Here’s to an Early Retirement: The ultimate option of not having to work

I once saw a billboard advertisement about a decade ago which may have been for the Australian Financial Review. It read something like “If you think working is hard, try not working.” It may not have been about early retirement, but it has stuck with me through the years, mainly because there are few ways of interpreting it.

Is it that you may find not working harder as the recurring pay cheques stop coming in? Or could it be the challenge of having to redefine what working meant to you?

What are alternative options and possibilities of not having to work?

Remember that working keeps your mind agile and provides you with a sense of achievement, in addition to monetary rewards.

At the end of the day monetary rewards are important to your long-term financial health and well-being. So it is not really about not working, but having the ultimate option of not having to work if you choose early retirement.  That would bring about tremendous freedom.

Let’s work backwards and look at what it would take to achieve a comfortable early retirement.

Think about the cash flow that you want each year in order for you to have this ultimate option.

Planning For Early Retirement - Cash flow and Investments

A simple example might be that you want to maintain your current lifestyle, which requires a cash flow of… $50k or $100k or maybe $150k per year. This of course will vary from person to person and is subject to calibration.

In order to generate this cash flow, you would need a reasonable amount of investments. An imprecise rule of thumb is to multiply the cash flow you want by 20.

This means you require investments valued in the vicinity of… $1m or $2m or $3m respectively to provide adequate cash flow to maintain your current lifestyle.

The key to early retirement is to start planning early. Take preventative measures, rather than scrambling to find a solution when you are much closer to retirement.

Here are 5 things to consider if you are planning for an early retirement

  1. Your investment will need to last for the rest of your life. Now, pending on your age at retirement, as well as looking at average life expectancy today, you could live well into your 90’s
  2. Ideally investments you have made for early retirement are passive investments that are diversified, liquid and not singular in nature
  3. Investments are subject to tax considerations
  4. Superannuation can be a very tax effective vehicle for investment purposes
  5. Inter-generational wealth planning can be very powerful


Blog photo credit goes to Sergii Gulenok