How to retire early without having millions of dollars

I remember sitting down for a meeting with our financial advisor ten years ago. My wife had finally given in to her pain and applied for disability benefits, so we would be living on a much smaller income from then on.

Worse, her job had good health care benefits, so I would have to pick up that cost, at least for myself (she would be covered by Medicare).

Our advisor had put the revised numbers into their retirement planning computer program and had a new batch of colorful charts to show us. I couldn't help a yelp of amusement when I saw that their computer said I would need approximately $2,000,000.00 put away if I expected to retire at age 66 (the year I would be eligible for normal Social Security benefits).

I laughed because to sock away that much in thirteen years, we'd need to find a way to spend absolutely nothing, pay no taxes, and put every dime I earned into retirement funds. Even that would not quite do it - I would need the money to have a great rate of growth to meet their figure. It was beyond impossible; it was ludicrous.

And yet, here I am, at age 62, with barely over a tenth of that amount, and I am what I call "PMR" - Pretty Much Retired.

Working in Retirement

Oh, I "work". I have a business, money comes in, I am not "retired" in the sense that I do nothing. But really, I don't do anything difficult. Most days we get up when we feel like it and pretty much do what we want.

That's what you need. You don't want a "job" you have to go to every day - you want to be able to enjoy your life.

How do you do that? Well, I don't know what you can do specifically because I don't know what your skills are and what you like to do, but one thing that can make it easier is living in an over 55 community as we do. Why? Because you have a built-in community of people you can work for. We have seamstresses, barbers, handymen, computer repair people and more living here and getting much of their work from their neighbors.

This isn't like selling Amway to your people in your town (though you can do things like that too). People living in retirement communities often prefer doing business with other people who live in the community - they know you are probably staying right here, you obviously have things in common, it's an easy choice.

Of course, nothing says that you can't advertise to the greater community also. It's just that your fellow retirees are almost a captive audience.

I don't do that - I earn income from my technical consulting, from writing on the Internet, and from selling mail servers.

I do want to caution you about writing. You CAN make money this way, but it's not the quick and easy path to riches some would have you believe. It's great work for a PMR person - you can do it when you want and you can put as little or as much effort into it as you want. I earn about $1,000.00 a month from that activity, but I have been doing it a long, long time, which is a big factor in earning money this way. If you would like to give it a try, I highly recommend signing up at HubPages by clicking here - it's free and you can find a lot of help to get started.

If your skills let you earn by doing a little consulting in whatever field you were in, that has another benefit: if you are traveling somewhere that could also be a little mini-vacation, your temporary employer is probably paying for your travel. You might even encourage that by specifically advertising your services in places near where you would like to vacation!

You can do the same sort of thing with public speaking. No, you may not be able to command hundreds of thousands of dollars for a speech, but many clubs, organizations and even businesses want interesting speakers. Another place that loves that kind of thing is retirement communities - we have people who speak here regularly at $8 to $10 a head. With a hundred people or more in the room, that's not a bad deal, is it?

Are you afraid of public speaking? I have some tips at my "Public Shaking - Overcoming fear of public speaking".

Selling things like the mail servers I sell may require some technical expertise, but you can get a smaller income from affiliate programs like Amazon.  There are many opportunities in this area, some of which require some knowledge to do well at.  I get a very small amount of money from Amazon, mostly from books people buy after reading reviews I have written.

By the way, that's another way to cut expenses:  if you do enough reviews and get rated well by the people who read them, you might be able to get free books from publishers.  I have paid for very few books since I started doing that.

Whatever you do, keep it simple and stress free. The point of being PMR is to enjoy your life, not be stressed out by it. You probably had enough of that at your job, right?

Social Security

I am thinking about taking some early Social Security benefits this year. There are several reasons to do that - business is slow in this recession and a little extra money could help. If it turns out that we don't need it, I can return it later without penalty. But I have another reason.

It is possible that Congress may change benefits. There will be tremendous resistance, but it may get pushed through. If it is, they may be more reluctant to mess with existing recipients - it would be very upsetting to make radical changes to people's existing retirement. If that is what happens, I might be helping myself by "locking in" now, and if they do not build in that protection, I am no worse off. It is a little bit of insurance; a bet that might or might not pay off, but that costs me nothing.

You might have read that you should never take early Social Security benefits. That's not necessarily true and you can learn much more about that at my "When to Take Early Social Security Benefits".

401K's and other funds

We are not planning on touching our other retirement funds. We don't need to because we live simply and inexpensively enough to get by with what we have. We cannot afford to take cruises or dine at fancy restaurants, but we have never had any interest in those things anyway. Living in a resort style over-55 community makes us feel like we are on permanent vacation, so there really is no need for expensive travel or other high priced entertainment. We can easily afford the activities we do enjoy, why would we need any more?

I'm a fan of a minimalist life style. We don't take it to extremes, but even without that, you can make your life far less expensive than it currently is. If you want to learn more about that, I highly recommend Everett Bogue's excellent books on living a minimalist life. Like us, you probably won't want to take it as far as he does either, but you certainly can get some excellent ideas. By the way, that's an affiliate link - I make a little bit of money from people who buy through that link. By itself, it's not much, but you'd be surprised by how much these little things can add up to.

Eventually, we will need to dip into those funds - they make you start taking them after age 70 anyway. By that time, they should have grown a bit more and inflation may have crept up enough that we will need them. I have done the spreadsheets; it all plays out well.

However, if you do need to take from those funds to finance your PMR life, there is nothing wrong with that as long as you are conservative. You don't want to be puling out money aggressively - you retired early, you may need that money flowing for a long time. If you can keep it well under 5%, it should last. We had put half of our funds into 5.5% annuities some years ago, so we could take that if and when we need to, but it grows if we leave it alone, so we will be able to take more later.

Do remember that the typical advice of taking 5% came from an era when the expected growth of your funds was much higher. Also, you are retiring earlier, so your money needs to last longer. Be conservative.

The Nursing Home Threat

One of the big reasons our advisor said we would need money was to pay for nursing home costs. She even recommended buying insurance for that - it is very, very expensive!

We ignored her advice. Only about 5% to 10% of us end up in homes. Many of those are people who already had serious health problems. Yes, the unexpected can happen. My father-in-law had a very bad stroke and is now in a home. It can happen to anyoe.

On the other hand, he led an unhealthy life style. He refused advice to limit fats in his diet, and ignored a doctors finding that his arteries were clogging up. His stroke was very unnecessary and that sort of blind ignorance is what causes this sort of thing for many others.

What I'm getting at is that if you take care of your health, your chances of needing a nursing home are even lower. We decided that we could run that risk. Yes, if something awful happens, we'll end up losing our home and have nothing to pass to our children, but actually our kids have done very well for themselves and don't need us to pass down anything.

It wouldn't have mattered anyway: we could not possibly save enough to cover that possibility and we could not afford insurance for it either. What will be, will be.

Can you do it?

Can you retire early? Yes, you can if you accept that "retirement" means working at a less stress filled job and perhaps giving up some meaningless luxuries. Sure, maybe you do need millions if you have a markedly different idea of what your golden years should be, but a realistic look at your expectations (and perhaps a peek at Everett Bogue's books mentioned above) might paint a very different picture.

What is important is health and happiness. A stress filled job can ruin your health and true happiness comes from family, friends and being with the ones you love. Yes, you need some money - you don't want to be sleeping in the street when you hit 70. But you don't necessarily need as much as financial advisors say you will need. If you have it, or anything close to it, that is great, if you don't, it doesn't always mean you will be eating dog food when you retire.

Plan your life and live your plan. Set realistic goals and have contingency plans in case of disaster (major illness, unexpected layoff). You absolutely can retire early if you plan it well and it absolutely can require less money than you might think.

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