Retire Early With Effectiveness And Financial Freedom, But Don't Forget The Softer Side

by: William Sabin


This article discusses how to plan for retirement – estimate your retirement needs, lower your expenses, maximize savings and earnings. Also, you can learn from my mistakes.

With the right long-term strategies, you can "retire" before 50 or whenever better opportunities present themselves. The key is being able to do more than just work for someone else.

How much do you need to retire to achieve financial freedom?

We discuss the softer side of retirement – the non-financial, life-optimization strategies.  What will your retirement lifestyle look like?

Stocks and funds that might be helpful in your retirement planning are discussed.

Growing up in Florida, there was always grass to be cut. So, during middle and high school, I cut grass, trimmed bushes, and cleaned pools. It was hard work, but it was rewarding, and it was a nice little business for a teenager. I used my dad’s equipment and paid him 10% of sales. A good lesson in business.

Image result for lawnmower

During this same time, my grandfather and mother taught me about the stock market, investing, and especially how to trade stock options. I was hooked at an early age. By 18, I had my Series 7 and Series 63 licenses.

While in college, I worked for a stock broker. All during this time, I was learning how to invest and save. I worked hard, I saved. I also counseled people that from the curb in front of their house and looked like they had it all – big house, fancy cars, exotic vacations, nice things, etc. However, most people were barely scraping by – they barely had enough money to keep the lights on in their houses, credit cards were maxed out, and they were under tremendous stress. At that time, I vowed to never live like that.

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Source: US News

Fast forward many, many years, and I find myself on the other side of the typical 9-5 work days. Actually, my days when I worked for others always seemed more like 7-7 work days. I’m sure many of you feel the same way.

As I journeyed through my work career, I always thought, "there must be a way to be frugal and retire from the rat race and to be able to rewire yourself to follow your desires, work for yourself, give back to the community." But how?

With over 30 years of investing and saving, I have a number of strategies to share below and in future articles. What follows is wisdom I have acquired from personal friends, reading, experience, as well as my (many) mistakes I learned along the way.

Retirement Planning - Ensuring a Smooth Transition

As defined benefit plans and other retirement benefits are being greatly reduced or, in many cases, eliminated, the burden of retirement planning is falling on individuals more than ever.

Source: Shutter stock

Below are some basic guidelines that might trigger some thinking and planning on your part. Of course, each of these areas is more complex than what is written below. However, this could serve as a foundation for future study and retirement planning.

The big five "whats": What is your time horizon, what is your risk tolerance level, what do you plan on spending in retirement, what estimated rate of return should you use, and what estate planning needs you might want to consider.

1. What Is Your Time Horizon?

Foundationally, time is key to ensuring a successful financial retirement. While money is truly not everything (making a difference in the lives around you and health probably rank higher), having money set aside for retirement is helpful and helps enable you to focus on other important things.

The longer the time between today and your expected retirement age, in general, the more risk you can take now. Remember, stock markets move in long-term trends of ups and downs - 30-year or even 50-year trends. Of course, there are many other factors that affect your risk tolerance, many of which we will address below. Portfolio theory provides the investor with the ability to take more risk when younger as your portfolio can weather greater drawdowns in hopes that it will recover and continue to grow until you need to start taking distributions. In addition, higher returns generally mean that the younger you are, the more stocks, as a percentage of your total assets, you should have in your portfolio.

The key is that you are never too young to begin planning for retirement. I encourage even the youngest people to plow money into a Roth IRA as early and as often as possible.

Also, don't forget about inflation. Even small year-over-year inflation growth can substantially eat into your estimated savings. This is particularly important if you plan on living several decades more. No one knows for sure the day we will die - the best approach is to live like today could be your last day but plan like you will live to a very old age. Living for today frees you up from stress and worry, provides you the mindset to be kind to others, and to give freely of your resources to those in need.

In general, the older you are, the more your portfolio should be focused on income-related investments and ensuring capital preservation. This generally means that a higher percentage of your portfolio will be invested in relatively safer investments with less volatility. This might (not always) mean investing in bonds and other fixed income vehicles. As you age, as well as when your various sectors outperform the market substantially, remember to rebalance your portfolio.

2. What Is Your Risk Tolerance?

Everyone likes home runs - they are as exciting to see on the baseball field as they are in the investment field. Unfortunately, big returns almost always imply greater risks. While huge returns that outpace the market by 200% or more, if you can't sleep at night, don't buy them. Proper portfolio allocation that takes risk mitigation as well as overall returns into mind is probably the most important planning tool.

As mentioned, if you have a longer time horizon until the money is needed, you might be able to take more risk than someone who needs to tap into the money in the next 1-3 years. After accessing your retirement needs and your savings and spending habits, you might be able to throttle back on how much risk you are taking to meet your long-term objectives.

3. What Are Your Spending Requirements?

More on this below, but to whet your appetite, your retirement plan needs to account for big payout periods - buying a house, a child's wedding, buying a new car, etc., meaning that you should estimate what your near-term, mid-term and long-term spending will be.

However, I have found that big expenses seem easier to plan for. The ones that seem to creep up on you are the daily expenses. Spending habits in retirement change. However, you might want to plan on spending more for travel and medical expenses and less, on say, business lunches. I have read that one should plan on spending 70%-80% of what you are spending today for retirement. I feel that's bad advice - I would plan on at least spending the same or up to 20% more than your spending habits today (adjusted for inflation).

On average, people are living longer. This equates into you needing more money for longer during your life. Don't underestimate your retirement spending just to make you feel good today. Proper estimations will ultimately drive you to have to save more earlier and follow proper investing and spending habits your entire life. "Sorry Starbucks, but I need to only visit you once a week - I'm saving for retirement."

To determine your life expectancy, here's one of many tables to choose from.

4. What Rate of Return Do You Need?

Like underestimating retirement spending needs, factoring in a higher-than-average rate of return on your overall portfolio also is bad practice. While you might be able to beat the market in the short term, it's advisable to use the market's long-term returns by asset class for your analysis. You might even be more conservative and try your financial model out using a rate of return 120-180 basis points lower than the historical returns. More on this below and some of the tools and investment options you might consider.

5. What Are Your Estate Planning Goals?

Disclosure up front - This can be a complicated area for both tax and legal planning. See a licensed professional as you venture down the estate planning road. Do you want to leave assets to your kids and grandkids? Want to provide assets to your favorite charity? Discuss generation tax skipping ideas. Look into Roth IRAs moving to the next generation. Power of attorney, wills, trusts, medical wishes, etc. should all be discussed and taken into consideration. Estate tax planning also is very important - you want to leave as much as you can to your heirs. Also, review the advantages and disadvantages of life insurance as well long-term medical care insurance.

How Much Money Do You Need?

$2 million? 6 million? Circling back to the original question of how much money do you need to retire - it really depends on two main things: How long will you live and how much you will spend, net of earnings. Fidelity suggests this broad rule of thumb:

  • By 30: Have the equivalent of your salary saved
  • By 40: Have three times your salary saved
  • By 50: Have six times your salary saved
  • By 60: Have eight times your salary saved
  • By 67: Have 10 times your salary saved

For money saving tips, see my previous article here.

The problem is for most of us, but especially me, is that I'm driven by fear and greed far too often. That goes for investing and living. While made popular by various movies and the media, those emotions are not what life is about.

The big question is "how much do I need to retire?" It really depends on two main things: How long will you live and how much you will spend, net of earnings.

According to a report from the Economic Policy Institute (EPI), the mean retirement savings of all working-age families, which the EPI defines as those between 32 and 61 years old, is $95,776.

It appears from the above that most of us will not retire with a seven-figure portfolio. Will most people keep working forever? Is there a way to save more for retirement?

Guidelines and Portfolios

As mentioned above, how can you know if you are spending at the right level? There are a number of "rules of thumb." One is the four percent rule - a rule of thumb used to determine the amount of funds to withdraw from a retirement account each year. This rule seeks to provide a steady stream of funds to the retiree, while also keeping an account balance that allows funds to be withdrawn for a number of years. Simply put, if you plan on spending $50,000 a year in retirement, you will need (according to this rule) $1,250,000 (50,000/.04).

More on the advantages and disadvantages of this in a future article. However, one has to be careful pulling 4% indiscriminately out each year. I would side on spending less than 4% to be conservative.

Bond Laddering

One also might consider a bond fund or bond laddering. There are a number of good resources for developing a portfolio of bonds to provide you with the income that you need in retirement. I personally like what Fidelity Investments offers in this space. Click here for the basics on how to build a bond ladder.

In short laddering seeks to avoid reinvestment risk by not reinvesting a large portion of assets in an unfavorable interest rate environment. Each "rung" of the ladder represents a specific bond with a specific maturity rate and yield.

Creating a stream of income with a bond ladder

Source: Fidelity

Get Ready for Retirement

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Source: MCERA

To expand on what was mentioned at the beginning of the article, there are a few basics for those not quite at retirement:

  • Remember the value of compounding - save as much as you can as early as you can.
  • Always spend less than you make (some of my mom's best advice)
  • If you use credit cards, pay them off every month. No exceptions.
  • Make sure your investments work hard for you.
  • Put as much as you can into investments automatically each month.

In retirement, there are a number of lifestyle changes that you might be able to make, but they take more effort:

  • Budget. We budgeted for the first several years of our marriage. We started to budget again when we retired. Determine what your expenses are - what's fixed, what's variable and adjust accordingly.
  • Income Strategy. In conjunction with creating a budget, you will need to determine what your income will be and where your spending money will come from. When you enter retirement, your spending money will come from various sources instead of a paycheck. Part time job, social security, pension, investment income are all potential sources. More on this in the next section below.
  • Downsize. We have lived in big houses and small houses. There are several advantages to live in a small house. It's less costly to heat and cool. Taxes are most likely less. It's easier to maintain. The catch - let's get real here - it might not be something that people will drive by and envy. Isn't that why most of us live in a big house - to show others how successful we are?
  • Pick the best state. More on this later, but where you retire makes a big difference in cost and enjoyment.
  • Medical. This is one of the biggest expenses and you really need health insurance. Unfortunately, good insurance is expensive. Shop around. Analyze the risk of over and under insuring. Use generic prescriptions whenever possible.
  • Walk. We all need the exercise, so walk rather than drive. It will save gas.
  • Fewer cars. Do you need two or more cars in retirement? If not, sell one. Cut your insurance and maintenance costs in half.
  • Keep that car. Keep that car longer. Who are you trying to impress with a new, expensive car every couple of years?
  • Clothes. Have nice looking clothes, but don't go overboard. You are not going to the office anymore. Shop secondhand.
  • Communication. Apparently, everyone else stopped landline phone service years ago. Cut it. Shop for the mobile phone plan that you need and keep those phones longer.
  • Travel. With visiting over 85 countries in my life, I'm all for traveling as much as possible. There are ways to see the same things everyone else does for a fraction of the costs - shop airline specials, book hotels that are safe and clean but not expensive. Why pay top dollar for a fancy reception counter and a pool. If you vacation right, you won't be spending much time at the hotel anyway.
  • Food. Eat at home more and cut back on eating out. Drink less booze. If you smoke, stop. It's better for your health and wallet.
  • Shop. Shop around for the best prices. Buy what you need. Determine what is a need vs. a want.

Post-job/Retirement Perspectives

What follows below is a brief discussion on the softer issues of retirement.

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Retirement – in all its variations – can be a challenging part of life. There is newfound freedom of time but one might feel financially constrained as a regular paycheck is not being received. Many find it difficult to change their life patterns moving from 30 years-plus of working in an office in a structured environment to one of more freedom and with less personal interaction.

While you need to manage your finances, estimate your spending and your income, there are softer concepts that people sometimes don’t consider.

Behavioral and emotional aspects of retirement should be considered. This includes areas such as personal development, activities, mental health, and interpersonal relationships.

Personal Development

You most likely learned and had personal development courses during your professional career. Why stop when the job does? In a post-job environment, it is even more important to find meaning in what you do (or in many cases, to start to find meaning). Now that you have more time to learn, it is a great time to acquire new skills. You can learn about completely new areas and experience new things.

For instance, I just volunteered on a goat farm for a period of time. We learned so much about farm life and gleaned new skills including animal feeding, proper stall cleaning methodologies, medication and other special care needs, field raking, hay moving, tractor work, goat milking, egg gathering and candling, making animal dairy products, and how to make soap.

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Source: Columbia

How about being able to volunteer in Israel for two months, really getting to know people from different cultures? Experiencing thousands of years of history?

Would we have had time to do that during our "real" job? No way. However, I can tell you though that these experiences are some of the best in my life as far as being personally rewarding and meaningful. How many of us can truly say that about our paying jobs?

There are so many things that you can learn outside of your profession – master a new language, start a business based on a hobby, take courses at the local university, travel. Consider what you are passionate about and execute a plan to what spending more time in that activity would be like.



As many of you know, we have traveled extensively throughout the world – more than 90 countries and counting. In our post-job world, we are finding that we are super busy building our new website business, blogging, vlogging, and traveling. We routinely will work until 2-3 a.m. as we are so excited about what we are doing. Our traveling now consists of much longer trips helping people around the world with our skills and foundational insight. We are meeting tons of new people and experiencing life outside of the office – awesome.

Traveling takes planning. Traveling on a budget takes a lot of planning. Fortunately, we have had 15 years-plus of traveling worldwide on a budget. Having the Internet is the key – it’s probably more important to me than running water – in order to keep up with the markets and Seeking Alpha readership.

Working in Retirement

No one says that your post-job life can’t also include a different career. Do you want to stay in your same field or try something new? For me, it’s a mix – stay with the investment side of my brain with Seeking Alpha and my other investment activities. However, I’m also venturing out into writing non-finance articles and books, participating in work programs, worldwide disaster relief, etc.

Consider what type of work you would want to try. Define why you want to continue to work – money, authority, feelings of worth, status, etc. Determine if you want to work on a consultant basis, full time, or part time. Another great area to consider is volunteering.


Volunteering is a great thing. Many people don’t like the overused term of "giving back." However, that's exactly how I feel about volunteering – you are giving back – with your skills, strengths, and talents for, in many cases, people that have fallen on hard times due to poor choices or due to other social-economic issues. Maybe your skills can be leveraged to help an organization. I find it very rewarding and very humbling. Things that I take for granted – food, shelter, safety, etc. – are not givens for many people, even in the US.

Mental Health

Attitude is everything. You know this. You have probably said it. After you retire, there is a lot more time to think – sometimes that is not a good thing. We spend a lot of life before retirement being busy, staying busy, telling people how busy we are – it’s almost a badge of honor these days. Post-job life gives one time to evaluate the past – the good and the bad that you have done or left undone. While it's healthy to be introspective some of the time, there's a place for keeping a positive attitude to contribute to your happiness. Letting go of negative feelings and grudges are important, just as important as it is to lose weight, get proper sleep, exercise, eliminate tobacco use, and reduce your alcohol intake.


Retirement could mean less interactive time with a wider audience. You might find that you need to get to know your spouse again as now you spend a lot more time together. All types of relationships play a larger role in your satisfaction. Are you an extrovert, an introvert? Where will you meet new people? What do you want to obtain from your relationships? How do you balance time between other activities mentioned herein and developing new relationships and kindling older relationships?

Determining what you will do in your post-job life is an important aspect - your happiness and search for meaning. Of course, health and finances will play a major part of your outlook.

Which Stocks Might Be Part Of A Retirement Portfolio?

There's a lot to be said for building a portfolio of stocks for the long haul. As you get older, your time horizon is reduced and one would tend to allocate more to lower beta stocks and "safer" investments that pay dividends. Stocks like the following should be reviewed as part of a portfolio: Johnson & Johnson (JNJ), Medtronic (MDT), Coca-Cola (KO), Colgate-Palmolive (CL), Procter & Gamble (PG), 3M (MMM), Lowe's (LOW), as well as stocks in the Internet of Things (IoT) space such as Amazon (AMZN) and Apple (AAPL).

As mentioned above, over the long term, it is difficult to beat the indexes. One might consider looking into broad-based funds such as Vanguard S&P 500 (VOO) and Total Market Index (VTI) funds. In addition, Vanguard has a Total World Stock Index Fund (VT) that contains approximately 8,000 stocks globally. Of course, Vanguard is not the only company to have these types of funds. Fidelity and others have similar types of funds. Do your research and pick the best fit for you and your investment profile.

Source: CNBC


We all might not want to retire early. Many will work until a very old age simply because they like what they do. However, for many of us, thinking about retirement keeps us going as we sludge through the day to day.

Of course, retirement is not the end of the race. Rather, retirement can be the most fruitful and best part of your life where you are able to live and do things that work would not allow you to do. Work at your financial retirement goals, save more, spend less, but don’t forget to focus on things that really matter – your relationships and your health.

With all investments, one should consider management fees, aforementioned risk tolerance, when you will need to spend the money, time to retirement, diversification, etc.

Important Announcement

I hope you liked the article above. If so, there's so much more to learn and share in readying oneself for retirement and freedom. I'm pleased to announce that I will soon be launching my own Marketplace service newsletter - Financial Freedom Insights. This new publication will provide detailed technical and fundamental analysis, retirement insights, and investment ideas. Make sure you follow me to get updates on the service launch dates. Feel free to send me a direct message to learn more.

Disclosure: I am/we are long AAPL, JNJ, AMZN.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.