How much do you really need to enjoy early retirement?
The answer is probably lower than you've been told. Though the
average American is woefully underprepared for retirement,
there's a sizable chunk that could retire from their jobs today
and never look back.
Could you be one of them?
A bare minimum
Wes Moss, Chief Investment Strategist for Capital Investment
Advisors and host of the
radio show recently conducted a survey on how much money happy
retirees had in their accounts. He shares his findings in his
You Can Retire Sooner Than You Think
. With some people
if even $1 million isn't enough for retirement, what Moss found
was a pleasant surprise.
Source: Wes Moss
Once most retirees hit the $500,000 mark, increases in
happiness plateaued. That's a much lower mark that you hear
talked about today. Moss says that you should consider this a
"bare minimum" for retirement happiness.
So how many people does that mean could retire before Social
Security's full benefits age of 66?
It's hard to say for sure, but the Insured Retirement
Institute's (IRI) annual survey of the Boomer Generation offers a
glimpse. According to IRI, 80% of Boomers have saved for
retirement. Of that chunk, here's how much they have saved.
Source: Insured Retirement Institute
As you can see, about half of these Boomers have over $250,000
saved. It's impossible to know how many of those folks have at
least a half-million, but the figure is encouraging nonetheless.
The youngest Boomers are turning 50 right now, so there's still
time for serious savings and growth within these accounts as
If you count yourself among these strident savers, you've
passed the first step toward early retirement.
Early Retirement on just $20,000?
Don't start jumping up and down quite yet. If you do the math,
Moss's $500,000 number equates to about $20,000 per year in
That's because most financial planners say that you can safely
withdraw 4% of your nest egg to make it last indefinitely. With
savings of $500,000, that means pulling out $20,000 per year. For
a lot of people, that simply doesn't seem like enough, which is
probably why Moss calls it a "bare minimum".
Here are some of the key forms of income that can help
supplement that number, which are often overlooked when planning
: You can start taking Social Security at age 62. To find out
how much you could get, visit the organization's
. The average American earning $50,000 per year can expect an
additional $12,600 from Social Security if they retire at age
62, and up to $25,000 if they retire at age 70.
Defined benefit plans
: Though pensions are largely unavailable to today's younger
workers, there are still a number of Boomers that have some
defined benefit plan to fall back on. According to the Bureau
of Labor Statistics, in 2011, 18% of private sector workers had
access to pensions, while 78% of state and local government
workers had such coverage.
Redefining what "early retirement" means
But you don't have to rely solely on a pension or Social Security
to help you bridge the gap between $20,000 and what you'll need
in retirement. There are other solutions, but they require you to
tinker with your definition of "early retirement."
For instance, instead of meaning, "a total stoppage of all
paid labor," early retirement could mean dropping out of the 9 to
5 rat race, giving up the commute, and focusing on how you can
get paid for working on your passions.
Have a passion for woodworking? You could easily turn it into
a low-stress revenue stream in early retirement. Photo: Bertrand,
via Wikimedia Commons
Even if you can't get paid for your passions, part-time work
can actually be a very healthy decision for early retirees. One
of the biggest
retirees have is their sadness over the loss of social
connections with work friends. Part-time work affords you the
opportunity to stay active, healthy, and connected.
For those that have no pension and years to go until you can
collect Social Security, it won't actually take that much to
bridge your funding gap. If you and your wife can each find
part-time jobs that pay $15,000 per year, you'd be bringing in
$30,000. When you include the $20,000 withdrawal from your nest
egg, your total comes to $50,000 per year. That's about the
level of spending where Moss found happiness levels began to
In a practical sense, that means finding a job that pays $15
per hour that you work at for just 20 hours per week.
And the options don't stop there. There's always the
possibility of buying a rental property to provide a solid stream
of revenue. And if escaping the workforce is really important to
you, it could be worth evaluating whether or not you and your
spouse could go through a serious spending down-shift. If you've
paid off your house in-full, living on $20,000 per year might be
a lot easier
than you think.
But let's step back and take a reality check: saving $500,000
isn't easy--but it also isn't impossible. Half of Boomers are at
least within spitting distance of the figure. There's no reason
for outdated concepts of what "early retirement" means to hold
you back from changing your life in ways that are going to make
you happier. In the end, that's all that should really
How to get even more income during retirement
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Early Retirement: You Might Not Need as Much as
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