Is Early Retirement Only for the Rich?

You are here for a reason – You are ambitious and you would like to look at the nuts and bolts of retiring early. So we are not going to dwell too much on the obvious – that it takes discipline, time and effort – but instead, we will delve right into the list of exact steps you have to take to realise this dream.

Where to start.

The surest way to achieve early retirement is to build assets faster than normal. Your priority, while you are earning, should be to maximise tax deductions and attack debt, so that you can leverage your liquidity to invest in assets.

This will require a strict budget that accounts for fast debt repayment.

Without a plan, debt can quickly get out of hand, so having a system in place that you religiously stick to is integral to successfully manage your debt.

There are several standard methods for addressing this. Find one that suits you and communicate it clearly and regularly to anyone who has any influence on your money decisions. The most common budgeting methods are The 50/30/20 Method, The 80/20 Method, Zero-Based Budgeting and The Envelope System.

Once you have tackled tax and debt.

It is important to understand that not all assets are income-producing. You will want to focus on those that deliver a high return on investment.

The most common ones include.

  • Financial Instruments that gain in capital value or that earn you an investment income.
  • Rental property that has a “break-even” cash flow for 5-7 years, whereafter it produces an income.
  • Ownership of a Business that has a positive cash flow. It is important that the business is compliant on all operations, keeps diligent financial records, is built to scale, and follows timelines and a plan for profitable exiting. These will ensure that the business builds market share and value.
  • Intellectual Property such as ownership of a patent or copyright e.g. well-selling book or painting prints.
  • Hiring Human Capital if well-orchestrated can exponentially grow your business and its value.

Creating your Vision.

Without a crystal-clear vision from which you can reverse-engineer, your early retirement plans may be dead in the water. The key to visualisation is to see yourself in the exact place, at the exact age, enjoying the exact freedoms that early retirement will look and feel like.

Initially, the vision will be unclear. Daily practice for a dedicated period, will hone your dream to a point where the mechanisms to achieving it will, in turn, become apparent.

As a perfectionist, however, one can get caught up in the details. On the other extreme, you might find your imagination unable to concrete a vision due to various reasons.

Either way, as you practice, be sure to take steps in a direction. The vision will become clear enough for you to develop a plan.

Therein lies the second secret to visualisation. Commit your plan to paper. Then outline milestone goals, timelines and rewards and refer to your plan regularly.

The most well-defined action plans run on 3, 5 and 10-year timelines, with each milestone set at every financial quarter.

Planning your retirement.

Your life expectancy (and perhaps that of your spouse) would be one of the most important assumptions to get right. You may have to calculate well over 40 years of expenses into the equation – as well as factor emergencies, extra expenses (such as medical costs) and inflation into the budget.

Also, consider the risk distribution of your portfolio of assets and how well they will fair as markets inevitably change. Allow for low, medium and high-risk assets and various streams of income.

Retirement funds can buffer and support you through your retirement years. The sooner you can meet with an advisor and investigate and compare the multitude of options available, the better. Even small amounts, invested wisely, can pay dividends quickly. This will open you to opportunities for reinvestment or spreading your risk across a broader portfolio. Wise investors develop a relationship with their financial planner and keep an eye on the performance of the markets. This way, you can manage your drawdowns in a tax-efficient manner.

Your investment portfolio will need to be flexible, allowing for multiple withdrawals. Your investments must be managed in a way that outstrips inflation. This takes considerable planning and expertise.

Benefits of employment will fall away.

Subsidies and benefits that are covered by your employer will fall away. If you keep the benefits, these expenses may need to be covered in full by you. You may want to price around before moving into retirement. Also, take note of the pricing inflation trends, and calculate conservatively.

Extra expenses.

Early retirement may mean that you still have expensive purchases ahead, such as cars or different accommodations.

Certainly, most will have considered that medical expenses will go up as needs may increase…But medical prices themselves may also increase.

Petrol prices are volatile, so budgeting with high prices in mind will buffer you.


Lastly, as you cover the above steps, you may want to consider your legacy. As your assets or investment portfolios grow it is prudent to update your will.

After your plan has solidified and gained traction, you may also wish to include financial vehicles that will outlive you and will benefit those that follow. This will have an impact on your plan, the disbursement of funds and your strategy.