The Real Secret to Retiring Early

Filed in Living by on March 10, 2016 0 Comments


There have been countless books written on what it takes to retire early. By retire “early,” I and most people mean before the age of 65, when you become eligible for full Social Security benefits and Medicare health coverage.

There are many ways to improve your chances of retiring early: earn a lot of money; save early and often; invest wisely; and, don’t have 10 kids (!).

But what is the biggest secret to retiring early?

Avoid income and spending addiction.

So what do I mean by this? Specifically: 1. do not increase your spending at the same (or faster) rate than your income is increasing, and 2. don’t become overly attached to and hooked on consumption.

Let’s take these two points in order. I was fortunate to have been promoted a few times during my career, which along with came pay raises and bonuses. When I received a pay raise, Elaine and I would not view it as a reason to spend more. We would usually keep our lifestyle the same as before the raise, and instead increase our savings rate. Also, when I got a bonus, we would often just put it in the bank. Sometimes we would spend part of it on a fun, discretionary item, but we would never spend all of it.

With this approach to income and spending, we never developed a lifestyle that included a massive house, very expensive cars, a boat, country club memberships, etc., which many of my fellow executives acquired as they moved up the ladder. Since we kept our lifestyle relatively modest and our expenses low, it was much easier for us to retire early. (For full disclosure, the sale of the company I worked for, Applied Systems, did result us in getting a large lump sum of money. However, we were already on track to retire in a couple of years even without the unexpected sale of the company.)

The second, related point, is to pursue a simple lifestyle, one which is more focused on family, friends, and simple pleasures than material consumption, which will result in you having a lower expense structure. This will allow you to save more prior to retirement and have a lower rate of spending when you do eventually retire. I have written in previous posts about having a “fun” to-do list, which describes simple activities you enjoy that do not involve spending a lot of money. They can be things like going for a walk on a nature trail, binge-watching your favorite TV show, or just sleeping in on the weekend.

The usefulness of this principle is that it makes early retirement possible for everyone, regardless of income level. Otherwise, to save a ton of money, you have to make a ton of money, unless you have the investing savvy of Warren Buffet, which few of us do. But by focusing your efforts on simplifying your lifestyle and keeping expenses low, early retirement is available to most anyone. You might still need to work a part-time job before you qualify for Social Security and Medicare, especially to afford health care, but this is preferable to a lot of people compared to continuing to grind your way along at your current full-time job until age 65 or later.

Think about how you might avoid income and spending addiction, since it is an easy trap to fall into, especially in our culture of consumerism. If you aren’t crazy about your job and dream of early retirement, this might be the key to chucking your job a lot sooner than you thought and enjoying retired life.

About the Author ()

TIM MCINTYRE retired in 2004 from his position as president of Applied Systems after facilitating a successful sale of the company. At only forty-six years old, he made the unusual decision to fully retire to pursue other interests and simply enjoy free time. As a hard-driving Type A personality, this turned out to be a significant challenge for the Notre Dame and University of Chicago-educated MBA, CPA, and Certified Cash Manager.

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