One topic that’s fun to think about is Early Retirement. The thought of retiring while you are still young enough to enjoy life is very appealing, but is it realistic in today’s uncertain world?

The first thing to consider is what you mean by retirement? Do you mean plunking down in a recliner or beach chair and doing absolutely nothing? Or do you mean being able to give up the 9-5 grind and do something more appealing with your time? Do you own a business that you can monetize or turn over your daily tasks to other employees?

The only thing you need in order to be able to retire early is a stream of residual income. There are several ways to establish a residual income, here are a few of the most common:

The traditional idea of retirement planning involves opening an individual retirement account or utilizing a pension plan or 401k at work. Once you get past the age of 59 1/2 you can begin drawing funds from these accounts without any penalties. Then when you reach age 62 you can take early retirement as far as social security is concerned. If you take it early however, the results will be a reduced monthly payout so there is a cost associated with it.

Investment Income

As people move into retirement they tend to change their investment style to include more stocks that pay regular dividends as well as bonds that pay regular interest. This allows people to take the income portion of the money out of the account without diminishing their capital. Today with incredibly low interest rates this has been a challenging way to generate significant monthly income. People seeking higher monthly payouts have been forced into lower quality bonds investments such as a Junk Bond ETF or other things such as Master Limited Partnerships or REITs that produce monthly income.

Real Estate Ownership

Real Estate investing was all the rage a few years ago but has now fallen out of favor along with housing prices. Now (after the crash) real estate investing probably makes much more sense because the key is being able to rent out the property for more than your mortgage payment. Now many people can’t qualify for a mortgage but would still like to live in a house, so there is good rental demand. In the early 2000’s people were banking on huge capital gains from owning real estate, but the key is the monthly cash flow.

Turning A Hobby Into An Income Stream

If you have a hobby that has value there is a very good chance that you can organize things in a way that would make it possible. I enjoy writing for example, so I’m building a residual income based on my writing and web site development skills. 2 months ago I decided to make a change and only build informational web sites for myself instead of building sites for clients.

Other people like to restore furniture or cars or fix up homes, all of which can provide a nice source of income.

Monetizing A Business

Small business owners have several different ways to monetize their business and turn it into an early retirement.

These include:

Selling out to a larger business or business partners
Selling out to your employees (ESOP)
Maintaining ownership and turning over responsibilities to key people.

The key for a business owner is to determine whether or not they have key people who they can trust to run a business or whether they should simply try to cash out.

To me, the key idea of retirement is freedom. There are many ways to achieve freedom, start by writing down the assets you currently have and how they can lead to a stream of residual income.