Steve Adcock* explains how to make early retirement work so we can live off our savings for the rest of our lives.
There are a lot of unknowns with early retirement.
Hobbies change.
Opportunities come and go.
The stock market ebbs and flows.
But if there’s one thing that’s certain, it’s this: for early retirement to work, you need to be able to live off your retirement savings for the rest of your life.
Through market ups and downs, medical expenses, cost of living increases and those dream vacations that you now have the time to take, the money needs to last.
Otherwise, you’ll find yourself back at work again.
The idea behind early retirement is simple: make piles of money, save that money in appreciating assets like the stock market or real estate, then ditch the morning commute and live out the rest of your life without a care in the world.
Of course, just saying that your money needs to last is the easy part.
Actually making it work is a whole other thing.
How do we put this plan into action?
Overcoming the biggest challenges of living off your retirement permanently
I retired at 35.
It was sweet (and still is).
To live off your retirement, three major elements need to be satisfied.
I’m not going to talk about earning a bunch of money to stockpile your savings.
Building wealth is an important topic, but this article isn’t just about making money.
Simply making more money is the easy part.
I’m going over the three elements that make or break your ability to live off your retirement:
Element #1: Streamline your lifestyle
Whether you spent your career scraping to get by or bringing in $200,000 a year, your retirement comes down to one very basic principle: lifestyle.
The more expensive your lifestyle, the more money you’ll need to save before retiring.
And, the quicker your money will run dry in retirement, especially if something goes wrong.
Streamlining doesn’t mean sacrificing what makes you happy for the sake of saving some cash.
In fact, spending money on those things that make you happy is exactly what money is for.
Instead, be honest with yourself about what makes you happy.
Don’t assume your current lifestyle is perfect.
Re-evaluate your lifestyle often.
Continue spending money on things that make you happy and stop pouring cash into areas of your life that just aren’t doing it for you any longer.
Most of us change our hobbies more than we probably realise.
Element #2: Re-evaluate often
There is nothing quite like being blind-sided by a freight train that we didn’t see coming.
Of course, if you’re paying attention to your life, that should never happen.
The best way to ensure we’re not running headlong into a freight train of money horrors is to re-evaluate our lifestyles regularly.
Confirm your level of confidence.
I do this as a part of my New Year’s tasks.
My net worth has changed since last year.
My lifestyle might have changed as well.
Does my current level of spending mesh well with my net worth?
In other words, do things still look as rosy?
If they do, keep doing what you’re doing.
But if changes need to be made, that’s cool too.
Remember, this is a judgement-free task.
It might not be a fun process, but it’s better than the alternative of being in the dark.
Element #3: Always look for opportunities
One of the things that surprised me the most about early retirement is how many opportunities are out there to make money.
So many of those opportunities escape us when we work full-time jobs because, frankly, we don’t need them.
We’re gainfully employed, so who cares if there’s a way to earn an extra $200 a month.
But after retirement, we’re suddenly free from the mental responsibilities and emotional demands of holding down a full-time job.
We can see the forest for the trees, as it were.
There are a LOT of opportunities out there to get involved, make a difference and even earn a little extra money.
Don’t think of retirement as an end to earning money.
Retirement is about quitting the rat race.
It’s about fully controlling your time and taking full advantage of everything that the world has to offer.
Never close your eyes to opportunities just because you’re retired.
Instead, objectively consider the world around you.
Don’t be afraid to invest in something that sounds promising or help at the local bakery over the holidays because they need extra help.
Earning money through opportunities doesn’t mean you’ve come out of retirement or somehow failed at staying retired.
Opportunities mean that you’re being proactive and realistic.
Taking advantage of opportunities means that you’re a smart retiree.
And, there’s nothing wrong with padding your retirement cash even after you’ve retired.
Be a smart retiree
To live forever off your retirement, you’ll need to amass enough money to support your lifestyle without a full-time income.
Fundamentally, it comes down to that.
But, as with a lot of things, the devil is in the details.
Since my retirement, I’ve learned that there are a lot of opportunities out there and ways to get involved and to make a difference.
And retirement is the perfect time to be curious.
So — make money.
Save a lot of it, but don’t be afraid to spend money on things that make you happy.
Re-evaluate your money situation often.
Always look for confirmations that you’re on the straight and narrow.
Don’t get blind-sided.
And finally, don’t be afraid to look for opportunities, even if they include making some money.
After all, there’s never anything wrong with padding your stash for the next economic downturn.
* Steve Adcock is an online entrepreneur, travel photographer and digital nomad. He blogs at Think Save Retire.
This article first appeared at thinksaveretire.com
