The Best Retirement Strategy for 50-year Olds
If you still want to retire early and don’t have at least $1M in your retirement account by age 50, you have to change your thinking about what it means to retire while also taking a different path to retirement.
What is the best way to retire early if you’re 50 and don’t have much in your 401k?
Even without a large, traditional investment portfolio, you can still retire in just five or ten years by building a side income stream. By turning a hobby or side hustle into a significant income, you can leave your employment permanently and pursue your passion at your own pace.
To RETIRE early, you will need to change a few traditional expectations. First of all, don’t expect a passive retirement. Just as it has done for every other aspect of life, the Boomer generation is already redefining what retirement looks like.
Does that mean you should expect to trade your day job at 67 for part-time cashier work or a greeter position? Of course not. While these are honorable ways to spend your time, most people, given the choice, would prefer to pursue personal passions.
Should you, then, follow the crowd and just plan to work part-time after retirement age because you don’t have enough to live on? No. Although we need to redefine retirement, we don’t need to accept other people’s realities.
The New Definition Early RETIREment
You should expect a non-traditional retirement to include the following:
- Reasons for leaving your employment
- Enthusiasm for a side business
- Time to spend on your values
- Income to cover expenses
- Re-creation of yourself
- Energy for healthy living
Notice that this version of RETIRE does not refer to investments, 401(k)s, 403(b)s, Individual Retirement Accounts, stocks, or bonds of any sort. If you find yourself in your 50s and don’t have much in the way of retirement funds, you have got to change the way you think about preparing for retirement.
You can still retire early, but you should not expect what previous generations expected or experienced: sitting around, collecting a pension and social security, perhaps traveling here and there, but never thinking about a paycheck again. So many Boomers retire from their careers and head straight to part-time employment that GenXers and even Millennials should be shaking in their career tracks.
Let’s we’ll go through each of the descriptive words in the RETIRE acronym to get a clear understand y of what your early retirement can still look like:
R Stands for Reasons for Leaving Your Current Career
The number one most important step to this non-traditional form of early retirement income involves identifying the reason or reasons you wish to leave your current career. If you don’t know why you want to retire early, then you have no business trying to do so.
Finding and keeping in mind your purpose for seeking an early retirement will provide you motivation.
Motivational Reasons to Retire Early
Some early retirement reasons offer more incentive than others to do whatever it takes to retire early. Although dealing with health concerns and injuries often force people to retire early, they don’t usually motivate many people to attempt an early retirement. Likewise, retiring early just because you can should never be your top reason. If you love what you do as a career, why leave it?
Here are 5 common reasons that motivate many people to retire early:
- You want to spend more TIME with your FAMILY
- You have a PASSION you want to pursue
- You want to GIVE more time to your FAITH
- You want to VOLUNTEER in a CAUSE
- You feel the URGE to TRAVEL and experience other CULTURES
Find your reason to retire early. Write it down. Post it where you can see it. Share it with your spouse, partner, or mentor. Set up a step-by-step plan on how to get to your early retirement. Then, report your progress on that plan weekly. Before you know it, you’ll be handing in your two-week notice.
E Stands for Enthusiasm for a Side Hustle
This new definition of retirement involves having a passion or hobby that you can turn into a side business. Some side hustles have greater income potential than others. Blogging may take a year or two to grow into a money-generating hustle, but its long-term income potential far exceeds that of walking dogs or delivering food.
Becoming a personal coach or starting a consulting business will take some time and a lot of work but can make you a much more comfortable, long-term career than house sitting or being a campground host.
While you need to remember that early retirement isn’t about the money, this new definition of early retirement requires ongoing income. This holds especially true for those of us starting late but still retiring early.
T Stands for Time to Spend on Your Values
Above all, an early retirement is about time. YOU get to choose what you spend your days doing, not just your weekends. You get to be in charge of your weekday activities, not a boss. An early retirement should give you, most of all, TIME.
You may feel like you trivialize your values by writing them down in a list, but you should do it anyway. Write down five to ten of your top values in life that guide your daily and life-long choices. If you want, you can list them from most to least important, but forcing yourself to rank them brings trivialization into play.
Common values that drive many of us include:
- Building and strengthening relationships
- Growing and understanding faith
- Experiencing and appreciating other cultures
- Making the world a better place
- Facing challenges with dignity
- Gaining and sharing knowledge
If you’re married, you and your spouse may or may not share the same values. I would expect you to share several if not all.
Regardless, choose your top values from the list or note your own. Then, ask yourself, “what would I do with this value if I had more time each day to spend on it?”
Consider how you would match your day-to-day activities to your values. If you can align your values and your daily activities, you will find yourself living in a highly fulfilling early retirement.
I Stands for Income to Cover Expenses
Besides your daily living expenses, you will need income in early retirement for your periodic expenses (e.g. travel, annual fees, replacement of your appliances and vehicle). Additionally, your meaningful early retirement will include activities that help you fulfill your drive to succeed in your personal values.
Once you have an idea of what activities you will include in your early retirement that will bring you personal satisfaction, determine what sort of financial demand they will place on you. Will they require more money than you currently have available? Will they require ongoing income or periodic income.
Make sure you have put together a budget for your time in early retirement. See our FIRE Your Budget post for ideas.
R Stands for Re-creating Yourself
I believe life is about joy. You should expect to enjoy your early retirement, whether that takes the form of recreation or re-creation.
You should already have aligned your early retirement activities with your personal values above. For many people, their values will lead them to become someone almost completely new. If you would like to re-create yourself in your early retirement, you might need to take formal or informal training and courses, practice and develop difficult skills, add new habits to your daily routines, or do someone else previously unknown to you.
The act of re-creating yourself can, in and of itself, provide excitement and satisfaction. If “meeting challenges” matches one of your values, then what greater challenge can you think of than reinventing yourself regularly.
E Stands for Energy for Healthy Living
Many of those who seek to retire early often skip over the importance of this final “E.” In fact, retiring early usually means we have fewer health concerns or impediments to pursuing physical activities.
I can confirm from my own experience that camping in the wilderness in your twenties, thirties, or even forties is a whole lot easier and more enjoyable than doing so in your fifties. So, if connecting with nature drives one of your values, then doing while still young makes a lot of sense. Of course, a 50-year old is young to an 80-year old.
Here’s the irony that those who skip over the importance of this issue miss. Many nearly work themselves to death in their 20s and 30s, working 60 hours a week at the regular job and putting in another 20 for a part-time or side gig. Many work extra hours to earn the extra money they need to save and invest in order to meet their FIRE number.
All those hours worked, those extra cups of coffee, the late nights, and lack of sleep; it all takes a toll on your health in ways you may not realize until a decade or two down the road.
Those of us working toward early retirement need to make healthy living a part of the process. Otherwise, retiring early just means more years of visiting medical offices and clinics and taking more medications.
With this new vision of what it means to RETIRE early, we can all find a fulfilling life spend pursuing our values rather than our careers because we will have created the income streams required to cover our living expenses.
What is the best retirement plan for a 50-year old?
Someone just starting to plan for retirement in their 50s has just three options. First, invest 50% to 75% of their income in index ETFs or real estate; second, build a side hustle into an ongoing passive income, such as a blog, podcast, or YouTube channel; or third, do a combination of one and two.
Can I start saving for retirement at 50?
At 50, you can still start investing for retirement, but the power of combining compound interest with time will not benefit you as it does a 20 or 30-year old. Focus on investing in dividend-paying stocks, real estate (rentals), income streams from side hustles, or a combination of all three.