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.
Thereโs even a name for it these daysโฆitโs called FIRE.
๐๐ก๐ ๐ ๐ข๐ง๐๐ง๐๐ข๐๐ฅ ๐๐ง๐๐๐ฉ๐๐ง๐๐๐ง๐๐, ๐๐๐ญ๐ข๐ซ๐ ๐๐๐ซ๐ฅ๐ฒ (๐ ๐๐๐) 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.
Itโs 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.
๐๐ก๐๐๐ฌ๐ฌ๐จ๐๐ข๐๐ญ๐ข๐จ๐ง ๐จ๐ ๐๐ฎ๐ฉ๐๐ซ๐๐ง๐ง๐ฎ๐๐ญ๐ข๐จ๐ง ๐ ๐ฎ๐ง๐๐ฌ ๐จ๐ ๐๐ฎ๐ฌ๐ญ๐ซ๐๐ฅ๐ข๐ (๐๐๐ ๐) ๐ฌ๐ฎ๐ ๐ ๐๐ฌ๐ญ๐ฌ ๐ ๐๐จ๐ฎ๐ฉ๐ฅ๐ ๐ซ๐๐ช๐ฎ๐ข๐ซ๐๐ฌ $๐๐,๐๐๐ ๐ ๐ฒ๐๐๐ซ ($๐๐๐,๐๐๐ ๐ข๐ง ๐ฌ๐๐ฏ๐ข๐ง๐ ๐ฌ), ๐ข๐ง ๐๐๐๐ข๐ญ๐ข๐จ๐ง ๐ญ๐จ ๐จ๐ฐ๐ง๐ข๐ง๐ ๐ญ๐ก๐๐ข๐ซ ๐จ๐ฐ๐ง ๐ก๐จ๐ฆ๐, ๐ญ๐จ ๐ฅ๐ข๐ฏ๐ ๐ ๐๐จ๐ฆ๐๐จ๐ซ๐ญ๐๐๐ฅ๐ ๐ซ๐๐ญ๐ข๐ซ๐๐ฆ๐๐ง๐ญ ๐ข๐ง ๐๐ฎ๐ฌ๐ญ๐ซ๐๐ฅ๐ข๐.
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.
Youโll 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 itโs also healthy to have purpose and social activities, and exciting challenges in life. Happy early retirement dreaming!