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  • Writer's pictureNicholas Pihl

How to retire early without cutting back on spending

Updated: Feb 14, 2023

People in their late 50s and early 60s face an interesting situation when it comes to retirement. On one hand, many of them don't have quite enough to quit working entirely. But on the other hand, they have a long list of things they'd like to see and do while they still have good health and enough energy.

These activities might look like travel, picking up new hobbies, or simply enjoying more of life day to day without the constant interruptions of their day job.

One option is to "knuckle down and work a few more years," which gives them enough money but not the time or energy to enjoy it.

In the other situation, they have plenty of time and energy, and yet are constrained in how they enjoy this freedom due to a scarcity of money.

Ironic isn't it? And by "ironic," I mean it sucks. If only there were a way to have it all!

Good news! You really can have it all.

Retirement isn't an all-or-nothing decision anymore. In fact, there have never been more options available to people looking for better work life balance while slowly stepping back from their careers.

There are many reasons this works.

First, at this point in their careers, people typically have developed a wealth of knowledge and specialized skills, as well as an extensive network. This makes them a great fit for consulting, coaching, board positions, and contract work. This may not produce quite as much income, but it also means a lot less time on the job.

This is great news! If you want to produce great results, you no longer need to grind away for 50 hours a week! Instead, you can leverage a talent pool of younger, but inexperienced workers looking to accelerate their own development. It's a total win-win.

These younger workers bring energy, enthusiasm, and ability to dedicate massive time and focus to a project. They contribute 80% of the energy, and 20% of the knowledge. You, meanwhile, can offer 80% of the necessary knowledge, experience, and connections, while putting forth only 20% of the energy. They grow faster than they would without your guidance, and you get to have a really high impact in an increasingly limited timeframe.

By the way, this type of work tends to be a lot more fun and creative than the typical day-to-day tasks that used to consume 80% of your time. So that's a win.

The other win is that this helps you ease into retirement life. Eventually you will stop working, but rather than leap off a steep cliff into unknown waters, this path lets you meander along the shoreline and wet your feet before getting in all the way.

Another interesting dynamic for people in this phase of life is that their financial situation is driven far more by the returns on their portfolio than by their savings activity. Suppose they max out their 401(k) contributions for $27,000 annually. That's a lot of money, sure, but what if they got just 10% growth on a $500,000 account? That's $50,000.

By far, the biggest benefit of continuing to work isn't the extra money you save. Instead, it's the extra time you give your portfolio to grow. So, even if you completely stop saving, and earn just enough income to cover your basic living expenses and health insurance needs, you're far ahead of someone who retires cold turkey.

From a financial planning standpoint, this presents a quadruple benefit. That's right, quadruple.

First, each year you postpone portfolio withdrawals is another year that your portfolio can continue to grow.

Second, each year delayed is one less year of retirement that you have to fund from your investments. This becomes especially significant as you approach the age of social security, at which point you'll need even less money in your portfolio to cover your income needs. Assuming a 4% withdrawal rate, a $2000 monthly social security benefit shaves about $600,000 off your required portfolio balance. Conversely, each year prior to social security costs almost exactly what your annual living expenses are. If you spend $60,000 annually, you need to take $60,000 (after tax) from your portfolio.

Third, the more time you have before tapping your portfolio, the more aggressive you can be with your investments, and the higher return you can get on your money. For someone retiring next year, or a 50/50 blend of stocks and bonds might make sense (disclaimer: the specific details and investment mix may vary widely from one person to the next. This is a hypothetical example, not blanket advice). But if you have 5 years until you'll need that money, you can likely afford to be more aggressive. The difference between a 5% return on a 50/50 portfolio, and a 10% return on an all-stock portfolio (again, hypothetical), can be huge.

Fourth and finally, you actually have some time and flexibility to start enjoying your money. Which is what really matters.

"Well, Nicholas, this all sounds great. Now how do I actually go about implementing this?" Well, that really depends on your specific situation. Even two people with identical financial situations may differ in their preferences and in the opportunities available to them. It's a personal decision, and requires some good judgment. But hey, that's exactly the sort of decision I help people with every day.

To explore what this might look like for your personal situation, please feel free to leave me a voicemail or schedule a short introduction meeting at

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