To early retire by the time you’re 50 or 55 is quite a job. But to retire early in 10 years – that’s a much bigger job. Most people expect early retirement to come as a result of early retirement planning. So if you want to retire by the time you’re 50, and you’re 25 now, you’ve got a full quarter of a century to prepare for it.
But let’s say that you want to retire 10 years from today – no matter what your age – is that even possible? It is, but you’ll have to rearrange your life in ways that most people are not willing to do.
1. Commit yourself completely to the task at hand.
In order for you to retire in 10 years you’ll have to build your entire financial plan – and even your entire life – around the goal. While other people are enjoying life, you’ll have to be fully committed to a decade of self-denial. If you are not, don’t even bother to take this effort on.
As an alternative, you can choose a longer timeframe to achieve your goal. But to do it in 10 years will require some serious sacrifice. You’ll need to be ready for that.
2. Don’t have a family, but if you do – plan to retire in 20 years.
If you are serious about retirement in 10 years, don’t even plan on having a family. That sounds cold I know, but with a family comes greater financial obligations. You’ll have to maintain a larger home, a larger car, more money for food and clothing, and funding for future college education – at a minimum. All of that will eat into your retirement goal.
If you have a family, or plan to have one within the 10-year timeframe, you’ll almost certainly need to extend your retirement goal to at least 20 years. Early retirement is a juggling act; with a family you’ll just have too many balls in the air to make it happen.
3. Get the best job (or business) you can, and keep moving forward.
If you want to retire in 10 years, having a job that will be comfortable may not do it for you. You’ll have to be in a job or business that will enable you to make the most money that you possibly can. That means you want one of those jobs or businesses where you will be working 80-100 hours per week. Unless you already have a substantial amount of money saved and invested, your primary job will be your main source of funding for your early retirement plan.
4. And then get a second job (or business).
If you can’t make enough money to fund your retirement goals with a single job or business, you’ll have to get another. That won’t mean getting a job pumping gas or flipping burgers, but a second job that pays something like a full-time hourly wage. Two incomes will get you there a lot faster than one will, if only because the second income will be entirely for savings.
5. Learn to live on next to nothing.
There are two purposes for the extreme frugality:
- Keeping spending bare-bones so that you’ll have more money to save for retirement, and
- learning to live at a minimal level so that you will have less need for income when you retire.
The basic rule is that the less you need to live on, the more you will have for savings and investments, and the quicker you’ll be able to retire. That might mean living in a rented room, commuting by public transportation, and eating peanut butter and jelly sandwiches three times a day.
6. Save 50% or more of your income.
Now we get to where the high income and the low living expenses meet for a common agenda. You are maximizing your income and minimizing your expenses so that you can save and invest the most money that you possibly can.
If you are serious about retirement in 10 years, you’ll need to save at least 50% of your after-tax income. What we’re talking about here is putting away a serious amount of money each and every year for the next 10 years.
7. Invest aggressively.
If you want to retire in a decade you will not have the luxury of investing your money conservatively. Your investment portfolio will have to be heavily skewed in favor of high risk/high reward investment vehicles. That will mean investing in stocks, and largely in the most aggressive ones at that.
Let’s say that you are 25 years old and earning $75,000 from all sources. Your after-tax income is $60,000, of which you are saving 50%, or $30,000 per year.
You decide you need to have $500,000 by the time you’re 35 in order to retire early.
In order to reach your goal of retirement 10 years – at age 35 – you’ll need a rate of return on investment of roughly 12% per year. It will take some pretty aggressive investing to achieve that return over 10 years, and you better hope that there isn’t market crash along the way.
That will most likely see you investing your money in the highest risk stocks available, such as aggressive growth stocks and a very healthy mix of emerging markets stocks. Unfortunately, the time value of money isn’t nearly as strong over short periods of time as it is over nearly a lifetime.
8. Stay out of debt.
If you want to save, invest, and retire in 10 years, you absolutely positively must avoid debt at all costs. Not only will debt payments reduce the amount of money that you have to put toward savings and investments, but it can also leave you walking into retirement and still carrying some past obligations. And, make sure you get out of debt as soon as possible (perhaps try ReadyForZero).
So there you have it – you probably can early retire in 10 years, as long as you fully commit to the plan. That will mean becoming single-minded, and excluding nearly any other goal that you have for your life – at least until you finally retire.
Will be worth it? That’s a personal decision . . . .
Would you be willing to commit to this level of sacrifice if it meant that you would be able to retire is little as 10 years? Leave a comment and let us know!