How to Retire Early: NEW Step-by-Step Guide [2023]

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Retiring early may be a dream for many of you, and with this article, I’m going to demonstrate how you can make this goal a reality.

The most important thing is to start.

Your hopes and wishes of retiring early will never become a reality if you don’t act on your dreams.

Remember – your future is only as good as your actions.

Keep reading.

How to Retire Early

In this step-by-step guide, I’m going to show you how to move one step closer to retiring early.

Let’s get started.

how to retire early step 1 determine your retirement lifestyle

Step #1: Determine your Retirement Lifestyle

Before we jump into the numbers, it’s important to understand what the word “retirement” actually means to you.

Sure, there’s the literal definition of retirement:

However, the definition of retirement is completely subjective, which means your definition of retirement might be completely different from someone else’s definition of retirement.

So, before we consider how much you have to save for your retirement, you first want to think about how you want your retirement to look like.

Below are some questions to consider:

  • Where do you want to live?
  • Do you want to downsize your home?
  • Will you be moving in with your kids?
  • How healthy are you and your partner?
  • What will your retirement lifestyle cost?
  • Do you want to stop working completely?
  • Do you want to move to a long-term care facility?
  • Which income streams will supplement your living expenses?

Some of these questions might seem a bit morbid, but they are necessary for you to get a better financial picture of how you can plan for your retirement.

Here’s an example of a budget during retirement:

retirement budget example

Of course, keep in mind that your retirement budget may change as your life situation changes: You may be able to spend more during retirement, or you may have to cut down on expenses during retirement.

If I had to cut down on retirement expenses, I’d probably start by cutting out my $800 monthly travel expenses. 

In addition to understanding your expenses during retirement, you should also take a good look at potential income sources during retirement.

Some examples of income sources during retirement could include:

  • Pension income
  • Potential inheritance
  • Social security income
  • Rental property income
  • Part-time consulting income
  • Retirement income (e.g. 401k, IRAs, etc.)

It’s important to consider your retirement income streams.

One of the most popular sources of wealth (and income) comes from investing in real estate.

In fact, 90% of millionaires have built their wealth, in part, by investing in real estate. 

90% of the world’s millionaires have built their wealth, in part, by investing in real estate

Investing in real estate doesn’t necessarily mean you have to buy a house and rent it out. 

There are other ways to invest in real estate and still earn a passive income stream, such as investing in REITs (real estate investment trusts), real estate crowdfunding apps, and real estate partnerships. 

One platform that is very popular with beginner real estate investors is Fundrise.

With Fundrise you only need $10 to start investing (and they’re one of the few real estate investing platforms that offer a phone app).

Recommended Reading: Fundrise Review

When you think about your retirement years, it’s imperative to think about your longevity and your health.

Too many people fail to properly plan their retirement because they don’t factor in longevity.

In fact, by 2060, the average American life expectancy is estimated to increase by roughly 6 years from 79.7 (in 2017) to 85.6 (in 2060).

What this statistic means for you, is that your money has to last longer – which means that you have to save more today for a longer lifespan. 

You should also consider your family’s longevity:

  • How long did your parents live?
  • How long have your grandparents lived?
  • Did your family have any health complications in old age?

Keep in mind that health plays a major role in preserving your wealth, especially during retirement. 

In fact, the long-term average of the U.S. health care inflation rate is 5.26%.

The long-term average of the U.S. health care inflation rate is 5.26%

Source: YCharts

And sadly, the inflation trend continues to increase, so don’t expect your health care expenses to decrease during your retirement. 

The best thing you can do today to preserve your health in retirement is to maintain a healthy lifestyle and start investing

fiona smith the millennial money woman

The Bottom Line:

Before you figure out how much you have to start saving during retirement, you have to understand what “retirement” actually means to you. Take some time to determine your lifestyle expenses, your potential life expectancy, etc. Once you have the answers to these questions, you’ll be able to better analyze your current and future financial situation.

how to retire early step 2 analyze your current financial situation

Step #2: Analyze your Current Financial Situation

Now that you have determined 
how you want your retirement to look, it’s time to figure out where you stand currently.

Before diving deeper into Step #2, I’ve listed a quick summary of what I’ll be discussing in this section:

  • Calculate your net worth
  • Spend less than you earn
  • Pay off high-interest debt
  • Start investing your money

These 4 steps will help move you in the right direction to retire early.

You want to start by determining your net worth so you have a better idea of whether you are on track to early retirement or whether you need to start making drastic changes.

Below are some numbers you’ll want to analyze in your current financial situation:

  • How much you own
  • How much you spend
  • How much debt you owe

As a quick refresher, your net worth = what you own – what you owe.

The goal is to have a positive number. However, if you have a $0 net worth, that’s also a good start. 

I also want you to take some time to determine how much you spend currently to live your lifestyle. 

That’s called a budget. 

The goal is to spend less than you earn. 

If you’re not exactly sure how much you should be spending, check out some budgeting rules of thumb below:

Type of Expense Rule of Thumb

Monthly housing debt

< 28% gross monthly income

Total monthly consumer debt

< 20% of net monthly income

Total monthly debt payments

< 36% of gross monthly income

Retirement & savings

> 20% of gross monthly income

Now, if you checked out your numbers and find that you’re overspending in some (or all) of these categories and not putting enough money toward your retirement savings, then it’s time to get serious with your budget tracking. 

I would recommend you check out the phone app, You Need a Budget (aka YNAB).

YNAB claims that most people who use their budgeting app will save:

  • $600 in their first 2 months
  • $6,000 in their first year

The reason why I suggest paying off credit card debt (or any other high-interest debt) first before you even consider saving money for retirement, is because financially speaking, it makes more sense to pay off 20% (or more) in interest than to invest your money in the stock market and only earn an average of 7%.

When you pay off 20% in interest debt, it’s like you’re “earning” a guaranteed 20% and that’s obviously more than the 7% you’d likely earn in the stock market. 

If you want to retire early, you have to save (and invest) more than the average person does.

That’s because if you want to be above average (aka retire early), you’ll have to do what the average person will not (which is saving and investing a large chunk of your income).

As an example, my husband and I have saved just over 70% of our annual income in the past year. 

Full Disclosure: COVID-19 helped us save more since we didn’t go out to eat or travel, but even before COVID-19, we’ve saved around 60% to 70% of our income. 

So what if you just can’t seem to save 20% to 30% of your annual income?

Let’s say you’re trying everything possible, you’re cutting expenses, you’re paying off debt, but you still can’t seem to make that recommended savings number.

Here’s what to do:

  • Ask for a pay increase
  • Consider switching jobs
  • Consider getting a roommate
  • Consider taking on a side hustle
  • Consider downsizing your home 

I think you should consider pursuing all 5 steps to help you save and invest 20% to 30% of your annual income. 

Personally, however, my favorite option is taking on a side hustle.

The best part about side hustles?

If you dedicate enough time and energy to your side hustle, your side gig may earn more money than your full-time job… at which point, you’ll want to probably quit your full-time job and become your own boss.

In fact, the rise of the “sidepreneur,” has increased dramatically, especially after the COVID-19 pandemic.

49% of Americans under the age of 35 now report having a side hustle.

49% of Americans under the age of 35 now report having a side hustle

Source: Fortune

And there are so, so many other side hustle ideas out there. 

If you desperately need to make money fast, you may want to consider:

  • Dog sitting
  • Food delivery
  • Online surveys 

But – if your goal is to build long-term wealth, then I would recommend against those 3 side hustles and consider the following:

  • Blogging
  • Content creation
  • Affiliate marketing 

I guarantee you that earning $1,000’s per month (even $100,000’s per month) from these 3 side hustles will take a lot of time (and patience). 

But, if you stick with these side hustles, you’ll be making a lot of money to a point where you’ll likely be able to leave your full-time job and pursue your side hustle 100%.

And what’s better than being your own boss?!

how to retire early step 3 create an action plan

Step #3: Create an Action Plan

Now that you know where you stand currently with your financial situation, it’s time to come up with a plan of action.

Below are some sample figures that we will need to help determine our plan of action:

Example Action Plan

Expected monthly retirement spending


Current amount saved


Current age


Amount invested monthly (currently)


Years until retirement


Estimated retirement number (using a 4% withdrawal rate)


Amount needed to retire


For those of you who aren’t sure how I came up with the $1,500,000 retirement number, I typically use a 4% withdrawal rate.


Because typically, you can grow your investments, dividends and interest by 4%. 

So, if you need $60,000 per year, then $60,000 divided by 0.04% = 1,500,000. 

When you withdraw $60,000 per year from $1.5 million, you won’t risk dipping into your principal (aka the original $1.5 million) and thus, you may run out of money because $1 million (for example) won’t support a $60,000 annual withdrawal. 

Math aside, you now need to figure out how much you need to invest per month on top of your current investing rate. 

In this case, you’d look at the following numbers: 

Investment Example

Investment Time Frame

20 years

Current Investments


Average Annual Return


Deposit Frequency




Final Portfolio Value


If you are investing $500 already monthly, you’ll want to increase your current monthly investments by $2,075 to reach your retirement number, if we are assuming an average 7% return number.

That’s a lot of money…

…And to be honest, it might not be doable to increase your monthly investments – yet. 

Now, don’t be frustrated. 

Remember that you can always adjust the numbers:

  • You can adjust your retirement age 
  • You can adjust your current income
  • You can adjust your current expenses
  • You can adjust your retirement income
  • You can adjust your retirement expenses 

The point is that you at least know roughly how much you have to save in order to retire early and maintain a $60,000 per year retirement lifestyle.

What sounds easier:

  • Saving $1.5 million; or
  • Saving $83.83 per day 

For me, it’s saving $83.83 per day – because this goal is actionable, it’s something I can actually start doing now because I set clear boundaries.

How can you possibly set effective goals if they are too big?

If my goals were too big, I’d have no idea where to start. 

And if I have no idea where to start, I’ll delay working toward my goals.

Some mini-goals that may help you retire early include:

  • Download YNAB
  • Pay off high-interest debt
  • Create an emergency savings account
  • Increase your income through a side hustle
  • Invest 30% of income into low-cost index funds
  • Find a roommate and split 50% of living expenses

Keep in mind that ultimately, it’s crucial to invest your money.

You can’t save your way to wealth. Invest your way to wealth.

Yes, it’s important to establish an emergency savings fund, but it’s even more important to invest. 

I know some of you may say you want to invest in cryptocurrency, and that could be an option, but for me, I’d prefer to invest the majority of my wealth in the stock market (maybe have about 10% of my wealth in cryptocurrency).

Ultimately, whether you invest in crypto or not, is a personal decision. 

But, everyone should strongly consider investing in the stock market.

fiona smith the millennial money woman

The Bottom Line:

It doesn’t matter if you can invest $1 or $1,000. Every last penny helps, due to the power of compound interest. Time is the most important factor you have on your side, and the longer you keep your money invested, the more it will grow – especially as you near your retirement age.

how to retire early step 4 commit to the plan of action

Step #4: Commit to the Plan of Action

This step is probably the hardest of them all: Commitment

You’ve now:

  • Created a plan of action
  • Determined your retirement lifestyle
  • Analyzed your current financial situation

…And now it’s time to stick to your plan of action and see it through…until you retire…which could be a long time. 

Here’s what you’ll need to accomplish this goal:

  • Discipline 
  • Determination
  • Long-term vision
  • An accountability buddy

My secret to committing and sticking with my plan of action is my accountability buddy: My husband. 

Here are some examples of individuals who could be your accountability buddy:

  • A best friend
  • A family member
  • A trusted professor
  • A spouse or partner

If you just don’t seem to trust your friends and/or family with your finances and want someone else to manage your money for you, you may want to look into hiring a financial advisor. 

Why do we have accountability buddies?

Because as you pursue your dream to retire early, you’ll come across obstacles and roadblocks. 

You may even lose your motivation and want to stop your path to early retirement. That’s normal. 

And that’s why we have our accountability buddies to help motivate us and remind us about the long-term goals. 

The trick to accomplishing your goals is to be consistent and stick with your plan.

how to retire early step 5 invest in yourself

Step #5: Invest in Yourself

Lastly, while you are setting your plan of action into motion, it’s also important to remember to keep investing in yourself.

The highest ROI comes from when you invest in yourself.

Investing in yourself doesn’t just mean investing in the stock market. It could also mean:

  • Invest in your skills
  • Invest in your network
  • Invest in your education

Below are some examples of how you can invest in yourself:

  • Take a class
  • Start exercising
  • Read more books
  • Start a side hustle
  • Attend a networking event
  • Listen to self-help podcasts

Never, ever stop learning. 

Think about it this way: When you learn new skills, you will add more value, which means you can earn money (and save more money).


The rule of thumb is to have between 7 to 12 times your current annual salary saved up by the time you are age 55.

In other words, if you earn about $60,000 per year, then you should aim to save between $420,000 (on the low end) and $720,000 (on the high end).

However, that’s just a rule of thumb. 

A lot of times, the “retirement number” really depends on several factors, such as:

  • How long you live
  • How healthy you are
  • Where you plan to live
  • Your retirement expenses

That’s why this is just a rule of thumb – it might not apply to everyone.

Whether retiring early is truly worth the effort really depends on your future goals. 

Below are some of the pros as it relates to retiring early:

  • Less stress
  • Peace of mind
  • More time to travel
  • More time with friends
  • Opportunity to start a new career

Below are some of the cons as it relates to retiring early:

  • Increased strain on savings
  • Increased cost on health insurance
  • Potential negative impact on social health
  • Potential negative impact on mental health

As you can see, whether retiring early is worth it, really comes down to your personality.

Typically, early retirement means you are retiring before age 65 – which is the traditional retirement age. 

Age 65 is commonly known as the retirement age, because that’s when you qualify for Medicare (health insurance) benefits and many people start taking social security income (although you can start taking social security income, at a reduced benefit, as early as age 62 and delay benefits for as long as age 70). 

Other FIRE (Financial Independence Retire Early) enthusiasts may aim to retire as early as age 30 to age 40, but live in a much smaller retirement income. 

You can take several steps today to retire early – even if you feel like you have no money. 

Below are some steps you can take today:

  • Know how you want your retirement lifestyle to look
  • Know at what age you wish to retire
  • Determine how much you need to save for your retirement 
  • Create and stick with your budget
  • Pay off any high-interest debt
  • Invest your money
  • Find an accountability partner
  • Build an extra income stream through a side hustle
  • Consider hiring a financial advisor to help

You can certainly retire early, even if you feel like you have no money. 

It takes dedication, time, energy and effort – but you can make it happen.

Closing Thoughts

Retiring early is a dream for many, and it’s certainly achievable. 

Some of the steps you can take to retire early include:

  • Invest in yourself
  • Create a plan of action
  • Stick to your plan of action
  • Determine your retirement lifestyle
  • Analyze your current financial situation

The road to retiring early will not be easy, and you’ll probably encounter many hardships along the way. 

That’s why it’s a good idea to have an accountability buddy who can cheer you on, hold you accountable to your goals, and make sure you are doing the right things in order to retire early. 

And remember, the key to retiring early doesn’t necessarily have to do with how much you invest. 

What’s important is that you simply invest.

Consistency is the key to win in the long run.

Now I’d like to hear from you:

Which strategy from today’s post are you going to try?

Are you going to start by calculating your net worth? Or try to build long-term wealth by investing?

Or maybe you already have an early retirement plan? If so, what are your goals?

Either way, let me know by leaving a comment below!

Fiona Smith
Fiona Smith
Fiona Smith is the founder and CEO of The Millennial Money Woman. She has spent 10+ years studying finance, with the last 7 as a wealth and investment advisor. She has worked with clients with a net worth of up to $100M and holds her Master of Science Degree in Personal Financial Planning. She has also co-founded a local non-profit community teaching financial literacy and her work is featured on Forbes, FinCon, and MSN.

2 thoughts on “How to Retire Early: NEW Step-by-Step Guide [2023]”

  1. Really fantastic content. Iam really lot of things learning from u mam.
    Now I am going to determine my retirement lifestyle and then as per ur plan will go step by step.
    Very imp to find out Accountability buddy for continusly motivation.

    1. Amit,

      Thank you so much for your kind words! I’m glad you are enjoying the content and hope that you find your accountability buddy soon. They certainly can make a positive impact on your overall financial picture – at least this strategy worked well for me. Good luck and keep up the great work!



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