These principles of early retirement don’t just apply to those who never want to work again.
In fact, these same principles can apply to those who may just want to work part time instead.
There’s a spectrum to early retirement, from never having to work again to working part time:
Full Retirement – where you don’t want to work again and therefore need a larger portfolio.
Partial Retirement – where you want to work part time and therefore need a small portfolio.
Side Retirement – where you want to work part time but on a passion project or business.
Geographic Arbitrage – where you move to a cheaper country in order to retire early sooner.
In this post, I talk about how long it would take for you to fully retire and partially retire early.
I also talk about starting a passion project during retirement and moving to a different place.
Finally, I discuss which option may be better for you and where to find out more information.
Full Retirement
Let’s say that you have your sight set on full early retirement – you never want to work again.
That’s great, now we need to figure out how much you would need in your portfolio to retire.
Let’s say you need £3,333 per month during retirement. That’s equivalent to £40,000 a year.
Following the 4% Rule, that means that you would need £40k x 25 = £1 million to retire early.
Now let’s say that each month you invest £1000 and that your average annual return is 10%.
As you can see in the table above, it would take you over 23 years to reach full retirement.
You’re probably thinking – that’s not bad, I can fully retire and never have to work in 23 years!
You may also be thinking – huh, I still have to work for another 23 years, that’s way too long!
Unfortunately that is the reality – unless you make more money, invest more, or require less.
What if you don’t want to fully retire, only partly? This is where partial retirement comes in.
Partial Retirement
You may be thinking – that’s great, but do I really want to work full time for the next 23 years?
I just want to work part time – how much would I need in my portfolio to cover my expenses?
As mentioned, let’s say you still need £3,333/month to live on, or in otherwards £40,000/year.
However this time, let’s say that if you work part time, you will make around £30,000 a year.
That means that you just need your portfolio to cover you for your remaining £10,000 a year.
Following the 4% Rule, that means that you’d need £10,000 x 25 = £250,000 in your portfolio.
Again, let’s assume that each month you invest £1000 and your average annual return in 10%.
As you can see in the table above, it would take you over 11 years to reach partial retirement.
In 11 years, you could go down to part time and never have to worry about a decrease in pay.
But what if dream about working in something else? Let me introduce you to side retirement.
Side Retirement
Let’s say that you’ve always wanted to become a writer, artist, actor or even an entrepreneur.
However, if you were to change careers and start something new, you’d be on a lower salary.
Like partial retirement, you would just need your portfolio to cover your remaining expenses.
Because it’s a new career, let’s say your salary will only cover £20,000/year of your expenses.
That means that you would need your portfolio to cover you for the remaining £20,000/year.
Following the 4% Rule, that means that you’d need £20,000 x 25 = £500,000 in your portfolio.
Again, let’s assume that each month you invest £1000 and your average annual return in 10%.
As you can see in the table above, it would take you over 17 years to achieve side retirement.
In 17 years, you could finally change careers without having to worry about a decrease in pay.
If you like this idea but want to reduce the length of years, you could try geographic arbitrage.
Geographic Arbitrage
In this modern digital age of remote working, you are no longer tied to your company office.
This means if you don’t have to live next to your office, you can live anywhere in the world.
That also means that you can live somewhere in the world with a much cheaper cost of living.
Therefore, your goal portfolio needs to be much less in order for you to reach full retirement.
Let’s say that back home you’d need £40,000/year – but in Mexico, you’d need £10,000/year.
As we saw in the partial retirement example, it’d take just over 11 years to reach your target portfolio.
In the UK after 11 years, you could only partially retire – but in Mexico, you could full retire!
If you have the option to work remotely from anywhere, you can move to Mexico from now.
However, if your job is not that flexible, then you would have to wait those 11 years at home.
I don’t know about you, but retiring in Mexico after another 11 years of working sounds great!
Your Idea of Retirement
What is your idea of retirement? As you can see, there are many retirement paths to choose:
- You could continue working for just over 20 years, and then fully retire in your home country.
- You might continue working for just over 10 years, and then semi retire in your home country.
- You can work for just over 15 years and change careers without ever worrying about money.
- You could work for just over 10 years, and fully retire in a country with a cheaper cost of living.
As you can see, it is all up to your vision of retirement – and how long you are willing to wait.
To find out more about these paths to retirement, check out the book Quit like a Millionaire.
The authors talk about how they were able to reach full retirement of $40,000 in just 9 years.
Are you on the path to early retirement? How is it going? Please share in the comments below.
If you have any future blog article suggestions, please let me know in the comments below!
