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6 simple things you can do to reach early retirement faster, according to the authors of 'Die Broke'

Submitted by Tech Insider on June 2, 2021 - 3:23pm

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If you want to leave traditional work sooner rather than later, a classic personal finance book written 20 years ago offers several pieces of advice. 

"Die Broke," written by Stephen M. Pollan and Mark Levine in 1997, came long before the FIRE movement was around on the internet. But, their principles of using all of your money while you're living and leaving full-time work to focus on your own interests and passions follow a similar aim — and a similar process. 

by Stephen M. Pollan and Mark Levine (small)

In the book, the pair outlines several considerations for anyone who wants to leave traditional, full-time work early.

1. Don't think of a certain age as the finish line for growing wealth

In conventional retirement planning, the finish line is a hard number, generally age 65. But for those who want to retire early, it takes a different philosophy to not only reach that level sooner, but also to maintain your lifestyle once you've left full-time work. 

Pollan and Levine write that if you want to retire early, there shouldn't be a finish line to growing wealth. "Just as the path is up in the air, so is your timeline. The only finish point you should worry about anymore is death," they write. This means you should think about building wealth as a lifelong project — you don't have to work forever, but your ability to grow your wealth doesn't stop the moment you retire.

Many retirees are actually able to grow their wealth even after they've left work full time, writes Bill Perkins in his book "Die With Zero." While having a specific number or age in mind can help to quantify your goal, it's worth remembering that the goal can always change, and you can always earn more, even after leaving full-time work.  

2. Focus on growing your money instead of reaching a certain number 

While there have always been a number of possible calculations for a FIRE number — or the amount you need to reach in order to leave work early — Pollan and Levine write that it should be about more than just a number. 

Ultimately, you should retire or leave traditional work when you feel you're ready, they suggest, and instead focus on growing your money as much as you can. "This isn't a race. No one is measuring you," they write. "Instead you've got a fairly simple goal: grow your wealth as much as you can, as quickly as you can, within your own comfort range." 

Without a hard number, you can focus on doing what you can with what you have, instead of reaching towards a goal that might be unattainable. 

3. Don't follow the typical rules for those retiring at 65

While the typical rules tell soon-to-be retirees that they can be more conservative with investments as they get older, that might not be the case if you're retiring early. 

In fact, as an early retiree, you might need to take on a bit more risk to make your money last longer. "You should stick primarily with equity investments far longer than those traditional charts and formulas say," they write. "Don't take your foot off the gas too soon." 

While it may involve more risk, staying invested longer can help grow your money more than it could if invested more conservatively.

4. Keep an emergency fund

Whether you're retiring at 65 or 35, an emergency fund is an essential part of everyone's financial lives. Not only can it help you cover surprise expenses, but it can also help buffer you as you stay invested more vigorously and for longer. "If you're going to keep the pedal to the metal, you'll need to have some backup," Pollan and Levine write. 

Pollan recommends having six months' worth of expenses to stay on track, which is consistent with what other experts suggest — financial planners recommend saving three to six months of expenses in cash to stay in front of any surprise expenses. 

5. Have the right insurance

If you plan to follow Pollan and Levine's philosophy of dying with nothing and spending all your money in your lifetime, a large life insurance policy likely isn't what you need. 

Instead, they suggest anyone working towards early retirement focus on spending their money on disability insurance, a type of coverage that can help pick up costs and bills and cover lost income if you become disabled or unable to work. Then, not only will you be able to live comfortably, but you also won't need to worry about how you'll make ends meet.

While life insurance can be an important part of a financial plan, oftentimes disability insurance is overlooked. "Almost all my clients start off having more life insurance and less disability insurance than they need," Pollan writes. 

6. Save as much as you can in the right accounts

Even if you're planning to retire early, retirement accounts are still some of the best places to save.

In addition to benefits like employer matches while you're working, accounts like a 401(k) can help you save more and take advantage of tax benefits. Other accounts, like IRAs, can also help you save more with tax advantages. 

Financial experts advise saving at least up to your employer's match in a 401(k), if available. Then, you can start contributing to an IRA up to the maximum amount each year. 

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