Retirement can seem daunting and far off, tough to contemplate as you're focusing on the early challenges of career and family. But the road to financial independence starts with a few steps taken consistently, especially if your aim is early retirement. Members of the FIRE (financially independent, retire early) community say they're essential. These are nine steps to becoming financially independent and retiring early, according to experts.
"By far the most important step is to have a plan," says Tim Kirch, CFP, owner/adviser at Nashville Financial Planning. "Retiring early causes some additional challenges, such as health care costs and lack of access to retirement accounts. Having a plan to save, invest, and ultimately use savings to live on is critical to get started."
"The first step to achieving financial independence and early retirement is to create a budget and stick to it," says financial expert Gary Hemming of ABC Finance. "This means understanding your income and expenses, and making sure you are living within your means." Kirch concurs: "Early retirement is effectively a math problem, and most who retire early take advantage of minimizing expenses while income continues to increase."
"It is also important to save for retirement, and to do this you should aim to save at least 10-15% of your income," says Hemming.
"While financial independence is achievable with a moderate income, it is infinitely easier with significant cash flow," says Kirch. "Most people who attain this will do it a couple of different ways: Finding a high-paying career, opening up to new job opportunities (most people increase their pay more by changing employers), creating a side hustle, or starting a business."
"The single most important pre-retirement step you should take to make sure you can be financially independent in retirement is to take care of your debts as soon as possible," says Ann Martin, director of operations at Credit Donkey. "While it's a smart move to compare the interest on your debt to potential returns on your investments, debt can be burdensome in excess of its interest rate when you're on a fixed income since you have no choice but to keep paying it off. This will leave you with less money to live on, and force you to grow your investments larger or postpone retirement entirely. If you're deciding where to put extra retirement savings as you hit your 40s and 50s, eliminating debt should take precedence."
"From my experience, those who've diversified well have seen more consistent growth in their portfolios," says Dominic James Murray, CEO and independent financial advisor at Cameron James. "Being adaptable and willing to pivot your strategy based on new information or changes in the market can make a significant difference in outcomes."
"To speed up the journey towards financial independence, consider tax-efficient investment strategies, such as maximizing tax-advantaged accounts like 401(k)s and IRAs, which provide tax benefits," says Adam Garcia, CEO of The Stock Dork. "If you're in your 40s or 50s, it's crucial to take advantage of catch-up contributions in retirement accounts," says James. "This allows you to contribute more than the standard limit."
"As you approach retirement, it might be time to reassess your risk tolerance and adjust your investment strategy accordingly," says James. "This doesn't necessarily mean becoming ultra-conservative but ensuring your portfolio aligns with your current financial goals and comfort level."
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"One thing I've learned from my years in finance is that the learning never stops," says James. "Markets change, new trends emerge, and what worked yesterday might not work tomorrow. I've always encouraged a mindset of continuous learning. It's not just about staying updated; it's about being proactive, anticipating changes, and being ready to adapt. It's this mindset that has allowed many of my clients to stay ahead of the curve."
