Four Steps to Saving for Early Retirement

“How did you do it?”

It was a common question after my retirement was announced.  Most would consider 60 to be an early retirement age – a goal for many. It also can be the age where struggling companies offer early retirement packages – often an unpleasant surprise.  So it’s best to prepare to retire early, even if that’s not your plan.

We were blessed with being able to retire on our terms, with enough savings to avoid the permanent reduction that would come from having to start our social security before our full retirement age.  But it required focus.

Know Your Goals

The first step is to know your goals.  In your 30’s, 40’s and even early 50’s, you don’t necessarily have to have a fully formulated plan, but you need an idea of what future retirement means to you.  If you’re married, you should sit down with your spouse and talk it through.  Do you plan to travel in retirement?  Take up an expensive hobby?  Buy the house of your dreams?  Is your health an issue?  Will you still have to support loved ones?  What about church and charity?       

Answering questions like these can give you a general idea of how much money you’ll need.

Airport Departure Board.  One goal to saving for early retirement - Travel!
Will you be traveling extensively in Retirement? Save for those expenses now.

Investing for Retirement

Before we start, I want to be clear that this is not specific investing advice for you.  I’m not a financial planner and multiple disclaimers on this site make that evident.  I recommend that everyone find a “fee only” Certified Financial Planner (or similarly credentialed professional) to create a personal financial retirement plan.  I believe the latest you should do this is a decade before retirement.  It was important for us, and I’m sure it will be for you as well.

Ok, disclaimer made – I have been investing for a long time and I’ve had some successes and plenty of failures.  So, to the question “How did you do it?” This is my answer.

Invest Automatically

Invest automatically and without fail and do not touch that investment!  This is the most important piece of advice I can offer.  If you have or can open a 401K, IRA, Roth IRA or 403b, take advantage of it.  If not, start your own brokerage or savings account and contribute on a set schedule.  Have money taken every pay period directly from your paycheck or from your bank account. Don’t trust that you’ll make that transfer yourself. Start saving immediately!

No amount is too little to start with if it will get you to begin investing.  If your employer offers a match up to a set percentage of your earnings, get to that amount as soon as possible. It’s FREE MONEY! Once you do that, keep increasing the percentage you’re setting aside. 

If you’re starting in your 30’s, aim to reach at least 10% of your salary (“salaries” if your spouse also works) by the time you’re 40.  Ideally by your 50th birthday you want to be contributing 15% of your earnings to your retirement accounts. If you can max sooner, even better!

If you’re older and haven’t made retirement savings a priority, don’t fret.  Just make a commitment to start now, and then increase your contributions as often as you can. It will add up faster than you may think.

Invest for Average

Ha!  Just average! You didn’t expect that coming from an early retiree, but let me explain.

Among the failures I’ve made is trying to land the great knockout. You know, the investment that puts us on Easy Street for life.  We all want to get in on the ground floor of the next Apple or Amazon.  For those few dramatic successes there are millions of failures.  Investing in obscure individual stocks is like buying a lottery ticket.  We only hear the stories of the big lottery winners. Or the guy who invested a bundle in Amazon 20 years ago. 

The History of Average

If I could go back 30 years, I wouldn’t get cute, I’d aim to be just average. No searching for hot tips or the company that makes that cool new product I found (because surely everyone is going to be buying this!). I might set aside a very small percentage of my savings for that, but the rest – I’d put in simple index funds that track the S&P 500 or Total Stock Market. Maybe even diversify with a target date fund which adjusts your investments according to your estimated retirement age.

S&P 500


1,421% return*

*Dividends Reinvested

If you just get the average market return you will be well ahead of the majority of savers/investors.   Over the past 10 years (April 2010-April 2020) the S&P 500 returned 183% or 11% annually with dividends reinvested. That time period includes the Coronavirus crash.  Go back 30 years and the return is 1,421% or 9.5% annually.*  (You can explore custom time periods for yourself here.)

Ladies and Gentlemen, a return of 1,421% over 30 years is just average!   

Hey, I did a lot wrong and we still turned out OK.  But we would be in even better shape – with a lot less stress – by just investing with the goal of “average.”

For more on being a successful “average” investor, we recommend the following book by Vanguard Founder John Bogle**

Set It and Forget It

Once you have your automatic investing underway and have determined what to invest in, let it be.  Don’t pay attention to the daily economic headlines.  I worked in the media business and even the most well-meaning operations know they have to entice you to watch or read their product.  Don’t buy in to the hype!  The market can be having a ho-hum day and you’ll see it characterized as “the market is jittery” or perhaps it’s “trying to establish a base.”  It’s just gibberish, because they can’t really report “well, not much is happening today.”  Who’s going to pay attention to that?

You Can Do This!

Four simple steps to saving for Early Retirement.

  • Knowing your Goals
  • Automatic Investing
  • Investing for Average
  • Set it and Forget it.

Saving for Early Retirement is not complicated, but it does require dedication.  Yes, Life will get in the way.  There will be times that you may get off track.  A big bill, a job loss, a major health crisis.  Those are difficult and often painful, but don’t give up. You owe this to your future self!  Just re-focus as soon as you can and get back on track.

We did this.  You can too!

For more stories like this, visit our Retirement Planning section.

About Retirement Success: We don’t buy into the panic about Retirement created by so-called “experts.” Follow us on (Facebook Twitter IG) for insight from the real experts on Retirement – RETIREES! This is your path to Retirement Success!

*Past returns are no guarantee of future results.  But you knew that already.

**As an Amazon Associate we may received a commission for sales on Amazon

Latest Stories