Retire Young!               You CAN Retire Young: How to Retire in Your 40s or 50s Without Being Rich

INTRODUCTION

     Surveys reveal that most people would like to retire young—55 or younger—and many would choose their 30s or 40s if they could. But can they? Absolutely. And so can you. It’s going to take more than wishful thinking, however; it’s also going to take some effective strategies and a sufficient net worth. This book will cover why you should, and how you can, turn that dream into reality; the rest will be up to you.    

    The more money you earn, the easier it will be to retire young. But regardless of income, the 3 Keys to retiring young delineated in the following pages will be your guide to spending less, saving more, and investing wisely. You can take control of your future, retire as young as possible, and start enjoying what should be the best years of your life. But in order for that to become a reality, you must start focusing on the future now.

THE THREE-LEGGED STOOL

    Perhaps you’ve heard of the "three-legged stool.Traditionally, retirement has been possible because of this stool. The first leg was employer-funded pension income, the second leg Social Security income, and the third leg personal savings. In the past, those three income sources provided most retirees with ample financial security. But the stool is getting wobbly and you cannot on it for your future retirement. What happened?

    Leg 1: Employer-funded (defined-benefit) pensions declined markedly. In fact, according to the latest annual report from the Pension Benefit Guaranty Corporation (www.pbgc.gov), employer-funded pension plans peaked at approximately 114,000 in 1985 and have since declined to a low of about 38,000. Because these plans simply became too expensive to fund and administer, and the financial burden would increase rapidly as the baby boomers—those born between 1946 and 1964—began retiring, many employers took a pre-emptive step and switched from employer-funded pensions to employer-sponsored plans like the 401(k) where employees primarily fund their own pensions.

    Employers may match their workers’ contributions up to a certain level, or they may not. That means the pensions of most future retirees will depend on how much they themselves contribute—and few are contributing enough. In fact, only about 42 million U.S. workers participate in a 401(k) and nearly twice that many workers (75 million) have no employer-sponsored plan at all.

    Leg 2: The old stand-by, Social Security, is in financial jeopardy. Chapters 12 and 13 focus on the problems surrounding this federal program and, once you read them, you will understand why there is mounting concern about the viability of this potential income source in the future.

     Leg 3: That leaves personal savings. If more money were being invested in IRAs and other retirement accounts, and/or in other mutual fund accounts (taxable or not), this leg wouldn't be as much of a concern. But the personal savings rate in America in 2000 fell to its lowest level since the Depression—and it was only a little better in 2001. Surveys further confirm that few people are saving anywhere near enough to support themselves in retirement.

    If the future of the three-legged stool appears grim, rest assured that it's going to impact some more than others. The reality for all of us is that we will not be able to count on the federal government and our employers to take care of us in retirement like they are taking care of today's senior citizens. So what can we do?

START TAKING CONTROL

    Almost everyone will retire one day. For some it will be when they turn 65 or 66, for others perhaps 70, and for those who do not prepare, it may be 80 or later. And what about you? That’s going to depend on how much thought and planning you start putting into it now. While some kind of retirement will eventually be a reality for most of us, let me ask you a few questions about your feelings today.  

    If these sound good to you, then you should focus on retiring not when you are 65 or 70, but while you are young, healthy, and motivated to take full advantage of what early retirement has to offer. Enjoy the freedom to do what you want to do, when you want to do it. You can’t imagine how good that feels. Or maybe you can and that’s why you’re reading this book! It’s a holiday everyday … a perpetual vacation … your ticket to a better life.

    One reality, however, is that while most people would like to retire young, the majority will not be able to financially afford it. Most lack the motivation and self-discipline necessary to take control, plan ahead, and accumulate the net worth needed. That’s okay. We need people like that, too; people who spend all the money they make. They help boost the economy that, in turn, helps generate continued growth in the investment portfolios of us early retirees. But is that where you want to find yourself—financially unable to retire young, or maybe never able to retire? We certainly didn’t, so we took control and did something about it. You can, too.

    I wrote this book to convince you that retiring young is an attainable goal and one you should strive toward. And what about money? Don’t you have to be rich to retire young? Absolutely not! We retired in our early 40s without being rich; but neither were we poor. The net worth you are going to need will depend on the lifestyle you want to live (which will be thoroughly discussed in chapters 6 and 9). Over our 18-year careers we averaged $47,300 per year in after-tax income—which included interest, dividends, and capital gains. Millions of couples earn well above that today.

    If you earn and/or save more than we did, or if you are fortunate enough to get a windfall or have a forthcoming military, civil service, or corporate pension to look forward to, then you could possibly retire in less years than it took us. Earn less or save less than we did and you can expect it to take longer. But there is yet another option for those who earn less or haven’t managed to save the net worth necessary to fully retire: part-time work during early retirement can still give you far more freedom than you have now while providing an income stream which can make retiring young possible.

    Don’t think you can realistically save enough money on your current income? In chapter 6 you will learn about a couple that had a dream of owning a big farmhouse in the country. But with virtually no net worth, an income that averaged less than $30,000 per year and four children, it seemed impossible. Did they meet their goal? You will find out later. But if they did save enough under those circumstances to achieve their dream (and a good guess would be that they did), then perhaps others can learn from their experiences and strategies too.

    If you can believe a guy who retired at 42, who has been retired nearly nine years, and who has no plans of ever returning to full-time employment, then there is simply no other goal to pursue than to retire as young as possible. The choice will be yours—to retire young or to keep working—but only if you plan ahead and follow the 3 Keys to retiring young that will allow you to build the net worth necessary to give yourself that choice in the future.

    You may love your occupation now, but what about in 10, 15, or even 20 years? Enthusiasm for your job or career can change dramatically. And with the number of layoffs we have seen in past years, whether you have a job or not in the future may not be your choice. So take control of your life now and prepare yourself for whatever may come. If you choose to, you can retire young; this book will show you how.