How To Retire Early (& What To Do After)

I retired at age 48.  It’s possible for almost anyone to accomplish (but it isn’t easy).  I’ll tell you how I did it, what I learned along the way, and more importantly, what I would do differently now.

On one level it’s just math.  I see you rolling your eyes at me, so let me assure you I know it isn’t simple.  But understanding the mathematics of it helps.  Finances are all about making choices.  They aren’t right or wrong, they are just choices with trade-offs and different mathematical results.

I Had An Advantage

Immersed in numbers my entire career (I worked as a CPA and in the banking and retirement industry) gave me a front row seat to other people’s financial choices.  Learning through their trial and error let me look into my possible future.  Rest assured that I still had to learn plenty of things the hard way.

The Conventional Formula

Conventional retirement planning is based on what is called a three legged stool.  A company sponsored pension, government sponsored pension, and your savings.  If you set aside 10 – 15% of our income, over your working career, and have a company sponsored plan and/or a government sponsored plan you should be sufficiently prepared.  The conventional formula works best if you are planning a conventional retirement.  A long working career where your company, your government and you all chip in consistently, followed by a comparatively short retirement, works.

Early Retirement Isn’t Conventional

Early retirement is a double edged sword.  Not only do you have less time to accumulate money, you also have more years of spending down the money you accumulated.  Compounding over time is the most powerful tool you have to growing your nest egg big enough to last.  Any reduction in time makes it exponentially harder to accomplish.  The conventional model isn’t enough.

Frugality 101

My plan, like most who attempt early retirement, was based on frugality.  Getting the spread between my earnings and spending as big as possible, so I could invest the difference, is the foundation.  Clipping coupons won’t get you there.  Saving at least half of your income is a good place to start.  How early you want to retire, how much you have saved already, and if you have access to a company/government sponsored plan, will dictate how extreme you need to be with your budget.  Frugality is tough……..especially in our consumer based culture.  It’s easy to feel deprived and give up.  The real secret is that you don’t have to be frugal forever.  More on that later.

You Can Only Deprive Yourself For So Long

Most diets and budgets fail because they rely on will power and depriving yourself of things you really want.  We feel bad because we think we just weren’t strong enough, or smart enough or something.  Success really requires a different approach.    Your future goal has to be something you are motivated to move towards.  My goal was adventure travel.  This wasn’t something to put off until my 60s.  If I waited too long, eventually the opportunity would be lost.  Moving towards my bigger goal made the choices and tradeoffs clearer and easier.

Quieting The Naysayers (including me)

Believing it’s possible is the first step.  Finding others who had accomplished what I wanted, help me see it was possible.  Today there are multiple blogs and forums discussing the topic.  Just because I started to believe didn’t mean I didn’t have plenty of naysayers in my life.  People were quick to point out the pitfalls of my plan.  There was nothing they brought up that I hadn’t already thought about.  From a purely financial and conventional thinking standpoint, it was a stupid decision.  From a life satisfaction standpoint, no regrets.  And the footnote here is that I actually have made more money after “retiring” than I did all the years of my corporate job.  More on that later.

Back To The Math

It’s easy to get lost in the weeds of retirement planning.  There are a million things to consider…..or so it seems.  But really there are just three factors that matter.

  1. Savings rate (the difference between what you earn and what you spend)
  2. Rate of return (what you earn on your savings)
  3. Time (how long you let your savings and earnings compound)

The quicker you want to pull the ripcord the more important your savings rate becomes.  That’s why most preachers of early retirement focus on frugality.

Grow your earnings.  Shrink your spending

Make the difference between the two as big as possible.

Learning Some Mathematical Shorthand

Do you need to do a bunch of calculations in a fancy retirement calculator?  Retirement calculators give you the illusion of precision.  Insert a bunch of unknowable factors (age when you will die, your rate of return over your lifetime, inflation rate over your lifetime, etc.) and it will give you a mathematical answer.  The math will be correct.  Your assumptions will be wrong.  You can’t accurately predict the unpredictable.  That’s why I like simple rules of thumb and rough calculations.  It reminds me how imprecise the process really is.

The rule of 25

The rule of 25 (some use 20) is used to ballpark the amount of money that you need to accumulate to generate enough income to live off for your life.  So say your spending is $40,000.  The rule of 25 would give you a target of $1,000,000 (40,000 x 25) to accumulate.

The 4% rule

This rule generally states that an accumulated sum of assets can be drawn down at a rate of 4%.  Again this is a rule of thumb but it isn’t fool proof.  You can read more about the limitations of this rule here.  Having a rough target is the point I wanted to make.  So that $1,000,000 can provide you with $40,000.

You can see the mathematical symmetry of these rules.  Once again, math is precise.  Life isn’t.  Both of these rules have limitations beyond the scope of this piece.  The purpose is to have some general targets.

Math is precise. Life isn't. Retirement calculations are only as precise as your unknowable assumptions. Click To Tweet

How I Reduced Spending

Nibbling around the edges of my budget wasn’t going to get me to my goal. I had to go for the big wins.  I downsized my house and downgraded my car.  Tough steps.  Temporary hits to the ego.  Having a bigger goal helped but wanting nicer things didn’t go away.  I weighed every purchase knowing it would move me away from my goal. I looked for lower cost alternatives to every expense.

Reducing spending is another double edged sword – more money to invest and less money needed to accumulate to sustain that lifestyle.


Income = $50,000  Expenses = $40,000  $10,000 is available to save.  $1,000,000 needs to be accumulated (rule of 25 – 25 x $40,000 = $1,000,000).

Income = $50,000  Expenses = $35,000 leaves $15,000 available to save.  The amount needed to accumulate is $875,000 (25 x $35,000).

Every dollar you can reduce your living expenses can also reduce the amount you need to accumulate.  But expense reduction can only go so far.  You still have to eat and have a roof over your head.

Increasing Income

I didn’t take side jobs or look for a new job.  My job was too time intensive for a side gig and starting over with another employer, even if I could have gotten a raise, would have meant walking away from some deferred compensation which was more valuable.  Fortunately, I was at a point in my career where my income was rising.  Instead of increasing lifestyle, I threw all the increases and bonus pay at my goal and hung in there long enough to earn the deferred compensation.  Increasing lifestyle was tempting, but knowing the math and having a bigger goal stopped the temptation.

How My Company Helped Me Save (sort of)

The job I once loved became unbearable.  I realized it was either step up the pace or find another job.  My honest assessment was that it was less about my specific company and more about the entire industry going through changes.  Another job would only be a temporary fix.  I needed to make this work.

Freedom Day

I finally had numbers I thought I could live with.  So I pulled the plug, turned in my resignation and hoped for the best.

Oceanic white tip in the Red Sea

Oceanic white tip in the Red Sea

The Rest Of The Story

My trip was great.  Scuba diving in the Red Sea with hammerheads and oceanic white tips was a big highlight.  By the time I was done, I was exhausted.  The temples and churches started to run together after a while.  Back to real life……..but what was that now?  This part of the transition was a lot harder than I imagined.  Primarily because my plan was to wing it from here.


The first thing that caught me off guard was the scarcity mindset that was triggered as soon as the regular paycheck stopped coming.  What I understand now is that the conventional retirement model sets you up for scarcity thinking.  No matter how much you accumulate, it is a finite amount.  Your future needs are unknown and seemingly infinite.  Scarcity thinking is a normal reaction.


Long-term frugality isn’t my jam.  When I had that bigger goal, it was completely acceptable.  I convinced myself I could live forever that way.  Reality was that I started to feel deprived.


My identity was more wrapped up in my career than I had been willing to admit.  I had given myself status by virtue of a professional career.  Who was I now?


Travel was great.  Leisure was great.  Time to read and think, both great.  But what was my purpose in life now?  Boredom set in.  My life felt empty.  All of the great parts of my life seemed diminished without meaningful work as a contrast.  The big goal was done and in the books.  Honestly, it didn’t even occur to me that I needed to set another goal.  Big mistake.


My social circle had revolved around work.  There was always someone to talk to, have lunch with, a quick drink after work.  We had the common ground of work and it was easy.  Once I quit, the common ground was gone and I hadn’t yet built a new network

I needed a job

As much as I hated to admit it, these issues would all be solved with a job.  Finding the right fit proved difficult.  My skills were highly specialized and I didn’t want to go back to that industry.  The interesting jobs wanted a full-time commitment.  The plentiful part-time jobs were routine and dull. Where was the middle ground?

The Accidental Entrepreneur

The short version of this story is that a friend of mine (now my husband) offered me a part-time job that would pay well enough to quiet that scarcity mindset, let me let go of frugality, find a new identity and cure my boredom.  Part-time turned into full-time, turned into ownership.   What I discovered in this process was how much I liked being a business owner.  It wasn’t all sunshine and rainbows.  Parts of it sucked to be honest.  Prior to this experience I had been too afraid to take the risk to venture out on what I assumed was shaky ground.  The truth is my corporate job was much riskier.

A New Model

The retirement model of accumulating money in the first phase and spending it down in the second phase doesn’t really work with early retirement.  The time period of the draw down is too long and the future too unpredictable for this to be a stable method. Scarcity sets in.  Frugality goes into overdrive.  Life satisfaction goes down.  Cash isn’t king.  Cash flow is king.  Focusing on cash flow producing investments is a better model.  For us, this means real estate.

Cash isn't king. Cash flow is king. Click To Tweet

Cash Flow Producing Real Estate

Thinking in terms of cash flow producing assets vs. asset accumulation has changed how we invest.  It has solved the problem of wondering when you have enough.  When your cash flow covers your expenses, you have enough.  You have freedom.  Freedom from frugality.  Freedom from scarcity.  Freedom to pursue work that matters or no work at all.  Freedom of time.  Freedom to define life on your terms.  Freedom is what I wanted all along.  Not freedom from work, but the freedom to define my work.

What I Did Right

With all the mistakes I made, I still did a few things right.

  • Burnout had distorted my thinking.  Giving myself time and permission to figure things out was a good idea.
  • Travel gave me a new perspective about how I was living and what was really important in my life.  I realized that I could take control of my future and figure out what would work for me.
  • Frugality gave me options.  I didn’t need a job to get by.  I had choices and options.
  • Learning about entrepreneurship and real estate provided greater stability and profitability to my plan

What I Have Learned

Given the chance to do it again, I would…….only sooner and I would apply these lessons:

  • Frugality is just one path to financial freedom and perhaps the most difficult.  If it isn’t in your nature to be frugal, forcing it will feel like deprivation.
  • Accumulating assets for retirement followed by drawing your assets down is one strategy.  The longer you expect the draw down phase to be (i.e. Early retirement) the less stable this strategy will feel, creating the scarcity mindset regardless of the amount accumulated.
  • Building cash flow producing assets is a more stable strategy.
  • Working as an employee is the most difficult path to financial freedom.
  • Entrepreneurship isn’t as risky as most would have you believe.  It is possible to bootstrap a business by risking your time rather than savings.
  • Real estate investing is a better wealth building strategy, for me, than paper assets (stocks & bonds).  Paper assets are better for preserving wealth.
  • Removing work removed structure, meaning and purpose.  Building something to retire to is more important than what you are retiring from.
  • We were made for work.  Life without work can feel empty.  Work on my own terms can be infinitely rewarding.
  • Life satisfaction comes from having a future bigger than my past.

I used to look at retirement as a finish line of sorts.  That was a mistake.  It’s not about being done and kicking back.  Creating a life of meaning and purpose needs to go hand in hand with your financial plan.



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