In his YouTube video on how to retire early, Humphrey Yang began with a salient point: The average American retires at the age of 64, yet their life expectancy is 77. That leaves only about 13 years to enjoy retirement. Yang asked a simple but critical question: Why do we retire with so little time left to enjoy life?
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At the core, retirement comes down to money. Yang explained, “You can call it wealth, you can call it total assets, you can call it whatever you’d like, but the main point is that we need enough money or assets to basically fund the rest of our life while we’re not working.”
Understand How Much Money You’ll Need
Before you can retire early, you need a clear picture of your spending. Your annual expenses largely determine how much you need to accumulate.
Many experts recommend a 4% “safe withdrawal rate.” This means that if you have a $500,000 investment portfolio, you could spend $20,000 (4% of the total) in the first year, and then adjust that amount for inflation in subsequent years. This strategy assumes your portfolio is made up of 50% stocks and 50% bonds, according to Charles Schwab, and it’s based on historical market returns.
To determine when you can retire, Yang suggests using a retirement calculator that factors in your current income, savings and expenses. Retiring earlier generally requires increasing your annual savings rate, which often means avoiding expensive lifestyle choices and making smart investment decisions.
Yang offered four pieces of advice to help you retire as early as possible.
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1. Define Your Retirement Preferences — But Stay Flexible
Yang emphasizes that early retirement starts with clarity about your goals. Determine how much you want to be able to spend each year in retirement and the lifestyle you hope to maintain.
That could prompt you to want to work longer to ensure you have enough money to participate in activities you enjoy and that give you a sense of purpose. Or it may cause you to adjust your expectations about early retirement. Flexibility is crucial, because preferences and circumstances can change over time.
2. Avoid Lifestyle Creep
Lifestyle creep occurs when you spend more as your income grows. As Yang illustrated, increasing your savings rate has a compounding effect, allowing you to reach your retirement goals faster.
By using your growing income to invest more rather than spend more, you don’t just wind up with a larger principal balance — you also reap the benefits of compounding gains. This simple behavioral adjustment can significantly shorten the timeline to retirement.
3. Plan for Everything You Can
Early retirement isn’t just about money — it’s about life planning. For example, if you have a Roth IRA you can’t touch until age 59 1/2, then it might not make sense to plan on retiring at 40 without other sources of income. If you plan to be married and/or have children, you should also account for how adding additional people to your household might affect your spending and saving. Unexpected events like health issues, emergencies and market fluctuations can also impact your retirement plans.
4. Invest Wisely
And finally, Yang recommends tips for investing wisely. Keep investment fees as low as possible, as high fees erode returns over time. Don’t try to time the market — consistent, long-term investing usually performs better. And just as important, avoid taking on high-interest debt.
Following these four steps can help you take control of your retirement timeline so that you can maximize the years you have to enjoy life after work. As Yang stresses, it all comes down to creating a plan for saving and investing and having the discipline to stick with it.
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This article originally appeared on GOBankingRates.com: Humphrey Yang: 4 Things You Must Do if You Want To Retire Early
