early retirement tips
Photo credit:

No matter how old you are, like all adults you have probably had thoughts about retirement at least once. We all understand that dealing with this issue is inevitable and we try to think through how to save enough money to keep enjoying the life in later years.

Another important thing about retiring is when to do it. Everybody has probably heard amazing stories about people who retire before turning fifty and it seems absolutely unbelievable. You probably wonder how they manage to pay for a living for a few decades after making this step.

There are always different options and we decided to check how it is possible to retire in early age having five hundred thousand in savings. If senior care is not for you, keep reading to find out if the strategy of an early retirement really works.

Matching the Four Percent Rule

The four percent rule is a well-known financial conception of a retirement. According to it, you should have enough savings for thirty years on condition that you spend four percent of your funds each year.

This rule allows you to plan how much money you need to save to cover all the future expenses. For example, in case you spend thirty thousand dollars annually, you will need to have seven hundred fifty thousand on your retirement account.

If each year you need forty thousand dollars, it is necessary to save a million. Considering this plan, if your retirement fund is five hundred thousand, you will be able to spend twenty thousand dollars annually.

The one crucial thing you should pay attention to is that the four percent rule is only good for thirty years. If you retire at forty-five, you probably expect this period to be longer.

Facing the Reality

It is possible to afford quite a good living if you spend only twenty thousand dollars each year but everything depends on your habits and a lifestyle.

If your plan is based on 4% rule, you will have < $400/week or ≈ $1600/month.

It’s not a lot, but it’s possible to live on that budget. There are things that could help you to live in comfort for this amount. Being in a good health will save you a lot of money so consider choosing an active lifestyle, well-balanced diet, and getting enough sleep.

It would be much easier to stick to this plan if you already have your own house and do not have to pay a mortgage (alos, read about FHA mortgage guidelines). There are a lot of ideas on how to live frugally but you can choose other options.

Creative Approach

place for a retirement
Photo credit:

Reducing the expenses is not only possible by living on a tight budget. Retiring abroad is a popular way to make the expense lower. A lot of countries become an attractive retirement destination because of a low cost of living.

It is also a nice way to get new experience, change the atmosphere, and discover a new culture. In such places as Ecuador, Costa Rica, Philippines, Thailand you can spend less than one thousand and fifty hundred dollars per month for two people. What is more, it includes the rent.

This is a good choice if you like exotic countries with picturesque views and ready for adventurous. The cost of health care in these places is also usually much affordable.

Another alternative is available if you own a house. It is possible to sell it to add some money to your savings and buy a smaller one or move abroad.

Other Factors to Consider

When we think about an early retirement, we try to count if it is possible financially. The money is the first thing to consider but there are other factors.

As you can see it is possible to retire at forty-five and live comfortably but it does not guarantee satisfaction. Is it really what you need? If you feel exhausted, it might be a better solution to go on vacation than retire so early.

In case you decide to retire at forty-five, you will have about forty years of life without work and it can make you feel a bit overwhelmed. An early retirement can be emotionally challenging. When the children are already grownups and the friends are still busy with their career, an early retired person can feel lonely and bored.

Before checking if you can afford an early retirement financially, it might be a good idea to think if you can handle it emotionally.