What Do We Mean by 'Early Retirement'?
You may or may not have heard of the acronym FIRE (Financial Independence Retire Early) before. This is a movement where people plan to retire VERY early, and to achieve this they live a frugal life and save a lot. But how realistic is this for most people? Buying a house, raising a family, having nice holidays and a decent standard of living are things that many people want and this means that money needs to be spent!
However, we can take some of the ideas from the FIRE movement, adapt them to suit our own circumstances and aim to retire at the age of 55 years. This feels a bit more achievable.
Before we go any further though, let's first think about what we mean when we talk about 'retirement'. It's important to think about this as for many people, a job or career gives their life a structure and 'meaning'. Without this, some may find that retirement isn't as happy as they thought it would be. Retirement therefore, doesn't mean stopping work and doing nothing as this can lead to real dissatisfaction with life. It's important to have a plan, a structure of some sort to put in place to replace the structure you had within your working life. Retirement is therefore about 'retiring' from the paid work that you 'had' to do to earn a living and replacing this with other activities such as hobbies, travel, voluntary work or even part-time work on your own terms. What you do doesn't really matter, as long as you have a plan to do something.
Ok, so talking of plans, if you want the option to retire at 55, then you need to start planning when you are relatively young, as the choices you make early in your life, affect your ability to maximise your wealth, which is important to retire early. Starting your retirement planning in your 20s is ideal as this gives you much more time to allow investments to grow. However, if you didn’t start planning that early, all is not lost, you just need to be able to focus even more on attaining your goal.
The next sentence is important, you may want to read it twice! Set yourself a goal of when you want to retire. I remember in my late 20s a pension advisor asked me when I wanted to retire and I said 55. That became my goal and whilst I didn’t necessarily think about that all of the time, it was in the back of my mind and influenced some of my decisions, for example when I had a choice on how much I wanted to contribute to my pension.
However, we can take some of the ideas from the FIRE movement, adapt them to suit our own circumstances and aim to retire at the age of 55 years. This feels a bit more achievable.
Before we go any further though, let's first think about what we mean when we talk about 'retirement'. It's important to think about this as for many people, a job or career gives their life a structure and 'meaning'. Without this, some may find that retirement isn't as happy as they thought it would be. Retirement therefore, doesn't mean stopping work and doing nothing as this can lead to real dissatisfaction with life. It's important to have a plan, a structure of some sort to put in place to replace the structure you had within your working life. Retirement is therefore about 'retiring' from the paid work that you 'had' to do to earn a living and replacing this with other activities such as hobbies, travel, voluntary work or even part-time work on your own terms. What you do doesn't really matter, as long as you have a plan to do something.
Ok, so talking of plans, if you want the option to retire at 55, then you need to start planning when you are relatively young, as the choices you make early in your life, affect your ability to maximise your wealth, which is important to retire early. Starting your retirement planning in your 20s is ideal as this gives you much more time to allow investments to grow. However, if you didn’t start planning that early, all is not lost, you just need to be able to focus even more on attaining your goal.
The next sentence is important, you may want to read it twice! Set yourself a goal of when you want to retire. I remember in my late 20s a pension advisor asked me when I wanted to retire and I said 55. That became my goal and whilst I didn’t necessarily think about that all of the time, it was in the back of my mind and influenced some of my decisions, for example when I had a choice on how much I wanted to contribute to my pension.