How to Retire

I wanted to retire by 40, but I ended up retiring at 35

Originally, my retirement goal was to quit the rat race and retire by 40. I was in my early 30s at the time and retiring by 40 seemed like a good number. A beautiful, round figure to aim for.

But as I started reading more about retirement, personal finance and financial independence, I quickly realized that I might be able to retire even sooner, like maybe in my mid-30s! And, that's precisely what I did.

It still seems like a dream to me sometimes, but I retired early at the ripe old age of 35.

Today, I am living a life of pure freedom and my wife and I are having a great time as early retirees. No more full-time job just to maintain an annual income. No more 8-hour days of doing anything other than what we choose to do with our time (hello photography!).

Our net worth in 2017: $890,000

How did my wife and I pull this off?

Our six steps to retire by 40

While we followed a simple program, it wasn’t easy or quick at times. But once we began prioritizing early retirement, things got simpler. Here’s what we did:

  1. Sold our cars and donated old clothes, tools and general clutter.
  2. I quit my day job after ten years of service and took a work-from-home position.
  3. Maxed out our retirement plans.
  4. Budgeted our monthly expenses.
  5. Maintained a frugal living by saving energy and income whenever possible.
  6. Set “target retirement by the age of 40” as a long-term goal and focused on it.

We also sold both of our homes and bought an Airstream travel trailer that we live in and use to travel the country. It's a super freeing lifestyle and we are able to manage our personal finance in the best way possible.

Also, if we ever want or need to make money fast, we have the flexibility to make it happen!

Early retirement and financial independence are alluring concepts for most people. From getting to travel the world to starting your own business, it gives you the power to make bold life choices.

But how do you retire by 40?

How do you carefully plan and save money for financial independence?

I planned to retire by 40 and actually managed to do it by 35!

In this article, I’ll cover everything about early retirement and financial independence to help you retire by 40!

Use the links below to jump to a specific section:

Let’s get started.

What’s Early Retirement?

Retirement means different things to different people.


For some, it might be traveling the world, while for others, it might mean spending quality time with loved ones.

However, retirement isn't just about "not working".

It’s about deciding what you do with your life outside the limits of a regular job.

Here’s some advice:

Don’t let society dictate what your retirement "should be"—it’s entirely up to you.

If you want to retire well before the average retirement age, you can do it!

While early retirement has its challenges, you don’t have to be a genius to retire comfortably! Just being a little flexible with your lifestyle alone can make things easier for you.

How To Retire At 40 In Three Simple Steps

Here’s a step-by-step guide on how to retire early by the age of 40:

Step 1: Identify Why You Want To Retire Early

The truth is, early retirement isn’t for everyone. While it’s possible for most of us, it takes a lot of guts and requires you to be sufficiently motivated.  

The first step is to figure out why you want to retire early.

Do you want to retire early just because you hate your job?

Then, early retirement isn’t a smart choice for you, and that’s okay.


Because you’ll probably find yourself wasting time doing nothing!

Instead, it’s better to maintain the income from that job while considering other options, like a sabbatical or pursuing another career.

You might also want to retire early because you already have a solid plan to support your family, and that’s okay too.  

The key is to know if you’re really up for early retirement.

And if you are, what age works for you?

While you can retire early whenever you want to, 40 is an ideal retirement age for two simple reasons:

  • It’s halfway between the prime years of your life (20–60) according to average life expectancy statistics.
  • You’ll also have gained relevant life and work experience to pursue other interests post-retirement.

Step 2: Determine How You Want To Retire

The next step is to decide how you want to retire.

There are two ways you can go about early retirement—either you fully retire or semi-retire.

Here’s a closer look at both options to help you decide what’s right for you:

Full-Time Retirement

Most people refer to full-time retirement (career retirement) when talking about early retirement.

Once you retire, you stop working for regular income and live entirely off of your savings and other avenues.

While full-retirement gives you complete freedom to do whatever you want, you need to save tons of money upfront to retire comfortably.

If you’re looking to fully retire by 40, here are two investment strategies that can help you achieve your savings goal:

1. Rental Property Investing

Rental property investment is a form of real estate investment where you hold a property and rent it out or even sell it after the value of the property increases. This applies to both residential and commercial properties.


Why is this a good strategy?

One of the biggest benefits of rental property investment is the steady passive income you’ll be getting from your tenants. You can also write-off certain rental expenses from your tax returns like:

  • Real estate taxes
  • Maintenance expenses
  • Mortgage interest
  • Casualty loss expenses (due to loss or damage to property)

Additionally, if the value of the property appreciates over time, you can sell it later for more than what you paid for it.

Quick Tip: Use real estate management software like Avail to streamline the rental process efficiently!

Small toy house with magnifying glass in foreground

2. Passive Exchange Traded Fund (ETF) Investing

An exchange-traded fund (ETF) is an investment fund that’s traded on the stock market, just like regular stocks. However, an ETF is a large collection of different securities like stocks, bonds and commodities.

Passive ETF investing is an ETF investment strategy where you don’t frequently trade on the market— saving you the trouble of actively monitoring everything on a daily basis!

Why is it a good strategy?

As you invest in a diverse investment portfolio (stocks, bonds and commodities), you won’t suffer significant losses if the price of one of those securities falls. This allows you to build a steady amount of savings for retirement without too much risk.

Additionally, passive ETFs also have low management costs as they aren’t frequently traded on the stock market.


Remember, your retirement is entirely up to you.

So why not think of semi-retirement as an alternative to full-retirement?

If you need extra income or just something to keep you engaged after retiring, semi-retirement is the right choice. It can even allow you to lead a digital nomad lifestyle where you work flexible hours and from various locations via the internet.

While you can always work from the comfort of your home, being a digital nomad gives you the freedom to move between cities or countries while you work. And if you want to travel while working, it’s best to start with countries like Thailand, Indonesia or Vietnam.


Because they have low living expenses! And while working from a cheap location, you can work for clients from richer countries like the US to make more money.

Here are some strategies to help you achieve semi-retirement:

  • Work in the gig economy
  • Rent out an Airbnb
  • Rent out your car

Step 3: Determine How Much Money You Need To Retire By 40 Your Way

So how much money do you need to retire early?

The answer is: it depends on your ideal lifestyle. We covered some of this above but here are a few more things to consider:

Piggy bank

Think about how much money you need to comfortably live for a year.

If it’s $50,000, a good rule-of-thumb is to multiply that by 25 to see how much you’ll need to save to comfortably retire for 25 years ($1.25M). And if your goal is to retire by 40, you’ll need more than the median household income because of the extended retirement period.

This will give you a good savings rate to aim for to achieve your retirement goal while also considering any future recurring expenses.

Additionally, you could use the 4% withdrawal rate to know how much you should withdraw post-retirement.

What's the 4% withdrawal rate?

It suggests withdrawing 4% from your portfolio for the first year of your retirement and then withdrawing the same amount (adjusted for inflation) for each following year. Click here to learn more about the 4% withdrawal rate rule.

How To Start Saving To Retire By 40

The key to early retirement is knowing that high income is not a recipe for instant success. Chances are, when you earn more money, lifestyle inflation can crop up and you could spend more if you aren’t careful.

What matters is how you control your living expenses.

However, this doesn’t mean that you have to lead a minimalist lifestyle; you only need sensible saving habits.

And how do you do that?

Retirement Accounts And Plans

While you can spend wisely, you can also start saving money with 401(k) contributions and investment accounts like IRAs (Individual Retirement Accounts). Remember, the earlier you start saving, the quicker you can achieve your retirement goal. Like pension plans, these accounts give you a steady source of income when you’re no longer working.

Quick Tip: Most early retirees prefer Roth individual retirement accounts as it gives them after-tax income post-retirement. However, the best savings account for you largely depends on your financial situation.

Eliminating Debt

A key element for early retirement success is eliminating debt, whether it's from a student loan or from your credit cards.

Here are some smart ways to chip away at large debts:

  • Pay off the debt with the highest interest rate first.
  • Pay those loans for which you can’t get a repayment period extension.
  • Don’t take new loans until you have paid off all the current ones.

Here are two additional tips to help you save for early retirement: Carefully consider what sacrifices you make to retire early. You should NOT sacrifice whatever makes you happy, like spending on restaurants or regular wardrobe upgrades, to achieve early retirement.

Person looking through clothing rack

My advice for you is to optimize your finances to the point where personal happiness isn’t sacrificed.

Start by figuring out what makes you truly happy and understanding that it’s okay to spend money on those things. This helps you spend your income meaningfully, in a way that doesn’t feel like a “sacrifice”, but still helps you achieve early retirement.

Just make sure you’re not going overboard when spending money on “fun” things, be it for a single movie ticket or for dining out.

Use a retirement income calculator

Unsure about how much you should save for early retirement?

Use a retirement income calculator to help you determine the right amount quickly!

There are tons of online retirement income calculators that give you an estimate of how much annual income you’ll need to live comfortably after retiring. Simply add your current living expenses and you’ll get an estimate of the money you’ll need for a comfortable retirement.

Click here to use Vanguard’s retirement income calculator.

You can also use retirement nest egg calculators to get a better idea of how much you should save and invest for early retirement. Click here to use Vanguard’s retirement nest egg calculator.

Interested in creating more savings today?

Check out these 100 ways to save more money to help you achieve your retirement goal.

The Pros And Cons Of Retiring Early

Before you jump on the early retirement bandwagon, it’s crucial to analyze its pros and cons carefully.

To help you out, here’s a quick glance at the pros and cons of retiring early:


  • It frees up time for you to invest in families and relationships.
  • You can travel the world (even if you’re only semi-retiring).
  • You won’t have to deal with work commutes.
  • You can enjoy a healthier and simpler life.
  • You can pursue exciting careers and hobbies without worrying about income.
  • You’ll learn better wealth management and saving habits—which can help you live comfortably.
  • You can avail tax benefits offered by your retirement plan.


  • You won’t get any Medicare benefits
    You’ll have to pay for your own health insurance as you’re only eligible for Medicare benefits when you reach 65 years of age. It’s a good idea to invest in health insurance plans (including long-term care plans) that can cover you before you turn eligible for Medicare.  
  • Lower Social Security benefits

The normal retirement age for receiving full Social Security benefits is 67 years of age for people born after 1960. So the earlier you start taking Social Security benefits, the lower your benefits will be.

  • You may find it challenging to cope with sudden financial needs

Your early retirement plan was carried out by carefully estimating how much you’ll spend each year. But what do you do when an emergency pops up?

Do you reduce your spending? Or do you go back to work?  

Trying either of those options can be difficult when you’ve been retired and used to a particular lifestyle. My advice for you is to be a calculated risk-taker the moment you start planning for early retirement.

Why You Should Aim For Financial Independence (FI) Even If You Don’t Plan To Retire Early

Once you make the smart decision to manage your money and retire early (or at the very least, achieve financial independence), your life changes almost instantly.

You no longer focus on "stuff".

You realize what true happiness is all about and how an optimistic attitude will help you achieve your goals quickly.  

But what if you love your job (or the annual income it provides) and have no interest in early retirement?

While there's nothing wrong with that, there are several reasons why FI is important even for people who don’t plan to retire by 40 (or any age under 65):

  • Your organization might shrivel up and dissolve, relocate or otherwise stop doing business in its current capacity.
  • You may want a flexible working life.
  • You might have a family emergency, requiring months of time away from the office.
  • Your next boss might totally suck, prompting you to contemplate slamming your head against a brick wall just for the few extra “workman’s comp” days off.
  • You may no longer enjoy what you’re doing now and want to look for other work opportunities.

Planning and getting yourself financially prepared for the future is one of the wisest moves that people can make. You could even approach a certified financial planner like Personal Capital that provides wealth management and other financial services, to help you out.

So, why become FI even if you love your job and want to work forever?

Because financial independence provides you with the freedom and flexibility to do anything you want.

Additional Resources

Here are some additional resources (articles and books on early retirement) we love, to help you on your early retirement journey:

Start Your Early Retirement Journey Today!

While early retirement can be daunting, you can easily achieve it with some smart lifestyle choices. And if you are ready to put a stop to your days of working for a living, welcome to the movement!

Once you have figured out how to save and invest, early retirement is a breeze. Use the methods and tips I covered in the article to know how you should plan for your retirement!