If you’re tired of the daily grind, you might be wondering: What’s the best way to retire early? It starts with finding the minimum savings you’ll need to cover your expenses in retirement. Then you can build a plan to get there as quickly as possible. 

This guide will provide the tools to do just that—and help you decide if early retirement is right for you. 

Is It Good to Retire Early? 

Many people struggle to put enough money away for a standard retirement, let alone an early one. However, if you can find ways to increase your savings rate, retiring early can help you pursue your passions and achieve a better quality of life. 

Some of the possible advantages of early retirement include: 

• You can fully enjoy hobbies while you’re healthy and physically fit 
• You can enjoy more freedom and time with family 
• You might experience lower levels of stress 

That said, retiring early can also have potential drawbacks, such as: 

• If you start drawing Social Security early, your benefit amount may be permanently reduced
• There’s a chance you’ll outlive your savings 
• Covering your own healthcare expenses can be costly  

Fortunately, you don’t have to commit to any given retirement date. Even if you decide against retiring early, improving your retirement plan now can only benefit you. 

How to Retire Early: The FIRE Movement 

The “Financial Independence, Retire Early” (FIRE) movement promotes tactics that may seem intense but can be useful guidelines. For example, adherents often suggest saving and investing 50% of your income to retire in your thirties or forties. 

Here are a couple of other practical guidelines that the movement has helped popularize. 

The Rule of 25 

To estimate how much you need to retire, use the Rule of 25 to find your “FIRE number.” Also referred to as the 4% rule, it suggests that you need to save at least 25 times your annual expenses. 

For example, if you expect to spend $50,000 per year in retirement, you would need $1.25 million saved. 

The $1,000 Rule 

The $1,000-a-month rule is another way to estimate your minimum retirement savings. It suggests that for every $1,000 of monthly income you need, you should have about $240,000 saved. 

For example, if you think you can live on $3,000 per month in retirement, you would need to save $720,000. 

Tip: The Rule of 25 assumes a 4% withdrawal rate, while the $1,000-a-month rule assumes a 5% withdrawal rate. 

How to Accumulate Wealth for Retirement 

Saving hundreds of thousands of dollars can be a daunting prospect, even with the help of tax-advantaged retirement accounts like 401(k)s and IRAs. Let’s explore some of the most important steps you can take to set yourself up for success. 

Confirm How Much You Need to Save 

The right retirement number is an important foundation for your financial planning. It informs your monthly savings goals and helps you track your progress, making it easier to make an effective budget and stay disciplined. 

One of the rules we discussed above can help you calculate how much you’ll need to save. Just make sure that your expense estimates are accurate. If they’re too low, you risk running out of money. 

Consider consulting a financial advisor to help make sure you set an accurate goal. 

Boost Your Income and Investment Returns 

If you’ve ever looked up FIRE movement tips, you may have seen that some people try to save up to 70% of their income for retirement. This goal might not be feasible for everyone, but it becomes much easier the more money you earn. 

Consider taking on a side hustle or negotiating aggressively the next time you change jobs. It may take more effort than cutting your expenses, but it also has unlimited upward potential. 

Investment returns are another positive lever you can look to pull. If you can improve your portfolio’s annual performance by even 1%, that can have a significant impact on your long-term savings. 

To take advantage of tax-deferred growth, focus on making the maximum allowable contributions to your retirement accounts. Just keep in mind that you generally can’t access the funds in these accounts until age 59 ½. 

To fund your early retirement, you’ll typically also want additional assets outside of these accounts, such as in brokerage accounts or real estate. 

Lower Your Expenses 

Cutting expenses is just as important to early retirement as boosting your income and investment returns. If nothing else, lowering your expenses means you’ll spend less in retirement, effectively reducing the amount you need to save. 

In addition, it’s often easier to avoid spending a dollar than it is to earn an extra one. That’s especially true when you factor in the taxes that apply to most forms of income. 

This is why so many early retirees emphasize strict budgeting. However, you have to be careful not to reduce your spending so much that it harms your health or quality of life. 

Exploring Early Retirement Strategies 

Early retirement can seem like an intimidating goal, but it’s quite possible with a concrete savings target. A strong income, smart budget, and effective investment strategy can all help you get there faster. 

Whether or not you want to retire early, working toward financial independence is a worthwhile pursuit. If you achieve it, you’ll have more freedom and stability to live on your own terms, whatever life throws your way. 

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