That pot of gold may be bigger than you think.
Walking away from your job into early retirement may not be as difficult as you think.
Most of us can live comfortably off the investment returns from $500,000, says Gillette Edmunds, author of How to Retire Early and Live Well With Less Than a Million Dollars.
Edmunds stopped being a tax attorney 19 years ago to see how well he could do investing his savings. "By the time I doubled our assets, I realized I was not going back to work," he says.
The key is to plan while you still have a job. Here are three steps to get you started:
Crunch the Numbers: The amount of money you need depends on your lifestyle, savings and investment return. Don't forget to factor in taxes and inflation. But you can maintain the same lifestyle after retiring that you have now because taxes are reduced and "you don't spend any money on things like commuting and clothes."
Diversify: You must have a portfolio that performs in any economic scenario. Put your money into three to five unrelated types of investments. A typical mix might be large cap U.S. stocks, real estate and inflation-indexed Treasury bonds.But don't put all your savings in your company's stock, advises John Greaney, who retired at 38 and now advises early retirees on a Web site. He says he sold the Exxon stock in his 401(k) plan while he still worked for the company, "because I didn't want my entire net worth at risk to the price of oil."
Plan to work a little. Unless you have a large cash stockpile, you'll probably have to work part time. "The trick is to find something you like doing and to avoid expending time and energy on activities with low rates of return," Greaney says.Working at least a few hours may have the added benefit of getting you out of the house. Without a job title and a daily routine, many early retirees become depressed, feel isolated and start having marital problems.
Do some soul searching to make sure you really want to give up a full-time career. Edmunds says people sometimes think they want to quit early but really "want a job they love and a life that will inspire them."
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