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5 Alternative Ways to Retire Early

Joe Udo

For many of us, retirement is a far off dream. It's already difficult enough to pay our current bills on time, and we aren't able to contribute to our retirement funds as much as we'd like. But early retirement is a real possibility if you work for it in your 20s and 30s. Here are a few alternative paths to early retirement:

Cut expenses. Many financial planners recommend that you replace 80 percent of your income before you retire. This is good advice for the general population, but it is very difficult to achieve. The alternative model is to cut your expenses and adjust your retirement income accordingly. If you are able to live on 50 percent of your income now, you should be able to keep the same spending model in retirement. Hence, you would only need to replace 50 percent of your income instead of 80 percent.

Another great benefit to cutting your expenses by living a frugal lifestyle is that you would be able to channel the extra money into investments. Imagine investing 50 percent of your income for 20 years. It would generate a larger nest egg for your retirement or possibly enable you to retire earlier than you might have thought possible.

Early pension. Pensions are rare these days, but there are still some jobs that offer early pensions. Police officers, firefighters and military personnel are among the professions that can help you get a leg up on early retirement. You can get a partial pension after 20 years of service in many of these jobs. But these are high risk occupations with a maximum age requirement upon entry, so not everyone can take advantage of this option.

Focus on income investing. If you want to retire early, investing solely in tax-protected retirement accounts isn't going to get you there. In addition to your retirement accounts, you need to broaden your investments to generate income. Many early retirees invest in dividend stocks, rental properties, bonds and peer-to-peer lending. These investments generate income that you can use before you are 59 1/2.

Work part time. Instead of an abrupt transition from a full-time job to retirement, you can retire in phases. According to a recent Gallup poll, 70 percent of us are unhappy with our jobs. Once you have enough saved up, you can transition to part-time work in a field that is more fulfilling. Leaving your nest egg alone so it can grow while you are working part time in a job you enjoy is a great way to retire sooner without hurting your finances.

Marry well. This one is just for laughs. Well, not really. Marrying someone who could support the family on one income is a valid way to get out of the workforce. We put off having a kid until we were financially secure and that enabled me to become a stay-at-home dad. This arrangement can also work if one spouse wants to retire while the other person is interested in advancing his or her career. Personally, I think both people should work and focus on saving and investing early on in their career so early retirement for one or both spouses will be an option later on.

These are just a few ways that you can get to retirement a bit earlier than your peers. Living below your means so you can save and invest early on is essential to early retirement. Many of us ignore retirement planning when we are young, and that's a mistake. The earlier you start planning for retirement, the better chance you will have to quit the rat race early.

Joe Udo blogs at Retire By 40 where he writes about passive income, frugal living, retirement investing and the challenges of early retirement. He recently left his corporate job to be a stay at home dad and blogger and is having the time of his life.

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