The dream of an early retirement is a common aspiration in this day of stressful work environments, and a desire for more freedom to pursue our passions. Early retirement beckons us with visions of freedom, travel, and pursuing new hobbies. However, beneath the excitement often lies a layer of financial anxieties. Fear of a declining standard of living, the possibility of returning to work, and the uncertainty of sufficient retirement income can cast a shadow on your dreams.
Today I want to share with you the Top 5 financial fears we faced in our pursuit of an early retirement and offer some insights and strategies to consider as you navigate the path to a secure and fulfilling retirement lifestyle.
Fear 1: A Decline in Standard of Living:
This was by far the biggest fear that Lisa and I had when we considered early retirement. The fear of having to significantly downgrade our lifestyle in retirement is a common concern. However, with careful planning and adjustments, we were able to maintain a comfortable standard of living without compromising our financial security. Here are a few tips for you to consider.
Evaluate Your Needs vs. Wants: Analyze your current spending habits and differentiate between essential needs and discretionary wants. Prioritize essential expenses like housing, food, and healthcare, and identify areas where you can cut back on non-essential spending. This isn’t always fun, but with the right perspective and a goal in mind (early retirement) it is something that can be used as a financial motivation.
Embrace Downsizing: Before moving into our Airstream we had to complete a considerable amount of downsizing. If you’re not considering full-time RV retirement travel, you can still consider downsizing your living space to a smaller house or apartment. This reduces your housing expenses, freeing up funds for other needs and activities. Additionally, consider selling underused possessions and embracing a more minimalist lifestyle.
Fear 2: The Need to Go Back to Work:
Other than a fear of a lower standard of living, this was MY biggest fear of early retirement. Once you leave the workforce, it's not always easy or pleasant trying to re-enter if you need to go back to work. The thought of returning to the workforce after retiring early was very scary to me. Fortunately, returning to work was not necessary for us and with some strategic planning, you can minimize this risk as well.
Calculate Your Retirement Income: Accurately estimate your retirement income by considering factors like social security benefits, pension plans, and any planned withdrawals from your retirement savings. Utilize online retirement calculators to gain a personalized picture of your financial landscape. But I would highly recommend that you be brutally honest with your budget estimates. We tended to be conservative with our retirement income estimates and liberal with our expenditure estimates.
Explore Additional Income Streams: Consider establishing additional income sources beyond traditional retirement savings. This could involve part-time work, freelancing, or passive income options like rental properties or dividend-paying investments. As content creatures we earn a few dollars here and there off of our videos, website, and affiliate programs. It’s not much, just a little extra income we use to go out for dinner every now and again or to put gas in the tank.
Fear 3: Our Retirement Income Would Be Inadequate:
The fear of having insufficient income to cover your retirement needs is a valid concern. When we retired early, we knew we would not qualify for social security or be able to access the majority of our investment accounts before 59 1/2 yrs. We were willing to assume a level of risk that we wouldn’t need those sources of income but we couldn’t see into the future. Would there be a big health concern we would need to pay for? Would inflation continue to rise? Addressing this fear requires proactive planning and responsible financial management.
Increase Your Savings Rate: Because we had learned years ago to get out of debt and to live below our means, we were able to develop a habit of monthly savings. The earlier you start saving and the more aggressively you contribute, the larger your retirement nest egg will grow. Additionally, we would increase our savings rate by a few dollars or percentage points after any pay raise our revenue windfall we received to boost our retirement savings over time.
Delay Retirement Age: We were in our mid 50’s when we retired. I had not originally planned to retire at that age, but we came to a crossroad in life and the opportunity presented itself. We were very fortunate and had set the conditions in our financial house to be able to retire in our 50’s if you so desired. However, we understand everyone’s situation is different. If feasible, consider delaying your retirement age by a few years. This allows you to accrue additional retirement savings and potentially benefit from higher social security payments and investment returns.
Fear 4: Our Ability to Save & Buy a Home:
When we retired early and started full-time RV travel, we knew it wasn’t our long-term (multi-year) plan. We wanted to buy a home that we could come back to when were weren’t traveling. However, our fear after the pandemic was our ability to enter the housing market and that interest rates were rising and the housing market was in short supply. With creative strategies, you can still achieve your goal.
Down Payment Strategies: Explore alternative down payment options offered by certain loan programs or consider a smaller, more affordable home that requires a lower down payment. As a military veteran we were able to leverage the VA loan process to our advantage.
Reduce Housing Costs in Retirement: As mentioned earlier, downsizing your living space in retirement can free up significant funds to contribute towards a down payment or mortgage payments. We purposely bought a modest sized home in a state that provided a favorable tax benefits to military veterans.
Fear 5: We Couldn't Afford the Travel Lifestyle We Wanted:
Traveling is a common aspiration for early retirees, but the fear of exceeding your budget can cast a shadow on those dreams. We had a fear that our early retirement income wouldn’t allow for us to travel the way we had hope. However, smart planning and responsible budgeting can make your travel dreams a reality.
Travel Hacking Strategies: We would always look for affordable campgrounds when traveling. Harvest Host, Airstream Courtesy Parking and Boondocking are other cost effective ways to travel. Here is a link to a video that we made showing the cost of our full-time travels.
Slow Travel: Another alternative to keep your travel expensive under control is “slow travel”. The longer you stay at a location, the cheaper it is generally. Monthly rates are cheaper than daily rates, and you use less fuel since you are stationary for longer periods of time.
The Dream of Early Retirement
Early retirement is a common dream that many people have but the fears that come with this financial decision can feel overwhelming. The choice of early retirement is a personal journey, and the strategies mentioned above should be tailored to your individual circumstances and financial goals. We are not financial experts and would advise that you seek professional assistance. Consulting a financial advisor can provide personalized guidance and help you develop a comprehensive retirement plan that addresses your specific needs and fears.
By proactively planning, addressing your financial fears, and making necessary adjustments, you can turn your dreams of an early and fulfilling retirement into a reality. So, embrace the adventure, conquer your financial anxieties, and embark on the next exciting chapter of your life!
Happy Camping and Safe Travels
Rick & Lisa
The Wright Life
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