Want to Retire Early? Here’s How to Set Yourself Up

Early retirement isn’t just for TikTok influencers or mega-wealthy founders. If you’re a high-earning tech employee in Seattle, you might already have most of the pieces in place; you just need a knowledgeable advisor who can guide you there. 

Whether you’re hoping to spend your 50s traveling, consulting part-time, or finally launching that vintage furniture restoration side hustle, here are a few tips to make early retirement a reality.

1. Start Saving Early (Like, Yesterday)

The earlier you start saving, the more time your investments have to grow. Compound interest is a powerful concept, and investing money in the market during your 20s or 30s allows it to work its magic over the course of decades. Even if you’re already in your 40s, it’s not too late — but you may need to save more aggressively or adjust your timeline.

Think of your future self as a demanding client. They want flexibility, freedom, and financial stability. Help them out by starting now.

2. Know Your Number, Including How Much Income You’ll Need

Retirement planning is more than just saving a big pile of money. You’ll want to estimate how much income you’ll need annually, then reverse-engineer the lump sum required to generate that income, adjusted for inflation.

Some advisors use the 4% rule as a rough guide, but this doesn’t make the most sense for all scenarios (i.e., whether or not you have children or the size of your portfolio). At its core, the rule suggests you can safely withdraw 4% of your portfolio annually in retirement. So if you think you’ll need $200,000 a year, aim for a $5 million portfolio. Just remember — this is a starting point, not a guarantee, and isn’t the right plan for everyone.

3. Reality Check Your Spending Habits

One common myth: you’ll spend less in retirement. Maybe, but maybe not, especially if you retire early and plan to travel, pursue hobbies, or eat out as much as you do now. Be honest with yourself about what your lifestyle costs and how you envision living in the future.

Track your spending now. Then imagine what changes (or doesn’t) in retirement. This can make a huge difference in how much you need to save. (Check out our tips and tools for budgeting here.)

4. Use the Right Accounts at the Right Time

Not all retirement accounts are created equal, and the timing of your contributions matters. High earners can be especially strategic about what they use and when:

• Got a high-income year? Max out your pre-tax accounts like a 401(k) or traditional IRA.
• Had a low-income year due to a sabbatical or startup phase? That’s a good time to contribute to Roth accounts, since you’ll pay less in taxes today and enjoy tax-free growth later. This could be a good time to consider a Roth conversion.
• Don’t forget about HSAs. They’re triple-tax-advantaged and can help cover medical costs in early retirement.

Your advisor can help you prioritize the right mix based on your income, goals, and tax bracket. (In the meantime, here’s a good article on the basics of retirement accounts.)

5. Make Sure You Can Access Funds Without Penalties

If you retire before age 59½, you’ll want to make sure you have access to some of your money without triggering early withdrawal penalties.

For example, Roth IRAs allow you to withdraw your contributions (not earnings) at any time, penalty-free. Taxable brokerage accounts are also handy for early retirees since there are no age restrictions on withdrawals.

Your advisor can help map out a strategy for how to withdraw in the most tax-efficient way possible, especially in those first few years when you’re not yet receiving Social Security or required to take distributions from IRAs.

6. Get Smart About Withdrawal Strategies

Once you’ve stopped working, the goal shifts from saving to drawing down. A common early retirement strategy looks something like this:

• Start with your taxable brokerage account to minimize taxes and give your retirement accounts more time to grow.
  Consider doing Roth conversions in low-income years before you reach the age when Social Security or RMDs become applicable.
• Time your withdrawals to avoid jumping into higher tax brackets or triggering additional Medicare premiums later.

Required beginning date for your first RMD, straight from the IRS:

• IRAs (including SEPs and SIMPLE IRAs): April 1 of the year following the calendar year in which you reach age 73.
• 401(k), profit-sharing, 403(b), or other defined contribution plan: Generally, April 1 following the later of the calendar year in which you reach age 73, or retire (if your plan allows you to delay taking your RMD until retirement).

It’s a delicate dance, one best done with a professional who knows your full financial picture.

7. Diversify Your Investments And Revisit Your Plan Often

Early retirement requires your money to last longer. That means having the right mix of investments — stocks, bonds, maybe even alternatives — based on your time horizon and risk tolerance. Diversification helps reduce the impact of market swings on your portfolio’s longevity.

And don’t just set it and forget it. Life changes, markets shift, and tax laws evolve. Schedule regular check-ins with your advisor to make sure your plan still fits your goals.

8. Plan For Healthcare Before Medicare Kicks In

Unless you’re waiting until 65 to retire, you’ll need a plan for healthcare. COBRA can be a temporary bridge, but it’s expensive and temporary with a max of about 18 months. Health insurance from the exchange may be more affordable if your income drops significantly in retirement — another reason to manage your withdrawals carefully.

You can also look into a health-sharing plan or part-time work that offers benefits. Either way, don’t overlook this line item. Health expenses can be one of the biggest costs in retirement.

9. Think Beyond The Financials — What Will You Do All Day?

Money aside, early retirement comes with its own emotional challenges. You might miss the structure, purpose, or identity tied to your work. The first few months might feel like a vacation, but then what?

Many retirees find fulfillment in volunteering, mentoring, consulting, or starting creative projects. The happiest retirees often have something that gives them a reason to get up in the morning. According to one study from the Harvard Health Blog, feeling needed and staying socially engaged are just as important as financial preparedness.

Make space for meaning, not just money.

10. Talk To Your Financial Advisor About Retiring Early

Retiring early isn’t easy — but it is possible. You’ll need a clear plan, some flexibility, and a little creativity. Whether you’re aiming for age 55 or 45, your advisor can help you model different scenarios and stay on track as life evolves.

At Northern Lights Advisors, our clients in tech are often very interested in early retirement. If you are in this club, we’d love to have a conversation. Simply schedule a meeting today. 

Northern Lights Advisors is a fiduciary, fee-only Registered Investment Advisor (RIA) firm based in Seattle, Washington. The information in this article is not intended as tax, accounting, or legal advice. Read the full disclosure here.