I want to retire. I’m sure you want to retire too. Everyone wants to retire. Wanting to retire is nothing new. Early retirement extreme is the new craze.
As a college student or young professional, I’m sure that the last thing on your mind is thinking about the best retirement plan. Retirement is something that happens when you’re old and can no longer get it up. You likely still know folks that are working in their 70s. You imagine that you’ll be working away for the next 40 years.
This is where early retirement comes into play.
Why work until you’re 65 when you can stop working at 35? Traditional retirement income planning is too boring for our generation. Early retirement extreme is in and I’m here to share the details with you guys…
What’s the early retirement extreme craze all about?
I first heard about the idea of early retirement from Tim Ferriss, in the 4-Hour Workweek book. I wasn’t sure what to think of it at first. The book brought up great insights on business and life in general. I wasn’t sold on the retirement stuff. Then I re-read the book and noticed that Tim Ferriss brought up an interesting idea on early retirement:
“Why not take the usual 20-30 year retirement and distribute it throughout life instead of saving it all for the end?”
That makes sense. Ferriss believes in taking extended periods of time off. He suggests that you work hard and then take some time to travel the world or just do whatever you want to before returning to more work. That’s cool.
I wanted to learn more about early retirement extreme.
I did some research on early retirement from the pioneer blog, Early Retirement Extreme, and checked out the FAQ. Jacob noted his thoughts on retirement income planning and how he interpreted it:
“Becoming financially independent and using that freedom to pursue other interests.”
Jacob doesn’t believe in retiring as a means to be idle. He sees it as having enough money to survive and do other things with your time (not just to work constantly).
Financial Samurai also presented an interesting take on early retirement:
“Retirement has always been about doing whatever I want, whenever I want without having much financial worry.”
The question: “What age can I retire?” now has a new answer. This age can be 35 or 40.
This leads to another important question about retirement income planning…
How do you survive while retired at an early age?
It must be tough to survive at 35 years old with no steady income, right?
The goal is to live off as little as possible. Jacob lives off $5-7 grand per year. Jacob also notes on his expenses:
“Comfort is mainly about living without constant stress and fun is mainly about what you do rather than what you spend.”
The trick is to master your spending so that you can survive off less money. To retire early, you must avoid debt or aggressively tackle all debt at an early age. You must also be willing to sacrifice by spending far less than you earn.
When you retire early, you need to embrace frugality and accept minimalism to an extent.
How do you make money in your early retirement days?
The common answer is to start an online business that generates passive income. The reality is that most fail at online work. The good news is that there are other options for income when you retire early.
For example, Financial Samurai created a detailed plan to make $200,000/year while working 20 hours/week. His income will come through passive income sources ($86,4000 — CD interest, rental income, etc.) and new income ($114,000 — various online projects).
There are a few more options to consider for retirement income:
- Passive income from investments (real estate, stocks, mutual funds, and so on).
- Passive income from other sources (books, eBooks, and any other product you create once).
- A new type of work that you enjoy more (starting your own business or pursuing a passion).
Does early retirement make sense?
For me it all depends on your financial situation and how dedicated you are from the very beginning.
Nelson of Financial Uproar doesn’t believe so. Nelson chimed in on the increasing amount of retired bloggers:
“Sometimes, choosing a career with added flexibility has all sorts of non-financial benefits. Those benefits should not be discounted. But to call it retired? That’s laughable.”
Nelson always has a unique and hilarious way of looking at things.
There are polarizing opinions on early retirement, depending on how you view it. I think that early retirement is pretty brilliant. It forces you to wisely manage your time and money from an early age.
If you’re in your 20s now, I it makes sense to look into the idea of early retirement. The key message is spot on. Consistently work hard, save your money, sacrifice, optimize your spending, live life on your own terms, and have the flexibility to walk away. If you pick up anything at all from the early retirement craze, I hope it’s the idea that the earlier you start planning, the better off you’ll be.
What do you think about the early retirement extreme craze?