Why Everyone Should Aspire to Early Retirement

Saving as if you’ll retire by 40 is useful even if you don’t plan to retire young.

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"Plan to retire early" is the basic advice I give to anyone who's interested in financial well being. While there is more specific advice that could help you to better save for the future, saving early and often can set almost anyone on a better path to financial security. The goal of early retirement can help motivate you to make smarter financial decisions. Here are a few benefits of trying to retire early, even if you are planning to work longer:

You'll get a plan together relatively early. Most aspiring early retirees have an investment plan, because they need to know how many years they have to work until they can be financially independent. Fortunately for them, plans written when the markets are calm will also help them weather the inevitable turbulence that risky assets go through from time to time. Some people end up short changing themselves by acting emotionally whenever volatility hits the markets. It’s a better idea to come up with an investment plan you can stick with through thick and thin.

It keeps you focused on what's important. Many people believe there's some magic to amassing enough wealth to retire, but the key to building a substantial nest egg is to control how much you save and spend. Because early retirees often try to quit the rat race as early as possible, they inevitably try to save more by spending less. Even if you don't want to go to extremes, practicing frugal living will speed you along your path toward a comfortable retirement.

It limits lifestyle inflation. Getting a raise deserves celebration, but it's also extremely easy to inflate your lifestyle instead of banking the increase in income. Consider how much were you spending in your college days compared to your spending now. Early retirees are focused on the prize of retiring a soon as possible, which helps them limit lifestyle creeps.

It's a built in safety net. Aspiring early retirees will have a bigger cushion than those expecting to retire at 65. Accidents may or may not happen to you, but those without a safety net won't be able to weather even the smallest of hiccups. I cringe whenever I hear former high income families file for bankruptcy, because they should have saved so much when times were good that there's no way they would fall into trouble. Yet, this happens so often it's not news anymore. Expect some bumps along the way, and save like you won't work until 65 even if that's your plan all along.

You're nudged to better manage your investments. The earlier you amass a bit of wealth, the earlier you will start spending time figuring out how to manage the sum. Early in your career, you have more leeway to make investment mistakes because you have more human capital to make up for the losses. The later you start, the less margin there is for error. That's why saving as much as possible as early as possible works so well. There's a built in safety net when you start saving early because you can better recover from investment mistakes.

You'll think about retirement life long before you actually retire. Sometimes retirement happens without warning. Maybe there’s a sudden emergency that causes you to retire unwillingly. All of a sudden, you aren't working anymore and need to figure out how your life is going to change. Being unprepared often creates confusion, and it’s likely to be costly to try things out without a plan. An aspiring early retiree would never have this issue, because they are likely thinking about retirement every single week of their working life.

Keeping up with the Joneses will take on a more financially responsible meaning. Instead of seeing who can purchase the flashiest car, you'll be more focused on who can be the most frugal and accumulate the biggest sum. Because the goal is to retire and enjoy life, material possessions aren’t as important as having the freedom that financial independence can provide. There’s no greater luxury than not being dependent on a paycheck.

David Ning runs MoneyNing, a personal finance site that shares money moves you can make to significantly increase your chances of having a comfortable retirement. He likes to share simple changes that anyone can make, such as picking the best online savings account and figuring out whether a 0 percent balance transfer credit card makes sense.