3 Things You Can Learn From Early Retirees

Your retirement is something you think about with a smile and some pleasant thoughts even though it might seem like it’s light-years away. But if you get to your golden years with insufficient funds, it’s guaranteed to be a nightmare and very unpleasant! You don’t want to live through that scenario, I promise you.

If you're having difficulty saving enough money for retirement, take a lesson from those who have been there. Here's what you can learn from early retirees.

Saving up enough money over a 45-year career to maintain your lifestyle in retirement is pretty challenging. But there’s a lot to be learned from the people who have managed to hit their savings goals well before that point, people who then retire early. You can learn a lot even if you haven’t been bitten by the early-retirement bug. That’s why it’s important to concentrate and learn about these three things you can learn from early retirees when you think that your retirement is at hand. But before you find out the answers…

Where Will the Money Come from to Support You in Retirement?

The big question that everyone asks themselves when they think about retirement is “Where will the money come from when I stop working?” How will you pay your bills and enjoy all of the things you want to do when you are retired? If you retire after the age of 62, then you are going to be eligible for Social Security, albeit at a lower amount then the maximum unless you wait until FRA (Full retirement Age), but nevertheless, it’s some predictable income. Hopefully, you have also saved for retirement and even have alternate streams of income to make life as a retiree really work well for you.

But Do You Have Enough $$$$$$$$?

One well-known plan to have enough money in retirement is to have alternate streams of income that I and others have written about frequently. Of course, the more money that comes in, the better off you will be. But there are other big ways to cope with your saving for and in retirement.

Adding more ways to the mix will make you even more ready to enjoy life as a “former worker”. But what about the early retirees, the F.I.R.E. crowd that is such a hot topic today? Well, even they can teach you and add something to your planning process by learning how they do it.

The Big Three

Americans on average spend 70% of their money on housing, transportation, and food (not including income taxes). They are the big three. In some parts of the country like New York and the rest of the Northeast, the percentage spent on housing, transportation, and food can be even higher. That may leave you feeling pretty defeated before you even start thinking about retirement and saving for it. But it may be that the answer is right under your nose.

It’s called “downsizing” or “cutting back”. If you can spend less on these expenses while and before you are retired, then you can bank and save that money for retirement. That may mean that you have to consider moving to a smaller home or an apartment, walk to work or take public transportation instead of driving, or cook at home more or exclusively rather that spend on eating out or ordering in as frequently as you do now. You can realistically increase your savings rate by 25% or even more when you do. To do this, do you have to get creative? Maybe, but there are some guidelines you can follow.

1. Housing

Are you part of the one-third of Americans who overpay for housing? One of the primary ways to save money for and in retirement is to downsize your living space and live where you actually use the space and not waste your money when you don’t!

Those who are overpaying can easily save money when they start looking for a place that meets their standard measure of affordability: 30% or less of their pretax income is a good guideline. If you make $60,000 a year, then you can set $1,667 a month as your maximum housing expense per month and so on. But to really make progress on your savings goals, you’ll want to limit it as much as possible. The more you cut out, the more you can save.

If you can find a place that allows you to spend 25% (or less), like $1,250 a month of your pre-tax income on housing, you can literally save over $5,000 a year just on that one category! Your savings account and your future retirement self will both thank you later on.

Even someone like billionaire Warren Buffet keeps his housing costs microscopically low. Buffett spends a modest $6,300 a month on housing of his projected $63 million a year income, that’s 0.001%!

2. Transportation

After housing, transportation is the next-biggest household expense, according to data from the U.S. Bureau of Labor Statistics. We seem too obsessed with cars and if you just look at the media advertising spent on it, you can easily see that. I often wonder why “luxury” cars are so prevalent since after you own them for five minutes, they decrease in value and by the time they are a few years old, you are already thinking about something newer, bigger, and better. It is an obsession in the umpteenth degree! And, they cost a fortune!

It’s not surprising then that Americans borrowed more money last year to pay for their cars than to pay for college!

Having a reliable car is important, but you don’t have to commit to paying $500 to $600 a month for the next six years to get one. There are lots of alternatives to spending that kind of dough such as buying smaller cars, used cars, or using all kinds of alternative methods of transportation that are way cheaper.

Look for something that is affordable in your budget, and not buy or lease just because it’s something flashy. It’s transportation and while you are in the saving mode you need to…SAVE!

When shopping for your next car, make sure you can either buy used and pay cash up front or pay off the auto loan in three to four years at the very most. Shop around for the best loan rates and make sure you are getting every discount available. Oh, and by the way, here’s an excellent reason to always keep your credit rating at its peak! It can and will save you big bucks on any loans, especially a car loan.

3. Food

Reports and studies show that eating out accounts for 43% of the annual food expenditures for typical families on average. And that’s a huge and obvious area where you can save some cash.

It’s an area that is easy to target, depending on your social life.

Cutting back on “miscellaneous” grocery expenses such as premade meals and snacks like Hot Pockets, Lean Cuisines, and Doritos come immediately to mind. There are also many, many other things you might also consider which are your very own specific money-wasting unnecessary weaknesses. Add them to your list.

As referred to earlier, dining out and ordering in are two massive places to save. You certainly don’t have to be a social recluse, just tamper it down a little, so if you dine out twice a week, cut it in half. And when you do go out, use these methods to save.

If you always order cocktails, skip them and save big money. Typically, even during “happy hour”, you’ll be spending way more that you would spend by buying even a bottle or a six-pack and drinking in front of your TV. All of the money you don’t spend can be saved!

Final Thoughts

I don’t want to oversimplify this topic, but it is really a no-brainer. We all have the ability to live on less. It does not necessarily damage your quality of life, just look around and you can easily see that you often overspend and over-indulge. You still may not actually be totally satisfied after you do.

This is especially true of things like your home which you don’t see most of the time unless you are already retired, like your car, which almost all of the time is parked or garaged someplace, and food which you enjoy and then have to find more of it soon afterwards all over again. Is that just too plain simple to understand?

What do you overspend on regularly that you could be put towards your retirement plan? Why are you delaying it and when will you do it? What time have you spent planning for retirement and is it a plan that will work?


  1. Jo Anna

    Thanks Gary, for your helpful ideas that focus on the big three expenses. It’s a good reminder that most of us spend very little time at home when we’re busy at work. We can certainly choose to live in pleasant areas that don’t cost big bucks, in comfortable homes or apartments that aren’t too big to finance, insure and heat/cool.

    When doing home cooking, we can ensure that we eat healthy and economically, as we decide the ingredients of our meals. Takeaways and processed foods carry financial and health costs, and so should be minimized.

  2. Holly

    My hubby quit smoking 5 weeks ago, so that definitely freed up extra monthly cash, and of course will improve his health.

    I’ve given up alcohol for 30 days and possibly even longer, I’ll see how it goes, so there’s some extra savings there too, less wine to buy. But I’m not giving up chocolate!!

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