Friday, November 05, 2010

Retiring Early is Still Possible

One result of the recent recession are the numerous articles about the end of retirements we've come to expect. With battered 401K plans, underfunded pensions, and low savings accounts, it is understandable that many may consider retirement a lost dream. Therefore, I found it refreshing to read Early Retirement Is Still an Option for Many by Joe Mont.

The trap some fall into is to work towards an absolute savings amount, or trying to support an expensive lifestyle. This can result in never being able to retire. According to the article, the secret to retiring early is to decide on a satisfying lifestyle, determine the cost, and save enough to support it with a 3% withdrawal rate. This can help avoid approaching a 5% withdrawal rate which would likely be unsustainable.

Overall, I agree with the article's premise that early retirement is still achievable. Specifically, I can attest the benefit of targeting for a 3% withdrawal rate in early retirement. While maintaining our pre-retirement lifestyle, we were able to take early retirement in October 2007 at a withdrawal rate of 2.5%. The decline in the stock market increased our withdrawal rate to 4% by March 2009, which was still manageable short term. The combination of a recovering stock market and paying off our mortgage has enabled us to currently get back to under a 3% withdrawal which should enable us to maintain our early retirement.

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial, saving or retirement advice. Please consult a professional advisor.

Copyright © 2010 Achievement Catalyst, LLC

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