Retiring early is simple but not easy. It’s simple because it’s easy to understand. It’s not easy because it’s not easy to pull off. It’s not easy because there are many steps to be taken to ensure that your retirement is safe, comfortable, and not costly to your family.
In today’s gig-worker, I-can-earn-more-money-at-startup economy, money is king. It’s a great thing, it allows us to do many things that we can’t otherwise, and it helps us to live our lives. The problem with money is that it can be fickle, and if you can’t align it with your goals (and the future you want to live in) then it can cause you a lot of trouble.
Retiring Early Is Simple But Not Easy
(Disclosure: some of the links below may be affiliate links). Many people say I make FIRE and early retirement too easy. And many people fall into the trap of thinking early retirement is easy. I want to raise this important issue. For me, early retirement is easy, no question. But it’s not easy! The difference is fundamental. And there are no secrets to achieving FIRE. You should focus your efforts on achieving this goal. And the effort you put in will determine how soon you can retire. So we will explain why FIRE and early retirement are simple concepts, but not easy to achieve.
Early retirement only
The calculation of early retirement is extremely simple: You withdraw X% of your portfolio each year, and you can maintain your lifestyle for a sufficient number of years. X will be your withdrawal percentage. For example, if you follow the famous 4% rule, you take 4% out of your portfolio each year, adjust that amount for inflation, and use that money to pay for all your expenses. During this period, you should invest your money in a healthy mix of bonds and stocks in the stock market. I don’t think it gets any easier than this! The not so easy part is choosing your asset allocation and withdrawal rate. However, there are many guides and calculators to help you with this.
Early retirement is not easy
It is important to come to the second part of this article: Early retirement is not easy! On the other hand, convenience means that it can be achieved without effort. And anyone who tells you early retirement is easy is lying. And unfortunately, there are far too many such claims on the internet. So why isn’t it easy? It takes dedication. To do this, you need to track your expenses. And that means saving far more money than the average household. Some people find it easier than others, but for most it doesn’t come naturally. Based on the savings rate, you can estimate how long it will take you to retire early. For a given withdrawal percentage, your savings rate determines how many years you will need. Most Swiss households save barely 10% of their income. And if you include vacation time, most families save even less than that amount. With a savings rate of 10%, it will take you over 50 years to retire. This means you can forget about early retirement. And even with a 20% savings rate, you’re still waiting 36 years to retire. If you start working at age 20, you can still benefit from early retirement. But in general: If you want to retire early, you must achieve a savings rate of at least 30%. If you want to retire in the next 20 years, you should set aside 50% of your income. This is not easy to do and certainly not common.
no early retirement secrets
You’ve probably come across similar statements on the internet: I retired at 35 with the following 5 simple principles for making money The requirements are always the same: Just follow a few rules and you can retire early:
- Set a strong goal
- Investing your assets
- Getting rid of debts
- Automate your money
And while these rules are important (with the possible exception of automation) and will help you, following them will not be enough to enable you to retire early. If you have a nice goal, but no positive cash flow, you’re not going anywhere for a long time. The truth is, it’s really too early to retire. You need to set aside a significant portion of your income. And for that, you can either :
- Spend very little money
- Make a lot of money
This is the only way to retire very early. If you have a salary of CHF 5,000, you can’t retire in 5 years unless you live in the woods. And if you spend CHF 10,000 a month, you can’t retire very early unless you have a huge income (we’re talking CHF 20,000 a month). And saving $5 on coffee won’t make you rich. In fact, for the vast majority of people, it won’t make a significant difference. There is no one thing that will allow you to retire early. I’m not saying it’s impossible to retire early on a low income. That’s it. But it will take either more years or very little money to achieve the goal. It’s a simple calculation. There is no other solution.
The road to FIRE is paved with illiteracy
If you look at the pre-retirees, you’ll see that there are a few key points in common. First: Most early retirees do not have children. While it is completely up to them whether or not they want children, the main point is that not having children definitely increases your expenses. If you don’t have kids, you spend less and can travel more outside of school hours. Of course, there are also early retirees with children. It’s just a little more complicated. Second: Many early retirees are software engineers. Nothing wrong with that. I’m a computer engineer myself. But the fact is we make more money than the average. If you make more money, it’s easier to set aside more of your income. After all, many retirees spend much less than the average. Some people live in a mobile home and others live almost self-sufficiently in the middle of nowhere. This is important because not everyone can spend such a small amount. Again, nothing wrong with that. But that makes early retirement easier for some people than for others. That doesn’t mean you can’t retire early if you have kids, aren’t a software engineer, and have a normal lifestyle. But that means it won’t be as easy for you as it is for some people. The best way for most people to retire early is to increase their income. But again, it’s anything but easy. But there soon comes a point where you can’t spend less money, and many people, when they reach that point, still don’t save much money. So you should try to earn more.
Reading between lines
The biggest problem is that many media outlets try to portray retirement as easy, when it’s not. The reason is very simple: It is much easier to sell light products than heavy ones. For example, which element do you find most effective:
- I retired at 32 by doing these 5 simple things, and you can too!
- I retired at 32, had a very high income and lived with my mother!
Message: Number 1 will be read many times. People want simple things. That’s why the media tries to sell them easy stuff. It’s that simple. So when you read all those success stories online, you have to read between the lines to understand what really happened. For example, some people retired after 5 years of the best bull market with annual returns of 20%. On average, you will receive much less than this amount. And if you start your journey before a declining market begins, your journey will last longer. Another important thing to keep in mind is that most FIRE bloggers generate a significant income from their blogs. There are two differences:
- This extra income allows them to retire.
- This extra income means that they are not fully retired.
I have to say that I do make some money with this blog, but it’s not much compared to my current main income. But it will definitely help me on my way to retirement, no doubt. Finally, don’t think that just by having a budget and adjusting your spending you can retire in a few years. For the vast majority of people, this will not be enough. Unless you are one of the high earners or very frugal, it will take many years and a lot of dedication (which is not easy!) to retire early.
I don’t want to discourage anyone from taking early retirement! On the contrary, I still believe that most people can achieve this goal. But it won’t be easy. I don’t think my own path to early retirement will be easy. But I think it’s worth a try for me. The main point of this article is that I don’t want you to think early retirement is easy, because it’s not. It’s pretty simple, but it’s not easy. There is no secret to early retirement! You have to make an effort. It is also important to understand that while the early retirement calculation works for everyone, it clearly favors high earners and very frugal people. It’s a simple truth. I just wish there was more transparency and less clickbait on the internet. However, one should not forget that most examples are exceptional cases. They should not be used as evidence for the lie that early retirement is easy. If you want to know more, you can read the fundamentals of early retirement. I was inspired to write this article when I read this excellent article by Nick Maggiuli. What’s your opinion? Do you think it’s easy to retire early? Get our best strategies and tips delivered straight to your inbox. Get free advice on your finances to help you become financially independent! Sir, I want to thank you for your support. Poor Swiss is the author of thepoorswiss.com. In 2017, he realized he was caught up in lifestyle inflation. He decided to reduce his expenses and increase his income. This blog tells his story and his conclusions. In 2019, he set aside more than 50% of his income. His goal is to become financially independent. Here you can send a message to Mr. Send Bad Swiss.Ever wonder how millions of people around the world become millionaires early in their lives? It’s a 70% success rate, but it’s not easy as you think. For it to happen, you need to take some very smart steps, and a lot of hard work.. Read more about how to retire early with no money and let us know what you think.
Frequently Asked Questions
What do I need to do to retire early?
If you are reading this article, it is likely that you wish to retire early. The most common reason is that you simply want to spend more time with your family. The good news is that you can start saving and working towards retiring early from the comfort of your home. Today, most people are in debt. They owe money on their mortgage, car, and credit cards. In fact, the average American will spend more money today than they did in 2005. How do you get out of debt? How do you move out of the rat race and retire early? Here is one simple way.
Is early retirement possible?
It’s difficult to start retirement early. You’re used to working 9-5, you have a girlfriend/boyfriend etc who you have to live with, and you need to save up a lot of money to start. But is it really that hard? Sure, it’s not for everyone, but as long as you understand that while building your savings you will need to live within your means, and use your savings to buy the things you want in life, it’s not hard at all. The idea of leaving the rat race is a strong one. Most people want to get out of the working life, yet they often find themselves not quite ready for it. The reality is that retirement is often far more complicated than most people believe.
What age is considered retiring early?
The simple “magic” age to retire at is 50, and that includes the “magic” age of 65. By the time you reach 60 you should be starting to think about retiring. In my opinion, it’s not the time but the amount of money you save that you need in the bank to live on. If you have been thinking about retiring early but aren’t sure if it’s a good idea, then you are not alone. Many people are confused about what age to retire and why you should retire early.
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