How to Retire Now: Your Guide to Early Financial Freedom

“Retirement is not the end of the road; it’s the beginning of the open highway.” – Unknown

Imagine having the freedom to retire and focus on what truly matters to you, years or even decades ahead of the traditional retirement age. Retiring early may seem like a distant dream, but with the right plan and determination, it can become a reality. Here’s your guide to achieving financial freedom early so you can retire now—or at least create the option to do so.

Step 1: Set a Clear Retirement Vision

Retirement means something different to everyone. For some, it’s about traveling the world; for others, it’s a chance to start a new venture, or to spend more time with family and friends. Begin with a clear vision of your ideal life post-retirement. Knowing what you want allows you to reverse-engineer the steps to reach your goal.

Example

Emma, an optometrist, wanted to retire by 50 to focus on volunteering for global healthcare causes. She created a retirement vision around her passion for service, which allowed her to set tangible goals early on and prioritize saving aggressively to fund her dream.

Step 2: Calculate Your “Magic Number”

Determine how much you need to live comfortably for the rest of your life. Financial experts recommend using the “25x rule,” which suggests saving 25 times your annual expenses to maintain your desired lifestyle. For example, if you plan to live on $60,000 annually in retirement, aim to save $1.5 million.

Pro Tip: Take inflation into account and factor in additional healthcare costs, which often rise post-retirement.

Step 3: Build an Aggressive Savings Plan

To retire now, you need a high savings rate, typically 50-70% of your current income. This might mean making sacrifices in your lifestyle, but the payoff is enormous. Automate savings to retirement accounts and investment funds to make consistent progress toward your goals.

Real-Life Inspiration

Sarah and Mike, both healthcare professionals, saved 60% of their income by downsizing their home and driving modest cars. They achieved financial independence by their early 40s, and now live off their investments, pursuing their passions full-time.

Step 4: Maximize Investments in Tax-Advantaged Accounts

Take full advantage of tax-advantaged accounts like 401(k)s, IRAs, and HSAs. These accounts provide tax benefits and allow your savings to grow faster over time. Here’s a quick breakdown:

• 401(k): Contribute up to the annual maximum limit, especially if your employer offers a match.
• IRA (Traditional or Roth): Maximize contributions here to benefit from either tax-free growth (Roth) or tax-deductible contributions (Traditional).
• HSA (Health Savings Account): This triple-tax-advantaged account is a great option if you have high healthcare costs in retirement.
• Cashflow Assets: In addition to the list above, invest in assets such as annuity, dividend paying stocks and ETFs, real estate that pays you cashflow whether you work or not.

Step 5: Diversify Income Sources

To retire now, you’ll need multiple income streams beyond retirement accounts. Consider options like rental properties, dividend stocks, and side businesses. The goal is to create passive income streams that replace the income you would otherwise be working to earn.

Example of Diversified Income

Dr. Sarah, an optometrist, invested in rental properties in her 30s while maintaining her practice. Her real estate investments now generate passive income, covering a significant portion of his retirement expenses.

Step 6: Practice Frugality and Mindful Spending

Reducing expenses is critical to saving aggressively for early retirement. Track your spending and identify areas where you can cut costs without sacrificing quality of life. The idea isn’t deprivation; it’s mindful spending.

“We make a living by what we get, but we make a life by what we give.” – Winston Churchill

Tips for Cutting Expenses

• Downsize housing: Consider a smaller home or renting out extra space.
• Drive less and buy cars strategically: Opt for reliable, economical vehicles.
• Limit eating out: Save money by cooking at home.
• Embrace DIY: Save on repair and maintenance costs by learning basic skills.

Step 7: Get Out of Debt Quickly

Debt can keep you tied to your job longer than necessary. Prioritize paying off high-interest debt first (like credit cards) and then tackle other loans such as student loans or mortgages. The less debt you carry into retirement, the less income you’ll need to maintain your lifestyle.

Quick Tip: If you have a mortgage, consider making extra payments or refinancing to a shorter loan term, which can reduce your interest costs and hasten debt elimination.

Step 8: Build a Contingency Fund

Early retirement means planning for the unexpected. Build a substantial emergency fund (at least 6-12 months of expenses) to avoid dipping into retirement savings when life throws you a curveball. An emergency fund allows you to address surprises without sacrificing your financial freedom.

Step 9: Work with a Financial Advisor

Early retirement is complex, and a financial advisor can help optimize your plan, provide valuable insights, and guide you on investment strategies that fit your risk tolerance and retirement timeline. Advisors can also help minimize tax burdens and ensure a sustainable income stream throughout retirement.

“Do not save what is left after spending, but spend what is left after saving.” – Warren Buffett

Step 10: Embrace the Mindset of Financial Freedom

Shifting your mindset is key to sticking with your plan. Financial freedom is less about accumulating wealth and more about the choices and lifestyle it enables. Cultivate a growth-oriented mindset focused on freedom, minimalism, and purpose-driven living.

A Word on FIRE (Financial Independence, Retire Early)

The FIRE movement has gained traction, with thousands of people working toward early retirement through a lifestyle of aggressive saving, wise investing, and intentional living. Though it requires discipline, FIRE shows that early retirement is achievable for many who are willing to put in the work.

Example from the FIRE Community

Grant Sabatier, author of Financial Freedom, went from nearly broke to financial independence in five years. He shares his journey of working multiple jobs, investing wisely, and living below his means to achieve financial independence by age 30. His story has inspired countless others to take control of their financial futures.

Take Charge of Your Financial Destiny

Retiring early is within reach if you commit to smart saving, wise investing, and disciplined spending. Whether you want to pursue passion projects, spend more time with loved ones, or travel the world, retiring early gives you the freedom to make the most of your life.

Call to Action

Ready to start your journey toward financial freedom? Begin by setting a clear retirement goal and building a plan. Develop a winning team to include professional such as accountant, financial advisors, , explore ways to cut costs, and maximize investments to set yourself up for success.

For more tips, inspiration, and resources, join our community at Optometry Divas and let us help you reach your financial goals.

References:

• Sabatier, G. (2019). Financial Freedom: A Proven Path to All the Money You Will Ever Need. Penguin Books.
• Bach, D. (2004). The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich. Broadway Books.
• Orman, S. (2000). The Courage to Be Rich: Creating a Life of Material and Spiritual Abundance. Riverhead Books.

Disclaimer: This blog is for informational purposes only and should not be considered financial advice. Please consult a qualified financial advisor to create a personalized plan suited to your financial goals and situation. Top image by Pexels from Pixabay