -- because life tends to throw unexpected expenses in our path now and then. If you plan your retirement financially down to the penny and then your property taxes increase much more than you ever expected or you suddenly need to buy a new car, you'll want to have a cushion in your budget to allow for the unexpected.

ALSO READ: Planning to Retire: A Complete Guide

Achieving an early retirement may require some compromises and/or sacrifices -- in retirement or before it. For example, if you're dreaming of traveling around the world for several months per year in retirement, that might be more doable if you work a few more years and save even more money. Retiring early might mean you travel less and/or eat out at restaurants less. If you wanted to retire with a primary home and a beach house, too, you might need to give up the beach house in order to be able to retire early. (You can still spend weeks at beaches by renting out spaces as needed.)

If you're saving aggressively for retirement, that's great! But you also need to invest that money effectively. You'll end up with vastly different sums if your money grows at, say, an average annual rate of 5% than if it grows at 8%. For money that has at least five (if not 10 or more) years to grow, it's hard to beat the wealth-building potential of the stock market. And for most people, who are not stock-picking geniuses or who don't want to spend a lot of time on their investments, it's hard to beat the simplicity and effectiveness of low-fee index funds.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

For many of us, Social Security benefits will make up a significant chunk of our retirement income -- so it's well worth taking a little time to learn more about how Social Security works and how to increase your benefits. For example, you can make your benefits bigger by delaying starting to collect them. That might be hard if you're aiming to retire early, but if you can do so, perhaps by supporting yourself with savings for a few years before starting Social Security, you'll end up with fatter checks -- for the rest of your life.

One retirement expense that's likely to be significant and that's often underestimated is healthcare. According to the folks at Fidelity Investments, for example, a 65-year-old couple retiring in 2021 can expect, on average, to spend around $300,000 on healthcare out of pocket throughout their retirement. And that's not counting long-term care, over-the-counter medications, or most dental care, among other things. Some people will spend much more, of course, while others will spend less. Medicare, which most of us are eligible for starting at age 65, can be a big help.

ALSO READ: How to Save Money on Healthcare in Retirement

When you're planning your retirement, ignoring inflation can lead to disaster. Inflation has averaged close to 3% annually over long periods, but there have been years when it has been close to zero or in the double digits. That 3% average annual inflation rate might seem minor, but it's enough to shrink the buying power of your retirement account by around 50% over 25 years. You might address inflation by opting for annuities that adjust their payouts for inflation and/or by investing in dividend-paying stocks whose payments will tend to be increased over time. In addition, just aiming to amass a greater sum for retirement will also help.

As you act on all these steps, be sure to monitor your progress. You want to be sure that your investments are performing as expected (or better), for example. (The stock market doesn't go up in a straight line, but over multiyear periods you should aim to at least meet or beat its return.) If you're working on paying down debt, make sure that you're not falling behind. You don't want to be falling behind on your saving and investing, either -- as your earliest invested dollars can be your most powerful ones, since they have the longest time in which to grow.

ALSO READ: Credit Card Debt: What You Can Do to Get Out

Finally, be ready to make adjustments as needed over time. If the stocks you expected to perform well have not done so over several years and you no longer have faith in them, consider switching to an index fund or two. If your side gig isn't producing the kind of extra income you'd hoped for, look into changing to another side gig -- or go about the same one in some new ways. Another adjustment might be moving your early retirement date a little further out, if you just haven't amassed enough by when you needed to.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Don't assume that an early retirement is out of the question for you. It might be, but you might still be able to move your retirement date up by a few years -- even if that's just from age 69 to age 66 -- by acting on these steps. If you end up retiring on time or later, having saved and invested and planned for your retirement is likely to make it more secure and comfortable.

The Motley Fool has a disclosure policy.