Here’s How To Retire Early and Quit the Daily Grind

The Great Resignation has shown us there is a different way to work. During the phenomenon, workers have shifted their priorities from the 9-to-5 job toward a path that better fulfills a work-life balance or provides greater opportunities.

And maybe there’s a better way to retire, too. Through retirement planning with a purpose, early retirement isn’t out of the question, either, and could allow you to quit the daily grind. A recent GOBankingRates study showed that while the full retirement age is 67, in some states, the average retirement age is 61.

But what is the best age to retire? What is the best way to retire early? The answer isn’t one-size-fits-all. It depends on the circumstances of each individual.

“In 18 years of practice, I’ve encountered three types of people that have retired early,” said Herman (Tommy) Thompson, Jr., a certified financial planner with Innovative Financial Group in Atlanta. “Those that inherited great wealth. Those that created great wealth through business ownership or professional sports. Those that started saving early and aggressively.”

Most of us will better fit into the latter category.

When Should You Retire?

What is the best age for early retirement? What is the healthiest age to retire? The best retirement age is the one at which you can live comfortably and enjoy the fruits of your labor. That depends on the individual, too. No matter what, you need to have a plan that starts with socking away as much money as possible, Thompson said.

“Saving early is obvious,” he said. “The sooner you start, the greater the effect of compounding interest. Saving aggressively is really the most important behavior an investor can have; it creates a virtuous cycle. If you make a point of saving, you start setting savings goals. As you start achieving your savings goals, you feel accomplished and your brain loves it. Eventually, the behavior itself becomes rewarding because your brain knows that the behavior gets you to the next goal.”

5 Steps To Retire Early

Although retiring early sounds like a pipe dream for many, it can be done — but you’ll need to plan to make it a reality. Not everyone takes the same path to early retirement, but certain steps are common among people who manage to achieve it. You’ll likely have to consider at least some of these options to amass enough money to fund a sustainable retirement lifestyle after you stop working.

1. Make Lifestyle Changes

The bottom line is that the more money you save, the more likely you’ll be able to retire early.

Making cuts to your lifestyle is one of the easiest ways to make sure that more of the money you earn goes into your savings. There are plenty of ways to cut spending, from the often-cited “giving up your daily latte” to the more substantial act of downsizing your home. Consider which expenses you can cut.

The more you give up now, the more savings you’ll enjoy later.

2. Increase Your Income

While you’re working hard to save for retirement during your peak earning years, use your professional expertise to make even more money by taking a second job or a side job.

Work as a consultant in your field, use your crafting hobby to sell goods on Etsy or list a spare room in your house on Airbnb. Put all of it into a retirement account — or invest it.

3. Make a Financial Plan

Once you’re generating savings and earnings to get to early retirement, you’ll have to preserve that money to make it last for the rest of your life. Find a trusted financial advisor who will look at your current age and your desired retirement age to help you plan a path to get there.

4. Create Passive Income Streams

There are only so many hours in a day that you can work, so cobbling together extra sources of passive income is the way to go.

As the name implies, passive income, such as rental or investment income, flows into your account without you needing to be an active participant in its generation. Thus, you can have multiple passive income streams without any of them taking up significant amounts of your time. The money earned in your side jobs perhaps could fund these investments.

5. Stay On Top of Your Plan

You ask yourself, “How much money do I need to retire at 55?” To successfully plan an early retirement lifestyle, you’ll need to make some pretty good estimates about your income and your expenses.

Retirement income can be fairly easy to determine, based on projections of your Social Security income, pension income and any side jobs you anticipate you will continue to work. Your expenses, on the other hand, can be harder to calculate.

In its Consumer Expenditure Surveys, the U.S. Bureau of Labor Statistics provides data that shows how much a 65-year-old spends today compared with the average spending across the U.S. You can use this information as a guide for your own projected retirement spending, subject to tweaks that are specific to your own lifestyle. For example, if you’re planning to travel a lot in retirement, you’ll have to adjust the BLS figures upwards for that category.

Once you’ve locked down your projected expenses, focus on the income and savings side of the equation with your financial advisor. No matter what you earn, you’ll need to save a lot if you want to retire early.

Is Retiring Early Worth It?

The dream of early retirement appeals to most people, but if you’re seriously considering it, you’ll have to come to terms with the reality.

So, the question you have to ask yourself is, how much are you willing to give up? If you don’t see yourself socking away such a large percentage of your income, one strategy would be to semi-retire at an early age and still take consulting or part-time gigs.

The next question you have to ask is, is it worth it? Yes, retiring early offers you the potential of a life with more free time and less stress. But you’ll be giving up things along the way, such as social outings, material goods and life experiences. And once you retire, you might be the only one you know with a surplus of free time, forcing you to fill your days with solo activities.

Thompson said once you’re deep into your savings plan, you’ll be motivated to continue.

“Eventually, the behavior itself becomes rewarding because your brain knows that the behavior gets you to the next goal,” he said. “This behavior necessitates that you sacrifice some spending in order to save. Before long, you’re saving more and more and adjusting your lifestyle to live well below your current income. A couple of decades of meaningful saving and investing coupled with a lifestyle free from indulgent spending is the recipe to be able to spend your 50s and 60s kayaking instead of commuting.”

John Csiszar contributed to the reporting for this article.

This article originally appeared on GOBankingRates.com: Here’s How To Retire Early and Quit the Daily Grind