Early Retirement: 37 Tips, Tricks & Hacks for Reaching your Goal

Early retirement is a dream for many Americans, but one that few are sure they’ll be able to reach. About half of Americans retire early — between the ages of 61 and 65. (that’s a full five to six years before full retirement age as defined by the Social Security Administration), and 18% of Americans retire even earlier than that.

There’s even an extremely early retirement movement among millennials called FiRE – Financial Independence, Early Retirement.
Early RetirementAre You Ready to Catch the Early Retirement Wave?
But how can you attain this dream of a life of leisure as soon as possible? There are many ways to achieve early retirement successfully. It all hinges on sticking to a plan.

Tips for Early Retirement

Whether you equate early retirement with the youngest age you can begin collecting social security (currently 62) or an age much, much younger, here are 37 tips, tricks and hacks to get there as soon as possible.

1. Eliminate Debt and Retire Early

Debt weakens one of your most powerful wealth-building tools: your income. Payments toward debt reduce your cash flow, cutting into the amount of money you have available to save and invest for or spend in retirement.

The first step toward early retirement is to get out of debt, and that starts with paying off high-interest credit cards. Make a list of all debts, ordered from highest to lowest interest rate and prioritize paying off the highest-rate debt first. Meanwhile, reduce your spending, so you don’t continue to add to your debt balances.

The sooner you stop overspending and start paying down existing debt, the sooner that money can be redirected to saving for retirement.

Need some inspiration? Document your finances in the NewRetirement retirement planner and try out a scenario of eliminating debt as soon as possible. You will immediately see the impact on your near and long-term finances. Or, explore ways to eliminate debt.

2. Consider Your Future Retirement Budget Needs Carefully

Cutting your spending now can increase your ability to save more and retire early.

However, thinking carefully about what you will need to spend when are retired can also help you get there earlier.

After all, the less you need to spend in the future, the less savings you will actually need.

Use the NewRetirement retirement planning calculator to set different levels of spending for different time periods. You can even budget for big one-time expenses like vacations. Varying your expense levels as your activity levels and interests evolve can give you a more accurate projection of how much savings you will really require.

3. Get a Handle on Your Current Spending

You can’t know if you can retire early if you don’t have a good idea about your current spending. The only way to really get a handle on your finances and make different choices is to create a realistic budget and track your current spending as closely as a mother tracks her kids’ whereabouts.

You probably have a good idea about where some of your money goes. But the rest of it can surprise you. Something as innocuous as a fast food cup of coffee on the way to work, which usually costs less than $2, adds up to $480 a year. If you indulge in a specialty coffee, that amount could easily double or even triple.

4. Cut Household Expenses Now

If you want to retire early, you might need to make some short and long-term sacrifices. Dramatically cutting expenses benefits you in several ways:

  • It frees up more money to pay down debt and set aside for savings
  • It conditions you to live on less money – which will come in handy when you lose earnings in retirement
  • It reduces the amount of money you require to live on, thus lowering the amount you need to save

To get a handle on where your money is going now, sign up for a free finance tracking service like Mint or just create your own spreadsheet to track income versus expenses.

Then, relentlessly look for ways to cut costs, like spending on:

  • Subscriptions you don’t use
  • Services you don’t need
  • Dining out
  • Expensive entertainment or even just your cable bill
  • Utility bills — wear a sweater or take a shorter shower
  • Banking fees

Learn to be thrifty, even if frugality is not your nature. If you think about saving as depriving yourself, then you might always struggle with it. You’ll also be a lot less likely to retire early. Instead, consider saving money as empowering yourself to control when you retire and how well you’ll live afterward.

In addition to cutting small expenses, get in the habit of periodically shopping around on larger expenses such as home repairs, car insurance, and cell phone plans.

5. Take Advantage of Catch Up Retirement Savings

Once you have figured out the best way to cut your current expenses, you will be better able to start taking advantage of catch up retirement savings.

Catch up contributions are the IRS’s way of making it easier for savers age 50 and up to tuck away enough retirement savings.

You probably already know that there’s a limit to how much you’re allowed to save in tax-advantaged retirement account such as IRAs and 401(k)s. Well, once you reach age 50, you’re allowed to make additional “catch up” contributions over and above those annual contribution limits.

Learn more about the limits on catch up retirement savings.

6. Have a Solid Retirement Investment Plan

It is not good enough to save money for an early retirement. You also need to have a solid investment plan.

However, don’t be fooled into thinking that you need to outsmart the market, trade every day or find a hot stock tip. To the contrary, you just need a strategy that keeps you ahead of inflation and doesn’t put the money you will need at risk.

7. Understand Why You Want to Retire — What Do You Want to Do?

Retiring early is about money. However, it is also about time. When you retire, you are trading a dependence on earning money for the freedom of spending your time however you like. Therefore, it is important to know what you want to do with your life once you are free from the shackles of your job.

Many people retire to get away from something and then realize that they need to reinvent themselves and figure out how to spend their time.

You may find that you will have a more successful early retirement if you have a plan for what you want to do. Explore 120 ideas for what to do in retirement and 3 ways to find meaning and purpose for this phase of life.

8. Make Sure You Have a Plan for Staying Engaged and Active

Some studies show that an early retirement predicts a shorter lifespan.

The reason? Having a place to go, people to see, a reason for being are all critical to staying mentally, emotionally and physically healthy.

Before you retire early, make sure you have a plan for staying engaged.

9. Plan for Healthcare Costs — Especially Insurance Before You Qualify for Medicare

One of the biggest drawbacks to an early retirement is how to fund healthcare before you qualify for Medicare.

Self-insurance in your 40s, 50s and 60s can be prohibitively expensive. Learn more about your early retirement insurance options.

10. Adopt Healthy Habits

While lightning can strike, adopting healthy habits can help you live longer and minimize your out of pocket health expenditures.

Eat well, exercise., minimize stress, stay social and have a purpose in life for better overall health.

11. Dramatically Reduce What You Spend on Housing

Housing costs are usually — by far — the single biggest expenditure for any household. Reducing what you spend on your home can go a long way toward helping you achieve an early retirement.

While conventional advice is to keep housing costs at no more than 30% of your income, if you want to retire early, you should aim as low as 15 to 20%. That may mean moving to a more affordable city and avoiding homes that are large and high-maintenance.

Downsizing, retirement abroad or getting a reverse mortgage (if you want to stay put) are all options for eliminating monthly payments and even releasing equity.

12. Go Smaller — Even Tiny!

Maybe you need a 4-bedroom house with three baths and a 2-car garage. But then again, maybe you don’t. If your home is more than you need, selling it and scaling down could dramatically reduce your living expenses and help you add more to retirement savings.

Some retirees are even embracing the tiny home trend.

13. Want an Early Retirement? Plan for Retirement Abroad

Another housing option that can help you achieve an early retirement is moving abroad. Living in some foreign countries can dramatically reduce your expenses and therefore the amount of savings you need for a secure retirement.

Here are 10 unexpected places where you could retire early.

14. Be Aware of What You Actually Spend on Transportation (and Spend Less)

Did you know that transportation costs households more than even medical expenses?

“Transportation is one of the greatest under-discussed and under-planned things in retirement I’ve seen almost anywhere,” said Joseph Coughlin, director of the Massachusetts Institute of Technology AgeLab and the New England University Transportation Center, in an Investment News article. “We think about health, wealth and housing, but not mobility. Before we do anything, we have to get there first.”

To retire early you will likely need to drive older, more affordable cars. According to Consumer Reports, the average car costs more than $9,100 a year to own.

You can reduce that number by choosing less expensive cars that are more reliable and cheaper to service and driving that car longer. If you really want to cut costs, consider living in an area with reliable public transportation.

15. Keep Increasing Your Savings Rate

Every time you cut an expense, get a bonus or raise or free up money in your budget one way or another, make sure that money is redirected to either:

  • Paying down debt
  • Saving for retirement

Experiment with different savings rates using the NewRetirement retirement planning calculator. See what kind of a difference big and little changes will make for you.

16. Create Guaranteed Income Streams

Research has shown that retirees who receive guaranteed income in retirement tend to be happier than those whose retirement income is vulnerable to stock market fluctuations. Two ways to create guaranteed income are pensions and annuities.

It’s hard to find a private employer offering a pension these days, but many government agencies still do. It’s not uncommon to find people who go to work for a government agency for ten years solely for the pension. However, you should weigh the benefits of a guaranteed pension against any possible reduction in current salary. You may be better off seeking out a higher salary now and buying an annuity to generate guaranteed income in retirement.

An annuity is essentially an insurance contract in which you pay a financial institution a lump sum or a series of payments in exchange for a promise to pay you a regular income. With an immediate annuity, you will start receiving payments right away. A deferred annuity begins paying you at some point down the road. Before you purchase an annuity, make sure you understand the expenses, management fees and any surrender charges you’ll be required to pay if you later want out of the contract. And to make sure your guaranteed income really is guaranteed, stick to annuities issued by insurers with high financial ratings from companies like A.M. Best or Standard Poors. If the company goes belly-up, your state’s guarantee fund will take over the policy, subject to the coverage limitations set by your state.

Explore the pros and cons of annuities or find out how much income you can buy with an annuity calculator.

17. Plan for a Retirement Job

For many early retirees, retirement isn’t really about never working again. It is about having time and freedom to pursue hobbies, start a business, or travel. The right retirement job can provide an income stream and possibly other benefits while giving you the flexibility to pursue your passions.

Part-time employment isn’t just fast food and retail jobs. Many websites have popped up in the past few years that connect experienced professionals to part-time and flexible jobs. Check out Flexjobs.com, RetirementJobs.com, and Indeed.com for work that matches your skill set and interest. You may also be able to parlay your professional experience into freelance consulting work that you can do on your own terms.

In your talks with potential employers, make it clear exactly what you are after. Be up front that you are in the market for part-time or flexible work. While you might be worried that this level of honesty will harm your chances of being hired, it can actually help you. Employers may be reassured that you’re not just looking for a job to hold you over until something better comes along. They may also like the idea of getting someone with your experience at a lower rate since you’ll be working fewer hours.

18. Retire Early . . . But Only Temporarily

For a long time, the “norm” was working for 40+ years, then taking the time to enjoy yourself. But with more people working well into retirement age, why not find a way to inject bursts of freedom and fun into your career path?

Consider taking a sabbatical or a career break for a few months or a year. Some companies provide formal sabbatical programs for employees – meaning the time off may be paid or unpaid, but the employee will have a job to return to. Other employers don’t offer formal sabbatical programs, but you may be able to request an unpaid leave of absence to travel or just try out the work-free world for a while.

Pick a date and duration for your break. Don’t just think about “someday.” Make it concrete. Then start planning your finances: paying off debt, reducing expenses, and planning for covering expenses while you’re on your break.

Next, figure out what you want to do with this time. Do you want to travel, volunteer, try a new career, write a novel, or work on projects around the house that you started but never had time to finish? Don’t take a career break without a plan for spending your time. Doing nothing for several months will likely just lead to boredom and depression.

19. Maintain a Living Financial Plan and Keep it Updated

To retire early – with enough money to stay retired – is a tall order, but it is doable. Early retirement will require tough choices and a strong highly detailed financial plan that you can update at least every quarter as your situation evolves.

The NewRetirement retirement planner is a good place to start. It is one of the most personalized and detailed retirement calculators available. Best of all, your data is saved and you can make updates or try different scenarios at any time. Forbes Magazine calls it a “new approach to retirement planning” and the tool was named a best retirement calculator by the American Association of Individual Investor’s (AAII).

20. Round Up Your Checking Account

Are you one of those people who keeps a precision checking account balance down to the last percentage of a penny? Stop it. No, we don’t mean to imply that you should take on poor money management habits. Quite the opposite. Round up, and pretend that the extra isn’t there.

When you make a purchase totaling $5.99, you probably write the exact amount in your register. But would you really miss that penny if you ignored it? Now think bigger. If you’re rounding up, go big or go home.

Rounding up every transaction to the next whole dollar gives you an even tidier sum to forget about. Then at the end of the month, go ahead. Satisfy your desire to keep a tidy account by balancing it. Remove what you didn’t realize that you had and tuck it away. This is one of the money-saving hacks that locates truly “found money.” You’ll never miss it because you hadn’t yet seen it.

21. Figure Out How Much You NEED to Save!

Saving for retirement is hard for everyone. Retirement happens in the future and it is kind of an abstract concept.

The more you can do now to create a retirement plan and establish a savings goal, the better job you will do of saving for that goal. You can’t retire early — or even retire — if you don’t know what it actually takes.

Retirement calculators can help you figure out how much you need to save for retirement. When you familiarize yourself with the numbers, it can help you feel the real need to save.

The NewRetirement Retirement Calculator is one of the most detailed tools available online. It is easy to use but is designed to help you imagine your future and take the steps you need to take to make that future happy and secure.

22. Save Dining out for Special Occasions

Packing a lunch and cooking dinner at home never looked better than when you realize how much you can save. Food is a necessity, but you can redirect a lot of money toward savings by preparing meals at home.

Lunch is often on-the-go, and that means fast food. Spending $5 for a meal might seem cheap. But multiply that by 5 days a week for a year, and you’ll spend $1,200 on lunches. If you regularly have dinner out only once a week, and if the bill only totals $30, you’ll spend $1,440 by the end of the year.

23. Make a Shopping List and Stick to It

Stores are designed for impulse buys. If you need a new pair of pants, there’s a shirt nearby that is made to complement it. If you’re shopping for groceries, there’s always something else delicious enough to tempt you to spend just a little more.

Shopping without a list is dangerous, and it’s a recipe for overspending. A list gives you a goal, and sticking to it keeps you on the right track.

24. Clip the Right Coupons

There’s an old joke that pokes fun at saving money by buying something that’s on sale. But sale items aren’t a bargain if you don’t need them. Coupons can tempt you into buying something that you ordinarily wouldn’t.

Choose coupons wisely. If you see one that applies to a product or service that you already use, then go for it and bank the money you save. If you see one that creates a false need for a product that you wouldn’t have considered, it’s best to skip the coupon and save money by not spending in the first place.

25. Add Coupon Savings to Your Savings Account

If you’re a coupon clipper, you already know the excitement of getting a great deal. But has the lack of a coupon ever prevented you from buying something that you wanted? For some big-ticket items, that might be the case. But what about groceries and household supplies?

Add coupon savings to your big retirement savings pot, and it might add up more quickly than you realize. Check your receipts, as most stores proudly show how much you saved that day. Then write yourself a check and put it into savings. You’ve earned it.

26. Don’t Assume that an Early Retirement Means Starting Social Security Early

Many people think that starting Social Security as early as possible is a good way to achieve an early retirement.

However, while you get a boost in income when you start Social Security, the earlier you start, the lower your monthly benefit amount will be (for life). The lower benefit amount usually means that you will earn less money over your lifetime if you start early rather than waiting.

Try the breakeven Social Security calculator to figure out the optimal time to start benefits.

27. Don’t Spend Found Money

Found money comes when you get a raise, find a lower interest rate, receive a gift of cash, or otherwise have money that you weren’t expecting. The usual course of action is to spend it. A better course of action is to pretend that it never existed at all.

Saving found money doesn’t pinch, and it doesn’t take away from your monthly budget. If you receive a lump sum, tuck it safely into savings before you have a chance to do something unwise. If your found money comes in the form of a raise, set up an automatic deduction to squirrel it away.

28. Earned an Income Bump? Increase Your Savings Rate!

Getting a raise might be one of the most satisfying experiences. You work hard, and a bump up in pay shows that the company really notices and appreciates your efforts. But what if you hadn’t gotten the raise? Would you suddenly be financially destitute? Probably not.

Merrill Lynch Edge says “Every time you receive a raise, increase your contribution percentage.” That’s another way to save. According to Fidelity Investments, “Putting just 1% more of your salary into a tax-advantaged retirement account like a 401(k) or 403(b) could make a noticeable difference in your ability to afford the retirement you want.”

It might help to reset how you think about raises. Can you transform your thinking to believe that the raise is really intended to help you in the future, not now?

If you genuinely need more money now, can you at least devote a percentage of the raise to retirement savings?

29. Make Savings Automated

There are different approaches to how to save for retirement.

  • Some people don’t think too much about saving — they just hope it happens. This type of saver might deposit their paychecks and hope that something is leftover as savings.
  • Some people consciously deposit money into dedicated retirement savings accounts.
  • Others automate the process and savings are deducted from their paycheck and automatically added to existing investments.

Automating your savings is proven to be the most effective way to insure that you actually save. You don’t have to think about it, it just happens –no hassle, no excuses.

Your human resources department or your bank can help you set up an automated system.

30. Shift Payments to Savings Once a Bill is Gone

Is there anything more exciting than paying off a bill? Maybe it’s a car, or maybe it’s a credit card. Whatever you’ve buckled down and paid in full, shift that payment amount into savings before you grow accustomed to having it available to spend.

Jack Coleman for Daily Finance calls it the lifestyle creep. You got along just fine while paying off the debt. You’ll get along just fine without adding the amount back into your usable income once it’s paid off.

Some payments can make a huge difference. If you’re paying a few hundred dollars monthly for a vehicle, your retirement savings will jump nicely every month once you’ve redirected that amount into your future.

31. Never Ever Spend Coins

Have you known someone who always had a coin jar someplace in the house? Saving coins is a great habit, and one that can add up surprisingly fast. This might be a difficult habit for someone who prefers to use exact change, but it’s worth at least trying.

If you buy a coffee on your way to work, toss the coin change into a bin, cup or coin purse. Pay for lunch with cash? Save the coins. Wherever you spend cash, keep those little metal discs aside.

At the end of the day, plunk all of the change that you haven’t spent into a piggy bank. If you really want to be ambitious, try to get your hands on an empty water cooler jug. According to Bill Carey for the Journal News, a lot of people save money this way. Depending on which coins make it into the jug, you might have several hundred dollars once it’s full. Or you might have a few thousand.

Nearly every place you look there are ways to save money. And as they say, a penny saved is a penny earned. In this case, a penny saved will help provide you with a steady retirement income later.

32. Take Care of Your Vehicle

Unless you live in an area where public transportation is ample and safe, you probably own at least one vehicle. Take good care of it, and you won’t have to shop for a new one any time soon.

Keep up with comparably inexpensive regular vehicle maintenance, and you’ll reduce the likelihood of notoriously expensive repairs. You’ll also extend the life of the vehicle. Once it’s paid off, you’ll have more to put toward retirement.

33. Save Big on Vacations and Stash the Extra

Do you take a vacation every year? Those trips can really add up fast. But what if you could visit all of the cities that you love and spend half of the amount you’d budgeted for? Some bed and breakfasts are most expensive than a hotel. But not AirBnB.

This service matches home or vacation home owners with people who want a getaway. And the prices are significantly less expensive, so you can carve your budget down. When you carve your budget down, you know what to do from there.

Many families budget for vacation months or longer in advance. So if you travel the thrifty way, take the remainder of your budget and put it into your retirement.

Here are more ideas for saving money on travel.

34. Save More When the Kids Fly the Coop!

If you have kids, I don’t need to remind you that they are big expenses!

No matter if you are happy or sad about the empty nest, all of us should definitely use this as an opportunity to save more for retirement. With fewer mouths to feed, a newly empty nest is a great time to increase the amount of money you contribute to your retirement savings. (After college costs are taken care of.)

35. Getting a Tax Return? Put it Into Your Retirement Savings

If you are lucky enough to get a tax return, this is an excellent opportunity to boost your retirement savings. Sure, there is lots you could spend the money on, but why not invest in your future security and happiness?

36. Outsmart Yourself!

All of the ideas listed above about how to save more money for retirement are just tricks. You don’t need to find new sources of income, you just have to rethink your existing spending.

Sometimes you have to outsmart your money. And sometimes you have to outsmart yourself. Unless you’re truly living on a shoestring with nothing to spare, you don’t need a second job just to find a little extra cash for your retirement savings.

Instead of looking for large chunks of money, think about ways to save that are a whole lot smaller. The trick is doing that regularly. A $500 deposit certainly makes a great addition to your IRA or another account. But if you consistently find and shift underutilized money away from your regular spending pot, it will eventually add up to the same deposit. The difference is, it didn’t pinch at all.

37. Pay Attention to Taxes

Taxes can add or subtract thousands from your bottom line each year.

A few quick tips:

  • Living in a state with a high tax base? Consider relocation to a state with a low tax rate — especially once you retire.
  • When it comes time to take withdrawals from your retirement savings accounts, monitor your tax bracket very carefully
  • Be careful to take mandatory withdrawals after age 70.5 and be careful about early withdrawals

Get more info about minimizing taxes on your retirement accounts and the best states for taxes.

Can You Retire Early?

When you choose to retire early, there are a few things you need to take into consideration. Obviously, you need to figure out how much you will need to retire early. This differs depending on what age you’d like to retire at. What benefits come from retiring at 62 versus 65? What are the savings differences?

The only way to know for sure is to crunch the numbers and track of them quarterly. Many things are taken into consideration when calculating an exact number. You must look at (for yourself and your spouse):

  • Your current age
  • Your retirement savings to date
  • Monthly income
  • Projected SS benefits at the age you wish to retire
  • Existing debts
  • Insurance
  • Value of your 401(K) and IRA plans
  • Amount added to savings each month
  • Percentage of savings in stocks
  • Possible inflation rates, rates of return, and other assumptions

You can use New Retirement’s retirement planning calculator to determine what you need to save and whether or not you can retire early!

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