Want to Retire Early? It’s Not About Making More Money

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Like happiness, retirement readiness doesn’t have all that much to do with how much you earn. It’s more about what you do with what you have.

Studies have shown that the extremely rich are no happier than the poor Maasai herdsmen of East Africa; rich nations like the U.S., Britain and Germany score lower than developing nations like Columbia and El Salvador in happiness tests. With money, it seems, come big expectations that often go unmet.

(MORE: News Flash: Long Lives Require More Retirement Savings)

Similarly, a survey from Transamerica Center for Retirement Studies found that pay had little bearing on early retirement planning. In the survey, one-in-five workers expected to retire by age 65 and this group represented a broad cross section of the population. From the report:

“The secret of future early retirees’ success is not necessarily born out of privilege or ultra-affluence. They are more likely to be everyday people. Demographically speaking:

  • 52% have a college degree.
  • 49% report annual household income less than $100,000.”

Put another way, roughly half who expect to retire early are no smarter or richer than many Americans, who as a group are woefully unprepared to call it quits and increasingly plan to work longer in order to make the math work.

Are these early retiree hopefuls deluding themselves? Not necessarily. Their confidence springs from the specific steps they are taking to reach their goals. From the report:

“The defining success factors for future early retirees are that they are more likely to:

  • Be offered a 401(k) plan and/or defined benefit plan by their employer.
  • Start saving for retirement at a young age (25).
  • Defer a high rate (10%) of their salary into their 401(k).
  • Save for retirement outside of work.
  • Be involved in managing their retirement accounts.
  • Be saving the same or more since the recession.”

They have a plan. They are following through. How much they earn is practically irrelevant, assuming they keep their job and have no catastrophic expenses. What matters is sticking to the plan.

To have an even better shot at retiring early these hopefuls could improve in certain areas. Less than half had calculated a savings goal or projected Social Security income. Find your numbers on calculators here and here.

(MORE: Save for Retirement or Pay Tuition? Most Parents Are Making the Wrong Choice)

Only a third understood the basics of asset allocation. Subtract your age from 110. That is the percentage of savings you should have in stocks. Just 29% had a back up plan if forced to retire ahead of schedule. Your plan might include things like disability insurance or downsizing your home.

In happiness and in retirement, it’s all about embracing what you have – not what you wished you had.

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