Everyone has their own perfect time to retire. Over the past 30 years of helping clients plan their post-retirement lives, there has been one constant: everyone retires at their own pace. For some clients, such as the engineer we talked about in our earlier blog post on giving (link here), this means retiring early to follow the path he believes God’s laid out for him. What does it mean to retire early? Why do some Cooke clients choose to do so? And what are some of the ways to strategically plan your wealth to ensure a fulfilling and sustainable post-retirement life? In this blog, we’ll try to answer some of these questions. Here’s a quick outline of what we will cover:

• The top reasons why some CWM clients choose to retire early 

• How to plan expenses strategically to last for a longer retirement period

• Leveraging debt avoidance to minimize your post-retirement financial commitments

• Building passing sources of income in addition to your core expenses 

• Being clear about your lifestyle expectations and planning for the long-term

Why do some CWM clients choose to retire early? 

It’s important to emphasize here that early retirement is one of several options in front of you. With increased “health spans” (something we discussed in our recent blog - link), many CWM clients are actually choosing to work longer. As Psalm 128:2 tells us, “you shall eat the fruit of the labor of your hands; you shall be blessed and it shall be well with you.” Your professional life and the work you do are recognized by the Bible as a key aspect of your physical and spiritual well-being, as well as being a profound source of self-fulfillment. 

That being said, there are some individuals we’ve worked with who have early retirement plans that are just as fulfilling, if not more. There are three main reasons why some Cooke clients choose to retire early. These include: 

• The desire to spend time and build capacity doing something else fulfilling that they enjoy, (such as a hobby or ministry opportunity). 

• Having the material resources to retire early and comfortably.

• Forced retirement as part of company policy. 

Let’s quickly unpack each of these reasons. 

Wanting to build something new

Some Cooke clients, like our computer engineer, realized with time that God had other plans for them apart from their professional careers. Our life goals aren’t always tied to our careers. If you have a profound alternative calling - whether that’s a hobby, or something exciting like international mission work - retiring early provides you with the most valuable resource of all: the time and ability to work towards those dreams. If you retire at, say 60 or 55, you will likely have an additional 10-20 years to actively pursue these goals before life slows down. This can be a powerful motivator to retire early. 

Having enough to settle down comfortably 

Some CWM clients who do exceptionally well in the professional sphere often have enough resources on hand to settle down and retire years before others. The ability to retire early doesn’t always translate into the desire to do so, however. We’ve seen business owners and educators work well past the “typical” retirement age because work gives them a sense of purpose. 

However, and especially when there is a strong alternate calling in life (as we talked about earlier,) the material ability to retire early can play a major role in the decision to do so. When resources are plentiful, it can be easier and more viable to plan out that longer post-retirement period. 

When work isn’t an option: forced retirement 

In some cases, unfortunately, Cooke clients are forced to retire from work at a certain age, even if they personally desire to work longer. This is often part of company policy and something that’s beyond their control. In these situations, clients know that their mandated retirement age is coming up years in advance. This can be an advantage because it gives us time to carefully plan out the future, as opposed to it being a sudden decision. 

Planning out your early retirement 

Good planning is critical if you’re looking to retire early. There are a couple of factors you will need to consider:

• How many years early are you planning to retire

• What will your post-retirement expenses look like?

• How are you planning your current lifestyle expenses?

How early are you planning on retiring?

The earlier you retire, the longer you will need your finances to last. If you’re looking at a 25-year typical span, retiring 5 years early could mean that you will need 20-30 percent more money to last through those extra years. There are other factors at play here, too: when you retire early, you typically lose out on your salary, a key income source, for all those extra years. This can mean a gap of several thousand dollars (or more) in savings that you’ll need to plan out for. Furthermore, because of inflation, the earlier you retire, the less your wealth will actually be worth. You’ll need to keep these factors in mind, and how they scale, when deciding on just how early you want to retire. 

Planning your post-retirement expenses

You will continue to have significant expenses to contend with after retirement. Some of these expenses, like late-life healthcare, are unavoidable. However, there are a number of cost centers, from housing and leisure to transport that are in your control and that you can plan, well in advance. If you already own your house or your mortgage period ends before you retire, living in the same house can save you a considerable amount on a month-to-month basis. If you’re renting, it might make more sense to scale down your housing situation. This could mean moving to a smaller house or apartment or relocating to a different part of town. 

Managing your leisure expenses can also play a major role. Many CWM clients plan on traveling extensively post-retirement. This can cost a lot and the impact is often more pronounced when you retire early. It makes sense to plan out leisure expenses strategically. If you’re traveling, for instance, consider visiting less-frequented locations and activities like ecotourism instead of visiting expensive tourist hotspots or going on cruises. 

Transport is another area where you can save considerably by being strategic about expenses. While you probably have your own car, gas can turn into a major monthly cost center. Living close by to the places where your leisure activities take place can be a great help. Public transport can cut down on costs. Better still, walking is free: commuting on foot can be an integral part of your overall exercise routine. 

Being strategic about your current expenses

One of the best ways to secure your post-retirement finances is by planning out your current expenses. Are there ways that you could reduce your current expenses without a major impact on your quality of life? What’s a sustainable percent of your income that you’ll be able to save on a month-to-month basis? There’s no single answer to either of these questions. However, as a general rule of thumb, we advise clients to plan their current lifestyle expenses mindfully, with an eye on post-retirement savings. When retiring early, your savings matter that much more, and smart cuts to your current expenses could go a long way towards bridging the gap. 

Avoid debt and minimize your financial commitments

The Bible takes a clear stance on debt. Proverbs 22:7 states that “The rich rules over the poor, and the borrower is the slave of the lender.” In line with Biblical wealth management principles, we generally advise clients not to take on debt. What about repayment? Romans 13:8 has this to say: Owe no one anything except to love one another, for he who loves another has fulfilled the law. If you do have debts, it’s important to repay them before retiring early. Outstanding interest on debt can turn into a substantial monthly cost center, which can prevent you from budgeting for your other plans. We recommend avoiding taking on any new debt if you plan to retire early and be prudent and consistent about repaying existing debt. It’s a good idea to plan for and completely eliminate your debt before the day you retire. 

Building sources of passive income 

At CWM, we will work to help you build out a balanced investment portfolio across multiple instruments to deliver more consistent returns. But beyond your standard investments and your potential social security benefits, it’s a great idea to build additional sources of passive income. 

What can generate passive income for you? This answer will vary considerably from person to person, but the key lies in identifying and leveraging untapped assets. For example, if you’re planning on traveling, putting your house on AirBnB could help you cover a good chunk of your expenses with minimal effort. If you’re traveling through countries with a lower cost of living, your investment returns, benefits and passive income could even be greater than your expenses. Again, there isn’t a single “silver bullet” as far as post-retirement passive income sources are concerned. But, as a general rule, you’ll want to assess the assets you have on hand and how you can get them to work for you.  As we just covered, being debt-free can be a great boon here, as you’ll actually own your car and home, giving you greater flexibility to leverage these to generate passive income. 

Conclusion

Retiring early is one path forward for CWM clients. It isn’t always the best option, and many of our clients actually choose to postpone their retirement date. But if you have a strong drive to follow your personal interests, it can be an incredibly exciting opportunity. The key here is to plan your finances strategically, eliminate your debt, and be disciplined about expenses. Reach out to Cooke Wealth Management today. If you’re thinking about retiring early, let’s get on a consultation call to talk about planning for your post-retirement future!