It’s perhaps a dream that everybody has, that of being able to officially take up retirement early and not have to work a single day further in their lives. It’s possible and all it takes is proper planning, but by no means is it easy. In fact, although it is indeed possible it is indeed difficult, making for the exception rather than the rule.

So what does it take to retire early?

The Financial Plan

This is perhaps the most important aspect of planning for an early retirement, well because the whole discussion is centred on money really. It’s all about the money in the first place and so basically planning for an early retirement is just another way of saying you’re planning to structure your finances differently so that you can retire at a younger age than the standard retirement age of around 65.

So the plan would have you structuring your finances in such a way that you build up a financial net which will kick-in once you officially take up your early retirement and the aim is for it to sustain you going forward. Basically you’ll need to earn twice as much as you do right now and save half of that so that you can maintain your living standard once you retire.

Adjustment Period

It’s been often said that you only really learn the true value of money in relation to the lifestyle you lead once you retire and don’t have things like your subsidised medical insurance to supplement the income which covers your expenses. It’s true and as unpleasant of an experience it generally proves to be it just makes for what is an adjustment period. Own it and take it as a learning curve for this is when you’ll probably find that you’ll need to effect a lifestyle adjustment.

You might also find that the fact that you now suddenly have a lot more “free” time on your hands adds to your living expenses, because this is more free time to spend money instead of making it.

This is often the exact reason why most financial services providers that cater to retirees suggest that the bulk of your money be invested long term, while some of it should perhaps be allocated to shorter-term investments which would then naturally carry more risk, but offer greater short-term returns.

The Exit Strategy (Defaulting)

I’m not talking about defaulting in the sense that you take measures such as declaring bankruptcy, but rather defaulting and going back to the life you knew before you took your early retirement. It’s perhaps an extension of the contingency plan, but with a more focused discussion of what the outcome will be – exactly what you’ll have to do.

What you’ll probably have to do is go back to work, which could entail going back to a traditional job or running a business. There will be an adjustment period here too, but it’s just something you should be prepared for as a very real possibility.