Many Australians caught in the hustle and bustle of full-time work, dream of the possibility of taking early retirement. Imagine spending their days traveling or enjoying time with family, or doing nothing much at all.
There’s even a name for it these days…it’s called FIRE.
𝐓𝐡𝐞 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐈𝐧𝐝𝐞𝐩𝐞𝐧𝐝𝐞𝐧𝐜𝐞, 𝐑𝐞𝐭𝐢𝐫𝐞 𝐄𝐚𝐫𝐥𝐲 (𝐅𝐈𝐑𝐄) movement is prompting more and more people to question exactly what it takes to retire early.
Yet without winning the lotto or suddenly inheriting a fortune, how possible is it to structure your finances so you never have to work again?
This might surprise you, but according to the Australian Bureau of Statistics, the average Australian retirement age is just 55.4 years, which makes it seem that early retirement is somewhat the norm for Australians.
So, how plausible is it to stop working sooner rather than later?
The answer depends on the type of retirement you dream of, where you are hoping to live, and whether you have children or other dependents you need to support.
It’s also more achievable if you can structure your life so you are still earning at least some money, albeit from a hobby or something you love doing and would do anyway.
𝐓𝐡𝐞𝐀𝐬𝐬𝐨𝐜𝐢𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐒𝐮𝐩𝐞𝐫𝐚𝐧𝐧𝐮𝐚𝐭𝐢𝐨𝐧 𝐅𝐮𝐧𝐝𝐬 𝐨𝐟 𝐀𝐮𝐬𝐭𝐫𝐚𝐥𝐢𝐚 (𝐀𝐒𝐅𝐀) 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐬 𝐚 𝐜𝐨𝐮𝐩𝐥𝐞 𝐫𝐞𝐪𝐮𝐢𝐫𝐞𝐬 $𝟔𝟐,𝟎𝟎𝟎 𝐚 𝐲𝐞𝐚𝐫 ($𝟔𝟒𝟎,𝟎𝟎𝟎 𝐢𝐧 𝐬𝐚𝐯𝐢𝐧𝐠𝐬), 𝐢𝐧 𝐚𝐝𝐝𝐢𝐭𝐢𝐨𝐧 𝐭𝐨 𝐨𝐰𝐧𝐢𝐧𝐠 𝐭𝐡𝐞𝐢𝐫 𝐨𝐰𝐧 𝐡𝐨𝐦𝐞, 𝐭𝐨 𝐥𝐢𝐯𝐞 𝐚 𝐜𝐨𝐦𝐟𝐨𝐫𝐭𝐚𝐛𝐥𝐞 𝐫𝐞𝐭𝐢𝐫𝐞𝐦𝐞𝐧𝐭 𝐢𝐧 𝐀𝐮𝐬𝐭𝐫𝐚𝐥𝐢𝐚.
But it can be done for less because many people are eager to retire overseas to a country like Indonesia or Thailand, spend years traveling the world on a tighter travel budget, or simply really reduce their living costs.
Against this, industry analysts estimate that for an individual to be truly financially independent, they need to be earning $50,000 a year from invested funds, in addition to owning their own home, requiring millions in retirement savings.
The key in deciding whether you can retire early depends on just how determined you are to achieve it.
You need to think through your lifestyle requirements and determine if you need a simple unit or townhouse, or whether you require a large family home; bringing down loan costs and overall expenses.
You’ll also need to ensure your retirement savings are invested in quality assets that will continue to generate a strong, consistent level of income, as well as capital growth. You cannot afford to be too conservative with your investments, in times of low interest rates.
Your financial planner can help you with this.
A good tip is to keep your options open and your skills up to date, in case you have a change of heart and decide you do want to go back into the office, even if only on a part-time basis.
While being permanently retired and free to live each day as you choose does sound wonderful, remember that it’s also healthy to have purpose and social activities, and exciting challenges in life. Happy early retirement dreaming!