Thank you for visiting my website. I will do my best to answer the question regarding why you should retire early. Many people dream of retiring early and so did I. The way to retire early was to have ‘enough accumulated savings’ to make this a reality. The age for planning your retirement, depends on how much savings you decide, is required to provide for the rest of your retired life. There are a lot more you must take care of for retiring early, than just to plan the money part.
What will be covered in this journey
The key topics which will be touched upon are
- Why People Want to Retire Early
- How People Plan for Retirement
- What Are the Risks Involved in Retiring Early?
- How these Risks Can be Mitigated
- The Ideal Solution
I encourage you continue reading the whole article and at some juncture you may get your questions answered
Why People Want to Retire Early
There are various reasons why people plan for an early retirement before the age of 65. After analyzing a broad spectrum of people, it boils down to the following 3 reasons.
(1) Get more TIME for self and family: The routine 9-5 job demands total concentration from 9 to 5 on the job and sometimes beyond 5 as well. This leaves you exhausted to plan for time with family or for a favorite pastime. The Weekends vanish as soon as they come and only give you the space to do some usual home repair jobs and procuring the weeks provisions.
Every individual dreams of an early retirement, especially, after going through the grind of a regular job. Because they do not get the time to take the family for a vacation of their choice, they cannot plan for a trekking expedition which they love so much just to name a few. We long to return to our childhood days when we were so carefree and enjoyed doing what we wanted.
After work, we are loaded with responsibilities of the family and providing for life after retirement that we keep going like a workhorse. We get completely exhausted when we come to retirement age and the urge to enjoy the beautiful things in life gets drastically reduced.
This is the prime motivation for every young person for wanting to retire early in life so he/she can enjoy it when they are still in their prime youth.
(2) SAVED enough to stop working: People, with foresight and an instinct for saving, start saving a fixed percentage of their income as early as at 20 years of age. When the savings have grown to a substantially big amount, they have an option of quitting their jobs at the age of 50 or even earlier. When you have amassed enough wealth to take care of your lifetime, why keep working for somebody else instead of enjoying life and doing things you love.
(3) Deteriorating HEALTH Condition: For some people the occupation or the type of job they are in causes them a lot of stress, handling work situations. Constant exposure to stressful work pressures tells upon their health, requiring regular monitoring of health conditions. This increases the medical bills to keep in good condition to carry on discharging their duties demanded by their jobs.
A change in the job sometimes brings temporary relief but again takes them back to the same stressful conditions. Such people think of early retirement as a solution to their physical and mental condition. They start to enjoy better health and stress-free living after retirement.
How People Plan for Retirement
Here we will touch upon how generally people plan for securing their retired life and decide when (or) at what age they must retire.
When planning for retirement the first important thing is at what age you start your plan. If you start your plan early say at the age of 20 then you have a good potential to save and every penny you save compounds each year. If you start your plan late, say at 40 or 45 then you need to think of other options of creating wealth other than your regular job. Starting early allows you to retire early.
When creating your retirement plan you need to consider your life expectancy and estimate how many years of retired life you need to provide for. Then you need to calculate your retirement expenses which should take care of basic living, medical expenses, vacation expenses and provision for contingency expenses each year.
Expenses per year (add inflation of 2~3% per year) multiplied by the number of years of retired life is what you need to retire. Since, you will be investing your savings you can safely assume 4~5% returns. Now add up what you can receive from social security, any pension or 401k. Subtract this from the expenses you have calculated which will tell you how much you need to additionally save (or create) to retire.
This is your plan to retire at the age you want to retire.
What Are the Risks Involved in Retiring Early
The earlier you plan to retire; this additional saving amount required increases exponentially and you must save additional amount or create the required wealth. So early retirement ideas puts in a lot of pressure on you to save more and more in less time.
(1) LIFE expectancy: The longer you live the more funds required to take care of your entire life. So, you need to plan to live at least up to 90 years. For this you must be confident of saving enough.
(2) Reduction in SOCIAL SECURITY Benefits: If you work for less than 35 years your average monthly earnings will be lower than when working for more than 35 years. You stand to gain if you work for more than 35 years as the higher earning years will be taken into calculation for average benefit. So, if you want to retire early, you cannot expect a huge benefit from social security.
(3) Going BACK TO JOB is difficult: If after taking an early retirement you decide to get back to some job because you are having lots of free time, it may not be easy to get an employment. Say after 3 years you seek a job it will be difficult to explain the gap in employment to your prospective employer. The employer will weigh the risk of providing you employment in comparison to another candidate who does not have a gap. The person with continuous employment may be preferred as the chances of his continuing in employment is higher.
(4) Run out of FUNDS: Despite all your conservative calculation of the retirement funds required and providing for it, there may be some conditions, which could put you in a situation, where you run out of money. It could be a medical disaster in the family which could drain out your resources. Some natural calamity which could blow away your non moving assets. An economic slowdown could tank your investments bringing down your potential savings. Any such situation could deplete your resources drastically and this is not a desirable situation.
(5) You still need to keep yourself BUSY: The basic purpose of retiring early is to have the time to enjoy what we have been missing in the busy days of our jobs. After early retirement these unfulfilled wishes get fulfilled in 2 to 3 years? time. Later people realize that suddenly they have nothing to do. You are not able to socialize as your friends and relatives are busy with their jobs and do not have time for you. You do need a job to keep yourself busy. The challenge is to keep yourself busy especially after a gap of 3 to 4 years.
(6) Your IDENTITY is at stake: When you were in a regular job you had an identity at the place of your work. You were appreciated for the good work you were doing. You would have a feeling of accomplishment when you were appreciated or got a promotion. Now after retirement that identity does not exist anymore. You are now longing for identity which can give you a sense of pride.
How these Risks Can be Mitigated
We all know that all problems have a solution and you must choose the one that best suits you. Like wise all the risks involved in retiring early can be mitigated by choosing a solution which is easy for you to implement.
There are essentially 2 main risks which are involved in retiring early.
(1)INSUFFICIENT SAVINGS or run out of money after retirement: How do you take care of this problem? In my view there are 2 ways you can do this. Look for some prudent investments methods to multiply your savings before and after retirement. This has a limitation in the sense that you can increase your reserve by X amount, but you will not know if this is enough to take care of the risk.
The other way is to learn some evergreen skills which can be provided as a service to earn money. Once you learn such skills you can use it to earn money when you want and how much you want. This will take care of the initial savings required to decide your retirement age. You may also create wealth to take care of unforeseen circumstances after retirement. What I mean is true financial independence. I will talk more about this in the next section on the ideal solution.
(2) Keeping yourself BUSY after retirement : This is the second problem most people encounter with. Some are of the opinion that even if you have the required funds one should not retire. What happens after you have fulfilled all your long-standing wishes which may take a couple of years. You come across a sudden void and you have a lot of free time. You are compelled to keep your mind busy or boredom will hit you.
There are 2 ways you can take care of this problem. There are a lot of charity organizations available which are doing good to the society. You may join one of these services which you like and work for free. You will keep yourself busy and you get a sense of achievement when people thank you for your help.
You may learn some evergreen skills and take up some part-time job where you dictate your working hours and you can stop working whenever you want. This way you keep yourself busy when you want or take time off to enjoy your time with your family. If money is not a problem, you can donate some of your earnings to charity thereby earning a name in the society and make your life meaningful. We will talk about these evergreen skills in the next section.
The Ideal Solution
When we analyze all the problems discussed above, one thing is clear. Early retirement does not mean remaining jobless. What it means is that you enjoy all the things in life, live the lifestyle of your choice and still work to create wealth. But work for yourself when you like at the time and place of your choice. Achieving true financial independence is the dream of most people.
What is the ideal solution we are talking about here? Yes, Creating Online Assets (not buying real estate). When you create online assets, you create a passive income which will earn money for you for many years to come.
What are these online assets? They are websites which address specific problems of people and give solutions to their problems.
How do we earn money from these websites?. You provide solutions to people?s problems. These solutions can be in the form of digital information or products. When people buy these products or information you earn money.
How do you learn the skills for creating these online assets? Here is the major problem. There are training academies online which make this process of teaching very complicated and charges you huge amounts of money.
Then where do I learn these skills? Today I am going to recommend to you the best training platform available online which simplifies the whole process of creating these online assets and they provide great value for the small fees they charge you.
The training platform I am referring to is WealthAffiliate.com. To say it in one line I would say ? Wealthy Affiliate gives you a Ferrari ride for the cost of a Honda whereas most other platforms give you a Honda ride for the cost of a Ferrari?
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Do you want to retire early and live the life you dreamed?
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Thank you for reading my article on ?why you should retire early? and hope it was useful to you. If you have any questions, please leave in the comments section below and I will be happy to answer them.