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10-Step Map for an Early Retirement Plan

Retirement is the one universal goal. Some plan for a traditional retirement while others dream of cutting their own trail sooner. Early retirement is a worthy goal and achievable with a modest amount of planning.

There are 10 things to consider before you submit your resignation. If you cover each issue properly early retirement will fulfill your dreams. Poor planning could put you back into the workforce.

The map below is a handy guide for your journey. Click on the map to enlarge and print. This map, along with the information below, can have you enjoying early retirement in record time.

Map and considerations for Early Retirement

Retire to Something, Not from Something

The first step in your early retirement plan is to make clear your future plans. In my accounting practice I see people as they enter retirement and the aftermath. Those that do it right are happy, well-adjusted and have fun. Those without a proper plan age rapidly.

Your current pastime isn’t a plan. If you enjoy fishing or golfing or travel or reading… Fishing or golfing all day every day soon turns a pastime into a replacement for the drudgery of work. Tiger Woods has a job golfing. Unless your plan is to merely change jobs, you will need more.

Doing the same thing day in and day out becomes monotonous. Even the thrill of travel grows old for many.

List all the thing you enjoy doing. Your list needs to be long so you have plenty of opportunity for variety.

“Retire to Something” is in the center of your early retirement map because everything else revolves around it. Where you live, your social life, spending and daily life activities need a mixture. Of course, some activities will dominate. If travel is your passion you will naturally do more of that. Fishermen will wet a line frequently. Golfers will hit the links as often as the schedule permits.

The worst thing you can do is retire from a job. You may hate your job, but if the only goal is to leave said job, your plan is completed almost instantly. Now what do you do?

Standing around wondering what you do after you retire is a bad plan. Instead, retire to the life that excites you. I can’t tell you what that is. Only you can list the things important to you. Take time. Weeks if necessary to clearly outline what you most want in life. This is the foundation of your plan.

Income Sources in Early Retirement

Retirement from traditional work does not mean an end to income.

Your liquid net worth is how you will fund your early retirement. Dividends, interest, capital gains, the sale of investments and other sources of income determine the liquid net worth level needed to pull the trigger on retirement.

Funding your entire retirement in advance is unnecessary. The 4% rule says you can draw 4% every year from your nest egg without running out. If your spending (see budgeting, variable spending and contingencies below) is $40,000 you need at least $1 million liquid net worth to retire. You actually need a lot less according to this article.

Because you are planning an early retirement you likely will have more than just passive income. Perhaps you have rental income from investment property. You may find part-time work to fill part of your day. And side hustles are always an option. In fact, you may plan your early retirement around fulfilling a business goal, such as opening a restaurant or consulting business.

The higher your income in retirement, the less liquid net worth you will need to retire.

Budgeting Your Life

Some expenses go down, other up, when you retire early. Job related costs will decline. Hobbies, travel and activities you now have time to enjoy are new expenses that need to be accounted for.

Most people don’t want to spend a lot of time on a budget. Neither do I. To build a reasonable budget in under an hour add up normal monthly expenses: utilities, rent, taxes, mortgage, food… Once the key areas are covered, add another 15% or so for unbudgeted expenses.

Add to your bare-bones budget line items for new activities that cost money: travel, books, entertainment, golf fees, fishing equipment…

Entering early retirement without debt is preferable. If you have a mortgage or other debt, account for the expenditure in your budget. Debt is the one thing you can’t reduce unless you pay off the loan. The sooner you are debt-free the better.

If your budget shows a shortfall, consider these frugal tips to cut costs. Modest frugality can bring retirement home sooner and make managing your financial life in retirement easier.


My American readers know this is the most difficult issue when considering early retirement. Once you reach 65 Medicare kicks in. Until then you need to plan your medical insurance costs and medical expenses.

The news isn’t all bad. The Premium Tax Credit can pay for most or all of your health insurance costs. You will likely have a lower taxable income once you retire. That means you may qualify for the Premium Tax Credit.

Healthcare costs are lower in other countries. If you live abroad healthcare costs may become a minor issue. With more time available in retirement, you can plan medical checkups and procedures around travel plans. Medical tourism can cut your medical cost up to 90%.

There is also an alternative to traditional medical insurance. Health sharing is a growing field as more people look for reasonable options. You can read more here if this is something of interest to you.

Variable Spending

There are three phases to your early retirement spending.

  1. Before Social Security and pension income
  2. With Social Security and pension income
  3. Required distributions from traditional retirement plans

Your savings will carry a heavier load until Social Security benefits begin. Keep in mind some expenses, like medical insurance, get more expensive as you age. Plan for higher insurance and medical costs by age.

Social Security covers many of your expenses, reducing the demands on your savings, once it benefits begin.

Once you reach 72 the IRS requires you start taking money from your traditional retirement accounts.

Taxes also play a role. Property taxes generally go up over time. Renters also face rent increases. The good news is that taxes go down with a modest amount of planning. This blog is filled with ways to reduce your tax bill; don’t be afraid to use this blog as a resource. Take advantage of the 0% tax rate on long-term capital gains under the threshold. Only profit from asset sales is added to income so it easier to qualify for the Premium Tax Credit.

Your plan needs to include a heavier draw from personal resources prior to Social Security. It is okay to draw down funds faster than the 4% rule early on as Social Security will cover a portion of expenses later.

Bucket List

Now that we have the money issues out of the way we can focus on the fun stuff we want to do once we ring the bell on traditional labor.

A bucket list is vital. A good bucket list takes time to develop and evolves over time. List all the thing you want to do, the places you want to see.

Now prioritize your list. What is a must-do, must-see item? Mark all those with a “1” or “*”.

Remove items that sounded good when creating the list, but really don’t excite you. (Yeah, it would be great to skydive, but on further thought, I’m not dying to do it. (Pun intended.)) The opportunity may arise where you get to zipline or skydive or whatever is on your list but not marked as urgent. The goal is to have a ready list of priority items you want to do.

Edit your list as necessary. You are allowed to change your mind as often as you want.

Arenal Volcano, Costa Rica. Surprisingly, I slept well the night we spent at the foot of the active volcano.

Rent or Own

Renting or owning your living arrangements will reflect heavily on your budget. Owning requires more time and possibly more expense. Renting is usually cheaper because you rent a smaller space than you buy.

Do you like tending your yard? Household maintenance? If not, a condo or renting may be the better choice.

Owning a home also brings mortgage considerations into play.

Budgeting for rent is a simple one line entry. Home ownership requires a sinking fund or adequate resources for roof repair, property taxes, furnace, AC, etc.

There is no right choice. You can even change your mind later. Just consider the responsibilities with owning or renting.

Domestic or Abroad

Where you live makes a difference in your cost of living. The cost of living within the United States varies widely. The coasts and parts of Colorado will put a heavy demand on your financial resources. Interior parts of the nation have a lower cost of living.

Living abroad can offer an even lower cost of living. It has to be something you want to do and the location makes a difference. Paris might not be the best low-cost choice.  Costa Rica might make the list.

Research each location you are considering. Due diligence is required. Review the cost of living, laws, culture. With rare exception, renting is better than owning when living abroad. If you do plan on owning property in another country, be sure to consult with a legal professional competent in the laws in the location you are considering. An extended vacation in the location in question is also a good way to get a feel for what life will be like living there. Internet, food and security will be different than you are accustomed to.

Making new friends is the best part of early retirement.

Making new friends is the best part of early retirement.

Social Life

Early retirement has some disadvantages. Most of your friends and acquaintances will still be working. They will have less time than you to explore exciting activities.

Traveling allows you to meet new people. You may also miss people back home.

Considerations: Will you make new friends for new activities? Is volunteering something you enjoy?  Who do you want to spend time with?

Your social life will be radically different from when you worked a traditional job. What was an activity you looked forward to to unwind is now just another part of the day. Keep you mind focused. Build a schedule. The comradery found in a work environment can be replaced with new relationships.

People tend to build friendships with people near their age and with a similar background. Early retirement allows you to break through this border and create friendships with people of different backgrounds and age. Done with an open mind, this one benefit or early retirement can provide massive amounts of learning and pleasure. Old people can be a lot of fun when you get to know them.

Contingency Planning

Our final point in planning for early retirement is a warning. Life will happen. How will you handle unlimited time with family and friends?

The kids still need an education and a chance to grow up and live their lives. If children are involved there are additional considerations. How will they complete their schooling? Are medical services for children available? What about your children’s friends? Are your children on board with the lifestyle change?

Illness or the death of a significant other is a possibility. Serious illness will lay a heavy burden on the non-ill partner. Prepare a plan for potential issues. Current medical condition plays a role. In the case of death, the deceased needs to come home. That is an unplanned expense. Illness and death need addressing prior to travel or living abroad. Involve family and friends back home.

Give consideration for financial loss. Theft or a market decline can shift the dynamics of your early retirement plan. Build a cushion into your plan. Don’t put all your eggs in one basket. A theft of a financial account should not be your entire financial resources.

Your contingency planning will grow and evolve with time. Your personal situation is unique to you. You may need certain medication. That requires additional planning. Bills can be set on auto-pay. Insurance can play a vital role in protecting you at home and on the road.

Plan for the best, prepare for the worst.

Every road map needs flexibility. Road construction requires a change of course. An early retirement map needs just as much flexibility. I can give you the skeleton to build on, but you need to fill out the flesh and blood.

I can’t, and shouldn’t, tell you what to do. Your plan needs to be you. All I can do is provide a framework and ideas.

And always change your plans as your situation and interests dictate. You are not wedded to your first plan. There is a reason why quality work has a pile of editing under the hood. With a flexible plan early retirement is more than a dream; it is your reality.


Thursday 2nd of June 2022

I worked in finance for years, this is a concept people need to understand. Solid read!


Monday 4th of October 2021

Very useful information - thanks for sharing! I particularly liked the 'Retire to Something, Not from Something' advice. I can imagine this can be easily forgotten although it's important to find other purposes in life - as you say, it's very easy to get bored otherwise!


Monday 4th of October 2021

Wonderful information. I worked in the financial planning industry for years and have seen that most people don't plan their retirement as well as they should. There are so many aspects of retirement that should be addressed and planned out. This is an awesome resource for people to start drawing up their plans.

One thing I specifically remember is that every so often someone would be very precise with their retirement plans and those plans allowed them to have more fulfillment during retirement.


Sunday 3rd of October 2021

Hey, Keith, I appreciate for sharing your thoughts. I will definitely have something to chew on for the rest of the year. Yes, you summarized my issue very succinctly and to the point "Should you place some money in a Roth, regardless of tax bracket."

Now, with regards to the 2nd issue of rolling 401k to the IRA, wouldn't you need to know the protections yourself before advising your clients to roll their 401k to an IRA? Or do really savings on fees offset the huge costs a lawsuit may cause? Or do you favor IRA just because statistically a lawsuit isn't such a big threat vs. years of overpaying in fees to the old 401k (we cannot exactly calculate such costs but we're sure they're somehow embedded there)? I'm not challenging you but asking for your further thoughts. Not long ago one early retiree (he FIRE'd at 50, but is over 60 now) mentioned that he was sued because of an auto accident. Unfortunately, he didn't share details, but did mention that he & his spouse had quite a few concerns and restless nights due to the experience. He has his money in the IRA and also has an umbrella insurance. I think what caused sleepless nights was that initially the insurance company's lawyer didn't even want to side with him (help the client). Alas, he didn't share how everything got resolved because in the end it was OK (I think), but he had to seek counsel from an attorney outside his insurance company and incur expenses. This was very disturbing for me to read hence my concerns of rolling 401k into IRA (didn't I mention that I'm a worrywart?!). We also have umbrella, but if the insurance company decides not to help us if God forbid we are at fault for something, we would be screwed :-(. Speaking of Umbrella Insurance, is there a rule of thumb what coverage to get? If say we had $1.5M in taxable accounts and a similar amount in 401k, would we need $2M or $5M of umbrella or would $1M (2M?) suffice because only taxable accounts need to be protected and auto/home also provide coverage.

Thank you!


Saturday 2nd of October 2021

Thanks for a good article, Keith. I'll need to visit the links you have imbedded in it. I'm 46 with 13 & 15 y.o. kids and I'm hoping to retire quite soon or more accurately become a stay at home parent while hopefully my spouse continues to work for a few more years as he claims wanting to do so. However, thanks to the pandemic (I'm a worrywart by nature generally speaking) I'm in a worried paralysis on the bad days and a hopeful optimist on the good days. The biggie here is that I've started to dislike my job quite a bit recently and that might get worse due to the upcoming changes. I don't really want to search for a new job now especially due to tendency of being told to go work in an office (I've been working from home the last 18 months). So, our numbers seem to work fine, but I'm irrationally (or a bit rationally too) scared especially about anything healthcare related in this country.

I've actually registered for a 2-day seminar called "Retirement Planning" with a CFP or some kind of planner. It's only $49 for 2 x 3 hrs and I was curious to go and hear their stuff because yes, I've read online about disappointing experiences by other people who go to some kind of financial seminars. I said to myself that I should hear them preach myself and make my own opinion plus if I'm disappointed I'll be $49 OOP. Today I had the first 3-hour seminar. If the next Saturday's seminar goes similarly as today, I must admit that I won't be disappointed with booking it. We got two textbooks in order to follow the material and it will be a good primer for me to have everything in two books. It's like a framework for me to find the topics I'm weak in and then research it online. Yes, I know, the gentlemen also hope to earn business from some attendees, but I'm not ready yet to meet any FA personally because I have a good grip on our retirement planning except for my fear that might lead to oversaving.

So, I generally I liked the seminar, but one thing he said was very interesting, and I would like your thoughts. You, Keith, might be the wrong person to ask because you're a tax preparer (not sure if a CPA or not), but still. This is what the CFP said during the seminar: "With regards to Roth IRA and/or Roth 401k, we think it's very good to have some money in these accounts even though it's after-tax. Yes, we know that tax preparers and CPA's will not advise this to their clients especially when you're in the 22% or 24% tax bracket, but in this particular case, CPA's and CFP's are wired very differently. CPA's want to save tax money for you today, and we are thinking about you when you're in your 70's or 80's. One of my clients is 78 y.o. and she wasn't too happy to hear him say that her $500k IRA was worth only $400k (after tax)." Somebody in the audience then asked him to confirm his understand that he should save his new money in Roth 401k if he can "swing the taxes today." The CFP's answer was "Yes, it would be a good idea or at least do a hybrid: Contribute 50% to 401k and 50% to Roth 401k."

What are your thoughts about the above tips? Is there a dollar amount or a percentage of retirement savings that should be in the Roth form vs. pre-tax form? We've been maxing out our 401k's and Roth IRA's (via Backdoor) for years and only have 10% in our Roth IRA's of the total savings/investments. Roth IRA conversions don't apply to us since we're FT employees (24% tax bracket currently). If Roth IRA conversions survive the debates in Congress, we might be able to do a little, but not much hence my question whether one of use should consider contributing to the Roth 401k and say save $60-80k over next 5 years, but to me feels a bit painful to pay higher taxes...I guess I'm more in a camp of CPA.

What I wasn't thrilled about with this CFP is that he couldn't answer my question during the break. I asked him about his advice to his clients whether it's better to keep pre-tax savings in the 401k or roll them into an IRA once those clients retire and don't look for another job and which of them is better. So, OK, he said, it's generally supposedly better to roll into an IRA. OK, what about the protections against lawsuits at federal and/or state level? And here he stumbled because he wasn't 100% sure about NC, but he said he would look into this a bit for our next seminar. Of course, he mentioned that we'd be talking about personal protection like umbrella insurance next time, but still I thought it's not good to lack such knowledge. Umbrella insurance is handy to have, but we are not guaranteed the insurance company will help us when/if the help is trully needed (sure, the insurance co. is happy to collect the premiums though).

Thanks for reading this far :-). If you can share some thoughts, I'd appreciate it.

Keith Taxguy

Saturday 2nd of October 2021

There are two issues you find of concern. First, should you place some money in a Roth, regardless of tax bracket, and 2.) should you roll a 401(k) to an IRA and will the IRA get the same legal protection.

I agree with the FA on the Roth, Smiley. I use different words when consulting with clients while saying the same thing. I say I consider "all years" when tax planning vs just this year's tax liability only. I think about RMDs and Social Security and other future tax issues. The Roth is a powerful tool later in life as it gives me some options to save taxes when you retire. Also, if your Roth becomes a legacy it is treated significantly better than traditional retirement accounts. I like the hybrid the FA mentioned. I am not an 'all or none' guy. I like some in the traditional and some in the Roth. The mix is up to you, but 50/50 is reasonable. Your tax bracket will skew the breakdown if I'm giving the advice. The Roth gives me the best of both worlds in future tax years. This is the elevator pitch on a topic that could fill a book. The basic premise is here as a start.

The second question the FA should have passed on even if knew the answer. From a tax/financial standpoint I recommend transferring 401(k)s to an IRA in most cases. You have more options and probably fewer fees, many which are hidden or virtually impossible to find. As for the legal protection: practicing law without a license is never a good idea. I always refer my clients to a competent legal profession when these issues arise.

It sounds like a good seminar presented by a knowledgeable financial professional. Take notes. Good financial advice from these kinds of seminars are less than guaranteed. You can always learn something and that more than covers the token fee to attend.