Why Work Forever If You Can Retire Young?
by Larry Ferstenou

     Surveys reveal that most people would like to retire young—55 or younger—and many would choose their 30s or 40s if they could.  But can they?  Absolutely.  And so can you!  It’s going to take more than wishful thinking, however; it’s also going to take a sufficient net worth and some effective strategies.  The more money you earn, the easier it should be to retire young.  But, regardless of income, here is your guide to exiting the workforce early: spend less, save more, and invest wisely.  Sound simple enough?  Then put it into practice.  By following that simple advice you can take control of your future, retire young, and start enjoying what should be the best years of your life.  If you aren’t already well on your way, though, it’s essential that you start now.


     Perhaps you’ve heard of the “three-legged stool”.  Traditionally, retirement has been possible because of this stool.  The first leg was employer-funded pension income, the second Social Security income, and the third leg personal savings.  In the past, those three income sources provided most retirees with ample financial security.  But that won’t be the case in the future.

     Leg 1:  Employer-funded (defined-benefit) pensions have declined markedly.  In fact, according to the latest report from the Pension Benefit Guaranty Corporation (, employer-funded pension plans peaked at approximately 114,000 in 1985 and have since declined to a low of about 38,000.  Because these plans became too expensive to fund and administer, and the financial burden would increase rapidly as the baby boomers—those born between 1946 and 1964—began retiring, many employers took a pre-emptive step and switched from employer-funded plans to 401(k) plans where employees primarily fund their own pensions.

     Employers may match their workers’ contributions up to a certain limit in these plans, or they may not.  That means the pensions of most future retirees will depend on how much they contribute themselves—and few are contributing enough.  In fact, only about 42 million U.S. workers participate in a 401(k) and nearly twice that many (75 million) have no employer-sponsored plan at all.

     Leg 2:  The old stand-by, Social Security, is in financial jeopardy.  In fact, according to the Social Security Administration’s 2001 Summary Report (, the amount of money coming in (FICA taxes) will be less than the benefits being paid out by 2016.  In other words, if nothing changes, Social Security will be insolvent.  While annual discussions continue in Congress concerning how to resolve this upcoming crisis, nothing has been done to date to remedy the inevitable. 

     Leg 3:  That leaves personal savings.  If more money was being invested in IRAs and other retirement accounts, and/or in other mutual fund accounts (taxable or not), this leg wouldn’t be as much of a concern.  However, the overall savings rate in America is at Depression-era levels, and most surveys reveal that few people are saving anywhere near enough to support themselves throughout retirement.



     If the future of the three-legged stool appears grim, rest assured that it’s going to impact some more than others.  The reality for all of us is that we will not be able to count on the federal government and our employers to take care of us in retirement like they are taking care of today’s senior citizens.  So what can and should we do?  Take control.

     If you take control of your life and start planning for the future, you will spend less, save more, and invest the difference wisely.  That is your solution to retiring young.  The earlier you start taking control, the more you will save and invest and the faster your money will grow over time—to a level where working becomes optional rather than mandatory.     

How do you spend less?

     First, simplify your life.  Most people work to support their assets; the more stuff you own the harder you have to work to buy and maintain those things.  Stop trying to keep up with the Joneses and rediscover how the simple things in life—like visiting with friends, reading, walking, and spending quality time with your spouse and kids—can be as enjoyable as your latest hi-tech purchase.  Choose to live with less so that it doesn’t cost so much to live.  Pick up a couple of books at the library on simplifying your life.  And while you’re there, look at the other entertainment available at the library at no cost to you. 

     Second, when you do make purchases, go for less-expensive alternatives in food, clothes, vehicles, vacations, and housing.  Find as many free and low-cost activities as you can for entertainment.  Watch for sales, frequent the clearance racks when clothes shopping, establish spending priorities, don’t buy items if you can’t afford to pay for them with cash, research purchases and comparison shop to get the best value, and take advantage of off-peak discounts for travel/recreation, movies, dining out, and purchasing seasonal items.

How do you save more?

     This should be pretty obvious after what you just read.  Spend less and invest the difference between what you could have spent and what you actually spent.  Consider bonuses, raises, tax refunds, and gifts as “extra” money and invest them for your future.  Take advantage of your employer-sponsored retirement account—like a 401(k)—where the money is taken directly from your paycheck (before you see it so you don’t miss it) and invested in mutual funds or some other asset.  You can also ask your employer or bank to send a check or direct-deposit money from your paycheck into a non-retirement mutual fund account.  This is a “forced-savings” arrangement that can work well for people who are less-disciplined in saving and investing on their own.

How do you invest wisely?

     Over the past 76 years, the stock market has far surpassed the performance of the other two major asset classes—bonds and cash—pulling an average annual return of 10.7 percent.  Although there are no future guarantees, based on historical performance and over long periods of time, those focused on growing net worth will do significantly better in stocks than in bonds or cash.  You can easily invest via mutual funds to diversify your investments and spread out the risks.  There’s no question that the stock market has its ups and downs.  But if you want to grow net worth sufficient for retiring young, and if you plan to invest for the long-term (20 to 30 years or more), there has been no better means in the past of accomplishing that goal than the stock market. 


     Retiring young offers a lot of advantages: freedom to get up every day and do whatever you want to do, opportunity to pursue hobbies and favored activities that there aren’t enough hours in the day or week for now, unlimited time to spend with family and friends, and a perpetual vacation instead of two or three weeks a year.  If that sounds good to you, then it’s time to start focusing on retiring while you are young, healthy, and motivated to take full advantage of what early retirement has to offer.

     Most people believe they need to be rich to retire young.  They don’t.  Many people have retired in their 40s or 50s without being rich; but neither were they poor.  The net worth you are going to need will depend on the lifestyle you want to live.  And the philosophy is quite simple: if you can live on less than most people, you can probably retire earlier than most people.  If you want to retire young, spend less, save more, and invest wisely. 

     Of course, those fortunate enough to get a windfall (like an inheritance) or who will receive an employer-funded pension, will not need a net worth as high as those not having such advantages.  And there is yet another option for those who earn less or haven’t managed to save the net worth necessary to fully retire.  Part-time work during early retirement can still give you far more freedom than you have now while providing an income stream that can make retiring early possible.

     You can give yourself the choice—to retire young or to keep working—but only if you plan ahead and build the net worth sufficient to having that option in the future.  You may love your occupation now, but what about in 10, 15, or even 20 years? Enthusiasm for your job or career can change dramatically.  And with the number of layoffs we have seen by corporations in past years, whether you have a job or not in the future may not be your choice.  So take control of your life now and prepare yourself for whatever may come.  Spend less, save more, and invest wisely.  You don’t have to work forever—if you start planning today.  In fact, you can even retire young!


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© 2015