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6 secrets of early retirees

Savers who follow this advice can be well-positioned to make early retirement a reality.

By MSN Money Partner Oct 24, 2011 11:30AM

This post comes from Catey Hill at partner site SmartMoney.

 

SmartMoney on MSN MoneyThere are some people who want to work well into their 70s. Then, there are the rest of us. Those of us who can't wait to get rid of the boss lady, hit the golf course and just plain chill out for a few decades -- maybe with a smattering of part-time or volunteer work and some new hobbies thrown in. If you're in this camp, a new study reveals how you can make it happen.

 

The Transamerica Center for Retirement Studies released a study showing what those who realistically plan to retire before age 65 are doing to reach their goals. "These aren't trust fund babies," says Catherine Collinson, president of the center. "These are everyday people with extraordinary habits." Post continues after video.

Below are the defining success factors of these soon-to-be "early retirees." They are more likely than the average person to:

  • Save for retirement outside of just their workplace plan. Sixty-nine percent of early retirees do this vs. 60% of those who plan to retire after 65 and 49% of those who say they'll never retire. (How much will your 401k provide? Try MSN Money's calculator.)
  • Defer a high percentage of their salary into a retirement plan. Early retirees defer a median of 10% vs. 6% for those who plan to retire after 65 or don't plan to retire.
  • Start saving at a younger age. The median age early retirees begin saving is 25 vs. 30 for those who will retire after 65 and 31 for those who never plan to retire.
  • Have a thought-out retirement savings strategy. Seventy-one percent of early retirees have either a written plan (16%) or a non-written plan (55%), while just over half of those who plan to retire after 65 do and just one-third of those who will never retire do.
  • Be very involved in managing and monitoring their retirement accounts. A total of 71% of early retirees say they are very involved vs. 58% of those who will retire after 65 and just 45% of those who say they will never retire.
  • Have saved the same amount or more since the recession began. Seventy-one percent of early retirees are doing this compared with 61% of those who will retire after 65 and just over half of those who never plan to retire.

More on SmartMoney and MSN Money:

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29Comments
mMha5D4i
Oct 25, 2011 11:36AM
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One thing that was left out......live below your means. All these factors worked for me, I retired at age 50.
road.rep
Nov 3, 2011 1:23PM
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Most of the people young enough to use this advice are not reading it. Most of those reading this are too old for this advice to make a difference. Sad but true.
Jason
Nov 3, 2011 2:34PM
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This article didnt include the most important step to being able to retire early: DONT HAVE KIDS

cookster79
Nov 3, 2011 1:44PM
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wow this article says nothing!
fran stevens
Nov 3, 2011 2:45PM
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Who in the world writes this stuff?  No wonder the world is so messed. Writing this article is suicide for people who really work for a living or have circumstances in their lives that don't allow a so-called savings or nest egg.  Why don't you interview people that really know how to live and spend within their means trying to raise moral, ethical, and upstanding adults one day?  Raising children to value others and learning no to be selfish is more important.  Retire? Now how in the world would a widow retire that has educated 3 daughters and sent them to college, dressed them "appropriately" and continued to always "teach"? Oh my... you need to talk to me... lol 
ljm30
Nov 3, 2011 12:48PM
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Hmmmm... save outside your workplace plan? Let's see, what should I not pay this month? Gas bill or electric bill? Then I can take THAT $ and stash it away for retirement! Great plan! (where do they find these financial gurus, anyway?)
Someone
Nov 3, 2011 2:20PM
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 How to retire in one step:

(1) Quit working

wotsup
Nov 3, 2011 1:07PM
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Number 1 Tip!.....Have lots and lots of money!! Eye-rolling
timothy kelly
Nov 3, 2011 3:25PM
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Seems to the that one of the biggest problems we are having is that there are to many people looking for jobs that don't exist.  I would think that the government would be encouraging people to retire and retire early.  Not the other way.  And if I was 30 working part time, I would rather pay more SS, have those older workers out of the market and work full time.
Steven Rockafellow
Nov 3, 2011 3:04PM
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On the above screen to this story there is a link that says savings retirement calculator: am I saving enough for retirement the interest is preset to 8% on the money that what you save where can someone find this kind of interest because I have never seen any one with that high of interest ever for retirement savings.  Or am I missing something ?
heyfred300
Nov 3, 2011 2:07PM
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I think being involved in the management of your money is mandatory if, like me, you've never worked where there was a pension, and never had a high income. I saved starting with my first job out of grad school at 25. I "bought and held" and never accumulated enough of an IRA to feel I would be comfortable, but then the market crashed and everything went on sale. Because I had the power, I put everything I could in a stock that went to $2 for no reason (Ford), and then sold it at $17, making my IRA very, very happy. Since I was already paying for my own health insurance, I went ahead and retired. There are still bargains created regularly in the market, but its all short-term now, so you must be involved and know the restrictions your IRA custodian puts on turn-over in your account. At some point this volatility will ease and opportunity diminish. You have to be careful, but my 4 and 6 year old boys are so happy to have daddy at home, taking them places across the country, letting them "help" working on a couple of antique sports cars, that the mild risk was well worth it.
upperdoper
Oct 25, 2011 8:03PM
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Disappointed If I live below my means I be living a life in squalor. I don't have great means to live below my means. Disappointed
notoldyet
Nov 3, 2011 2:44PM
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Who is this lady?  Save the same or more during the recession??  I am living out of my savings because of this recession.  It's a spiro downhill into retirement.  I will retire when my savings runs out.

grga1
Nov 3, 2011 1:36PM
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mMha5D4i, just out of curiosity, were you in the non-union private sector with only 401k as a source for your retirement (no pensions etc.)?
sho_tym
Dec 29, 2011 3:34PM
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While I agree that these type of one size fits all recommendations aren't for everyone, I personally can't get enough of them.  My wife and I are 29 and 30 years old respectively, and have been following these ideals since we were in our early 20's.  The author is simply conveying tendencies of a specific group of people that plan on retiring early.

 

I know it sucks out there for a lot of people, and I hope the economy gets better so my friends and family that are struggling can get back on the horse after losing their homes, retirement incomes, etc...  Just because you're blessed enough to be able to institute these ideals in your life, doesn't mean you're guilty of anything.  Just the same, because you cannot doesn't either.  All the best to those of you falling on hard times.  I hope your life becomes everything you want it to be...

 

I also agree that the author is sexy.  : )

Tad Sagendorf (TadS)
Nov 3, 2011 3:24PM
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Steven if you looked at the long term market average, at least a few years ago, it was around 8%. I am guessing that's what it's looking at. Really the key to that is diversify, and hope that the whole planet doesn't take a financial whack right before you hang up the boots. Which is why as you get older you should move into more and more stable investments. I mean right now I'm in a roller coaster fund. Up 35%, down 25% all in the last 6 months...It'll make you nauseous LOL, but as I get into some more advanced years I'll be moving into something safer. I have put in $25 a week, and have been since I was in my early 20's. It won't be enough alone, but it'll be a nice supplement to my wife's government deal, and our other assets.
Seasoned CFP
Nov 3, 2011 3:20PM
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Seriously?  Who is this so-called "expert"?  

Earnings on cash accounts are not subject to capital gains.  Cash equivalent vehicles (e.g., CDs, savings accounts, most money markets) generate interest.  Cash equivalents do not appreciate in value as do equities.  As such, interest earnings are subject to ordinary income taxation, not the more preferential capital gains treatment.   That said, the real rate of return (after taxes and inflation) on cash equivalents is generally negative.

And not paying off the mortgage in retirement?  Depends on the mortgage rate, current/future income tax bracket, the risk premium, standard deviation and return of alternative investments, risk tolerance, liquidity of other assets, longevity and projected income/expenses in retirement -- to name just a few variables.

While a few suggestions she made had merit (e.g., one shouldn't panic and sell all equity positions since most likely the funds are not needed today), this sort of "advice" is extremely dangerous. If she were a registered representative with regulatory oversight, she'd lose her license over this misinformation.  Unfortunately, there are no consequences or accountability for incompetent pundits. 
where is the love
Dec 23, 2011 1:04PM
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@ Mike60634: the blame might not be on the writer. She may have received an assignment to write about methods of preparing for retirement, then given a word limit. The heading is unlikely her own. That comes from the copyeditors, or the web editor, and is generally designed as an attention-getter. Writers/reporters may suggest a headline, but they are not the last people to handle the material and the company lives for screaming gut-response, which works. Which is why we all read it. Go easy on the poor writers. They are usually underpaid and competing hard.
toyota3
Nov 3, 2011 12:36PM
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I also retired at 50...

THANK YOU PENSION...

Mike60634
Nov 3, 2011 4:10PM
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Why are the titles for these re-hashed articles so misleading Six SECRETS of early retirees. Save outside of a retirement plan, save in a retirement plan.  Really, these are actual secrets. If you are going to retire without a big inheritance or a pension plan you need to have saved up some money.  They actually pay this woman for writing this stuff.
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