You decided right out of college that you wanted to achieve financial independence and retire early. With that plan in mind, you lived within or below your means, you tracked your spending and savings, and you invested a huge percentage of your income and let the magical powers of compounding interest do its thing. Now you’re 40 and have decided to step out of the workforce. You have no debt, you’ve put together a plan to pay for healthcare until 65 (when Medicare kicks in), and you have a nest egg that should theoretically last you the rest of your life. The plan to date has been successful, but now what?
Whether you choose to retire at age 40 or age 65, most retirees feel a great sense of relief to no longer be working. But that relief can fade as you are left to contemplate your next steps. I believe there are two key ingredients to a successful early retirement:
- Your plan for what you will do when you retire.
- What dreams you have for the future.
Quoted in an article on Nerd Wallet, young retiree Jillian Johnsrud noted that “it takes time to learn how to structure your day. No one feels great after bingeing on Netflix for 12 hours, especially the fifth day in a row.”
During your work life you have projects, deadlines, and a sense of accomplishment that brings you satisfaction. Once you remove yourself from the work world, you can lose a sense of purpose which can be psychologically harmful. I believe most of us are hard-wired to work, and we drift aimlessly when we don’t have a structured and productive lifestyle.
As a practical step, write down all the things you would like to do when you’re retired. Once you have a list, you should pick two that you can start to focus on right away. This is consistent with the advice of retirement blogger Joe Udo, who suggests concentrating on two big projects to give yourself a sense of purpose. His two projects were blogging about finances and spending more time in his role as a dad. Your big projects could be writing a book, learning a new language, taking a class at your local college, renovating your house, volunteering, or even going back to work in a part-time role doing something you really love.
Early retirees dream of financial independence and are able to plan a path to achieving their dream. If they have figured out what they are going to do once they are retired, they are part way down the road towards having a successful early retirement. The next step is continuing to dream about the future. Our dreams can give us a sense of hope and meaning. A traditional retirement can typically last 25-30 years. For those in the early retirement camp, it could be more like 40-50 years, where your retirement lasts longer than your working career did. There are many things one would like to accomplish in that amount of time—the key is to always be thinking about what is next. Just as you dreamed of financial independence, continue to dream of a better future. Having a goal and something to look forward to will keep you engaged and successful. The good news is you will have plenty of years available to do—and accomplish—many things.
DISCLOSURE: Pinnacle Advisory Group, Inc. (“Pinnacle”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Pinnacle and its representatives are properly licensed or exempt from licensure. The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your financial advisory, attorney or tax advisor.