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How to Retire Early

How do I retire early?

Lots of people dream of having more free time in their later years. Maybe you’re concerned about health issues. Perhaps you want to finally launch your own business. Or maybe you feel led to do volunteer work. Whatever the reason, the question is the same: What would it take for me to retire at 60? Or even 55 or 50?

The answer depends on your financial situation, but if you’re serious about learning how to retire early, there are some things you need to do:

  1. Determine what kind of lifestyle you want in retirement.
  2. Create a mock retirement budget.
  3. Evaluate your current financial situation.
  4. Get serious about lifestyle changes.
  5. Pour everything into investing.
  6. Meet regularly with a financial advisor.
  7. Play it smart when you retire early.

You may have already completed some of these steps. If so, that’s awesome! You’re ahead of the game. If not, then it’s time to roll up your sleeves and get to work—in more ways than one!

Step 1: Determine what kind of lifestyle you want in retirement.

Before you do any calculations to determine how to retire early, you need to know what you think you’ll do in retirement. That dream will determine your budget. Want to travel the world? Then you’ll need a big budget. Want to travel to see grandkids? Open a business? Do volunteer work? Take the family on a huge vacation? Each of these dreams carries a different price tag.

Step 2: Create a mock retirement budget.

When you can retire will depend on how much you think you’ll need to live on every month. Here’s a pro tip: You need to get specific about this number. Create a mock monthly retirement budget. Then, you can work backward to estimate how much it will cost to maintain that lifestyle over the course of a year, and then over the course of a few decades.


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After you know your target goal, you’ll need to have a plan for how much you need to set aside every month to build that nest egg. To give you a high-level picture, plug some numbers into our investment calculator. This tool does the math to show you how much you need to be saving for retirement from now until the time you decide to retire.



Notice that you don’t have a mortgage payment. That’s because you want to pay off the mortgage (and any other debt) before you retire. Debt will eat away your retirement fund and keep you working long after you want to retire.

Your budget will look different at different phases of your life, like when you drop life insurance and when you add long-term care insurance. It will also look different depending on what you want in retirement—travel, hobbies, volunteering, seeing family.

Step 3. Evaluate your current financial situation.

At this point, you should know how much you already have in retirement. You also have a target number of how much you think you’ll need in order to retire early. Now, the rubber meets the road. Take your target retirement number and subtract how much you’ll probably have in your retirement portfolio—including investments, real estate, cash, and other assets—by the time you want to retire. See example below.



In this example, there’s a big gap between the amount you need and the amount you will probably have in 10 years. Based on the example above, you’ll need to invest about $3,100 to $3,900 a month extra to bridge the gap.

Now what do you do? That’s up to you.

Step 4: Get serious about lifestyle changes.

Several actions could close the gap between the amount you need for retirement and amount you’re estimated to have in 10 years. Here are a few things to consider:

  1. Get out of debt—including your house. Debt is retirement quicksand. It’ll keep you from enjoying that retirement of your dreams. And you definitely won’t be able to put away as much for retirement as long as you’re giving money to the mortgage company every month. Kick that debt to the curb!

  2. Lower your retirement budget. That means you decide to live on less each month than your original number. You may have to take fewer trips around the world or cut back on your hobbies.

  3. Retire later. Ten more years on the job gives you more time to save money; it also gives compound interest more time to work. That $468,000 at age 55 (our example above) becomes a whopping $1.3 million at age 65—even if you never contribute another cent.

  4. Get a second job. Let’s say you get a part-time job mowing lawns in the summer. If you mowed one lawn every weekday for $50, you have an extra $250 a week or $1,000 a month. Of course, that’s seasonal work, but you get the idea. With an extra $1,000, you’re putting away $1,625 a month (including what you’re already investing). Over 10 years, that’ll put you at almost $680,000. Now that’s progress!

A combination of these factors could radically change your retirement picture. The question you need to ask yourself is, how hard am I willing to work now so I can retire early? Honestly, folks, this is where most people get stuck. They dream of an early retirement, but they’re not willing to do the hard work or make the sacrifices to get there. Remember, nothing of value comes without a price. Your sweat equity, time, and sacrifice are the costs you pay in order to retiring early.

Step 5: Pour everything into investing.

You need to put every extra dollar you can toward investing if you want to retire early. For example, if your typical vacation costs your family $5,000, you may want to cut that in half and put the other $2,500 toward investing. What if you could cut your grocery budget by $100 a month? That’s an extra $1,200 a year toward investing. Here are other areas you may want to look for savings:

  • Clothing
  • Entertainment
  • Cable/satellite
  • Haircuts
  • Gym membership (if you’re not using it)
  • Subscription services (magazines, streaming video, audio books, etc.)

Can you imagine how much money you could be putting away for retirement every month if you cut just $15 from each of these budget categories per month? That’s $90 a month— $1,080 a year! What if you doubled that amount and cut $30 from category? You determine whether or not you get to retire early. It’s all in your hands.

Step 6: Meet Regularly With a Financial Advisor

Yes, you need to keep an eye on your money. You need to ask questions about concepts and terminology that don’t make sense. Stay involved in your financial portfolio and maintain control. But don’t make decisions before you’ve talked them through with a professional who knows their stuff and has the patience to explain it.

Step 7: Play it smart.

When you think you’re ready to say goodbye to your job, there are some practical things you need to think through—and possibly take action on—in order to maximize your wealth potential. Before you retire, consider the following:

  • Revisit your retirement dream. Are you still on the same page with your spouse? What are your expectations about travel? Hobbies? Giving? How do you picture your daily routine?

  • Consider your retirement location. Before you retire, think about where you want to live. Is it your current location? Do you want to downsize? Which states have the highest cost of living? Which states offer the best tax breaks? Do you want to live close to family? You need to decide before you retire. An unplanned move after retirement can deplete your retirement savings.

  • Decide whether you’ll work. Some people still want or need a little extra income. What about you? Do you want to retire completely? Do you want to work part-time and try to start your own business? Do you think you’ll miss the social interaction that work provides? Think through these questions before burning your business connections. It’s your future—but you need to know how you want it to look!

  • Keep a close eye on Social Security and health care. These are two wildcards that could change your retirement plans dramatically. You can’t count on Social Security to be a major source of income in retirement. It’s just gravy on the biscuit. You’ll need to think through how you’ll budget with this knowledge in mind. And given the current rate of people retiring, you need to keep an eye on how much you’ll get. That will likely change between now and retirement time.

    Another major component to think about when you retire early is health insurance. If you leave a job before you can get on Medicare, then you may need to get private insurance. That’s a huge factor to consider when you’re thinking about how to retire early.

  • Determine how to manage income streams. An income stream is just a place you draw money from. Any savings outside of your emergency fund is an income stream. So are IRAs, 401(k)s, real estate, and cash in your pocket. However, you need to know when you can take money out of each stream. You’ll get hit with a big tax penalty from Uncle Sam if you withdraw money too soon. You can also be penalized if you don’t take out money early enough. Don’t forget these dates!

It’s a lot to think about and remember. That’s why it’s so important to work with an investing advisor when you’re trying to figure out how to retire early. These folks are MVPs of the financial world. And once you see how they can help you, they’ll be the MVP of your retirement planning!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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