Retire in Your 50s — Here’s How

There’s no real secret to retire early. The key is to start saving as much as possible as young as possible. People who start saving 20% of their income at 20 are far more likely to retire at 50 than people who start setting aside 10%, 15% or even 20% of their income at 30 or 40. Avoiding debt and adjusting your definition of a comfortable retirement can also help you make your retirement savings go further.

The real trick of retiring early, then, is having the discipline to sacrifice the right-now extravagances to focus on the long-term goal of working less in the long run. We’re certainly not the first to point out the $3 cup of coffee every morning, the new car when a quality used car will do and the weekend blow out in Las Vegas all add up over time. But if it were so easy to give up those comforts along the road of life, we’d all be out of the rat race before our kids were off to college.

The key thing to remember is that anyone can retire early with a little planning and sacrifice, and that its never too late to establish a goal to stop working sooner. Even at 50, you can shoot to retire at 60 instead of 65. What follows are some tips, trick and steps others have used to retire early.

Retirement is no fun if you still have to worry about money, so it’s not surprising that the people who post on online forums about retiring early talk about “financial independence” instead of retiring. Their goal is to save enough money to cover living expenses for the rest of their lives, even if they live well past the life expectancy. Indeed, a lot of people who “retire early” continue to work; the difference is they can choose to work as a volunteer or pursue a passion project that may not offer the financial stability of a traditional 9-to-5 job.

The first step, then, is figuring how much you spend now. Knowing where your money is going will give you a great foundation to estimate how quickly you will burn through your retirement savings. Monitoring where every penny goes for a month or, better yet, several months, will help you come up with a target number of what you need to tell your boss to take this job and shove it.

Monitoring your money can be time consuming. Once you have a good picture of how you spend it, you need to look for places where you can save it. And that’s not just the small expenses, like that previously-mentioned, gourmet cup of coffee. You need to periodically do some comparison shopping on your bigger expenses: insurance policies, cellphone bills and utilities should all be reviewed annually to see if you can get a better deal from another provider.

There are some built in savings that come with not working: the family may be able to get by with one car instead of two, and, since you’re already retired, you’ll no longer be contributing to retirement accounts. But the big key is to make sure you know you have enough money to last before quitting your job; for most people, not working and not having enough money is far more stressful than working and feeling like you struggle to make ends meet.

People who retire early come from all walks of life and, when they were working, had a wide range of income levels. The one thing they have in common is that they all found ways to live simply while they were saving to retire, and continue to live simply now that they are free from work.

One of the most famous financial independence gurus is the blogger Mr. Money Mustache. He and his wife retired at 30 after saving $600,000 and paying off the mortgage. The couple and their son now live on about $25,000 per year.

People like Mr. Money Mustache do this by deliberately not keeping up with the Joneses. The latest high-end German automobile might make you happy for a few weeks while that new car smell wears off, but in the long run, financially independent people are fine with a well-maintained used car that offers lower payments and lower insurance costs.

Annual raises at work aren’t an excuse to spend more for people who want to retire early. They’re a chance to save more. The same goes for bonuses, inheritances and that $25 birthday check you’ve gotten from Aunt Kathy every year since you were five.

Saving only works if you have low – or no – debt. Putting $100 in a savings account with a 2% return is great. But if you have $100 on a credit card with a 19% annual interest rate, those savings are gone in an instant. After you get rid of your high interest debt, your first step should be building up a six-month emergency savings account that can cover all of your expenses. This means you won’t have to live off of credit cards if you lose your job, and unexpected expenses like a new transmission for the family car or the kid’s braces can be paid for with that account as well.