Can You Really Retire Early in Your 40s?

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Look, I totally get how the dream of retiring in your 40s is basically the financial equivalent of your band playing an arenas. Everyone wants it. Most people talk about it. But, very few actually pull it off, and even fewer do it without some surprises waiting on the other side.

But here’s the thing, retiring in your 40s CAN BE possible! However, it’s just not as simple as adding up your 401(k) balance and deciding you’ve crossed some sort of finish line. There are a lot of moving parts, and if you miss one, you could find yourself in a situation that’s less “living the dream” and more “anxiously watching your bank account drain.”

Let’s see if we can break this down and what actually goes into figuring this out.

First, Get Brutally Honest About Your Financial Picture

Before you start planning your retirement party, you need to sit down and take a hard and unfiltered look at where you actually stand. Not where you think you stand. Where you actually stand.

A lot of peeps may assume that because they have hit that million dollars in assets, they made it! They’re golden. But, remember, assets and net worth are two very different things, and confusing them is one of the most common mistakes people make when thinking about early retirement.

So, let’s say you own a home worth $350,000, maybe you have a rental property, a SEP IRA, and a 401(k). On paper, you might feel like you’re sitting pretty. But check it out. If you’ve still got $140,000 left on your mortgage and another $65,000 in business debt, that totally changes the math. You’re not working with $1 million in freedom money. You’re working with $1 million in assets minus a pile of liabilities!

This isn’t meant to be discouraging. That’s not what I’m trying to do here. This is meant to be a reality check. Because the people who do retire successfully in their 40s aren’t the ones who were too optimistic about their finances. They’re the ones who were dialed in and accurate.

So before anything else, write it all down. Let’s do this! Every asset, every liability, every monthly expense. Your mortgage, your insurance, your groceries, your streaming subscriptions (yes, all of them). You need a complete picture before you can make an intelligent decision. Where do you stand, currently.

The Healthcare Question Nobody Wants to Deal With

Okay, this is the one that can catch people off guard more than almost anything else, and it deserves a full conversation. This is often the question I get asked most often about retiring early.

When you retire before age 65, you wouldn’t have access to Medicare. That means you’re on your own for health insurance, and health insurance in the U.S. is not cheap. There is a lot to think about too. Depending on your situation and the level of coverage you need, you could be looking as much as $20,000 to $30,000 per year for a solid plan, especially if you’re going for a Gold or Platinum tier on the marketplace.

If you or anyone in your household has ongoing health concerns, you’re going to want more robust coverage. This really isn’t the place to cut corners. A catastrophic health event with inadequate insurance can wipe out years of careful saving in a very short time.

Now, if you’re self-employed or running a business, there is some relief available. You can deduct a portion of your health insurance premiums, which takes some of that sting out. But it’s still a significant expense that needs to be built into your retirement math from day one, not treated as an afterthought.

The bottom line here is that if you’re planning to retire in your 40s, go look up actual plan costs on your state’s marketplace right now. Plug those numbers into your budget. If the math still works, great. If it doesn’t, you’ve just saved yourself from a very unpleasant surprise.

FILE vs. FIRE: Maybe You Don’t Have to Go All In

Here’s where things can get interesting, and honestly where the conversation has evolved a lot in recent years.

FIRE, or Financial Independence, Retire Early, is the concept most people know and more widely talked about. Peeps save aggressively, hit a number, stop working entirely, live off your investments. Clean and simple in theory.

But a lot of people in the financial independence community are shifting toward something called FILE: Financial Independence, Live Early. This is the idea is that instead of cutting everything out and grinding hard until you hit a magic retirement number and then flipping a switch, you start designing a life you actually want to live now, on your own terms, with or without a paycheck.

So, what does that actually look like in practice? Well, for some people, it’s dropping to part-time hours in their current career. For others, it’s stepping away from their nine-to-five and picking up consulting work or freelance projects that keep them engaged without the burnout. Some people start a small business around something they actually enjoy.

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