Early Retirement – How Should I Invest?

When I do financial planning with clients, we spend a good amount of time talking about retirement with the assumption that they will retire at age 65. However, clients often ask if early retirement is possible. For many Millennials, they don’t want to be doing the same thing for another 30-40 years. If you aren’t passionate about your job, then I get it. That seems like a long time to keep doing the same thing, but what if you could find a passion and create a side-hustle out of it? Maybe that could allow you to save more money and leave that day job? Could that be your key to early retirement?

Let’s not get ahead of ourselves though. First, you need to figure out what early retirement looks like for you. Here are some of the questions I hear all the time:

• How can I retire early? Is it possible?
• How much money do I need to save to retire early?
• What will my lifestyle be like in retirement?
• How can I save more for early retirement?
• What are the best investments to retire early? How should I be investing for early retirement? (I cringe every time I hear these questions.)

And to these questions, I respond back with:

• What does early retirement look like to you?
• What does “early” mean?
• Do you see yourself stopping work entirely or are you willing to do something on the side?

Retirement has a lot of definitions. I prefer to think of it as financial independence meaning that working has become optional. If you love doing something, then you can keep doing it, but you don’t have to in order to pay the bills.

Take a closer look at the questions above. Notice any differences? I like to focus on the bigger picture. The number will come into play, but I think too many people are focused on the numbers and what investments will get them there.  Yes, investing in a diversified portfolio that matches your risk tolerance and goals is important, but if you don’t have a defined goal, then it’s useless.

So, what is the best way to retire early?

Make a Retirement Plan

There is no way you can reach an early retirement goal without a plan to get there. The first step in order to retire early is to define what retirement looks like for you. When do you want to retire? How much will you spend each year? How long do you think you will live, etc? Once you answer these questions, it’s time to do the math and see how much money you will need to save for retirement.

Next, look at your current situation. Are you saving enough, or do you need to save more to reach that goal? For most, saving more will be the key to achieving their goal of an early retirement.

Saving More

If you’ve determined that saving more will get you to your goal, let’s look at ways to do that. If you are saving as much as you can at your current job and are limited in the raises you can get, finding a way to make extra income to save could be the answer. This is where the side-hustle comes in. It can seem daunting to take on another job while working your regular job, but it can be done. It could be the way that you can save the additional money you need to retire when you want.

How to Start a Side Hustle

1. Find your passion – What is it you enjoy doing outside of work (besides watching Netflix)? Or is there an aspect of your job that you love more than the rest of it? What do you have a talent for? What don’t you consider “work”? What do your friends come to you for? For example, career advice, the latest trends in fashion or media or even your Etsy-worthy craft.
2. Make a plan – Once you decide what your passion is, figure out how you are going to monetize it. Outline how you will start your business and what the launch steps are. Build your brand from the start.
3. Be patient – It make take time to turn this from just a hobby to an actual money-making endeavor. But stick to your plan and be disciplined.
4. Start saving – Once you are actually making money, start saving it. Remember the goal for this side hustle was because you wanted an early retirement.

This is just one of the ways to retire early. The bottom line is that in order to “retire” and stop working your regular job is to have enough money saved to live the life you want to live. There is no real best way to retire early, but being able to save more money can get you one step closer.