The ten commandments of early retirement

The Ten Commandments Of Early Retirement

Ah, the dream of Early Retirement!  Almost all of us have that dream at some point in our lives, but few of us actually do it.  Why?  When you get into the numbers, it’s hard to retire early.  Really hard.  There’s a reason the majority of folks can’t don’t do it.

Are you one of the masses, or one of the few? If you want to retire early, follow these steps. Click To Tweet

If you’re serious about wanting to retire early, follow these Ten Commandments Of Early Retirement.  They’re built on what worked for us during our 32-year journey toward our early retirement at Age 55 (soon, very soon).  Age 55 may not be drastically “Early” by the measure of many in the blogging community, but acceptably “Early”, me thinks, when compared to the Population as a whole.  These steps put us in a position to retire earlier than most, and they’ve worked for many other Millionaires Next Door.  They’ve worked for others, and they’ll work for you.

The more of these commandments that you’re able to follow, the earlier you’ll be able to retire.  If you’re too late to retire “early”, you can still apply these commandments to retire earlier than you’d otherwise be able to.  You’ve nothing to lose but time (think on that), so review the list below and see how many you can apply in your own life.

The Ten Commandments Of Early Retirement

I.  Start Early

I know,  you’ve heard this one a hundred times.  Sorry, but you’re going to hear it at least once again. Commandment #1 – if you want to retire early, you need to start saving money early.  If you’re waking up as a 50-year-old and just now decided you’d like to retire early, go back to bed.   It ain’t gonna happen.  Retiring early takes years of diligence and patience.  I’m sorry if that’s not what you want to hear, but that’s the way it is.  Genuine “early” retirement requires the leverage of “Compounding – The Greatest Force In The Universe”.  If you missed your chance to start saving early, you’ve severely impacted your odds of an early retirement.  If you’re late to the party, remember that the only day better than yesterday Is Today, so start now.

Life happens fast, jump on it early.

II. Save 20% Or More

While traditional advice is to save 15%, that’s simply not going to cut it if you want to get out early.  At a minimum, everyone I know who has retired “early” has saved at least 20% of their income, based on personal discussions I’ve had.  Realize that the biggest two factors in when you will retire are when you started, and how much you saved.

The Biggest Two factors to FIRE are 1) When You Started and 2) How Much You Save. Click To Tweet

Everything else is rounding.

If you want an example of the impact of savings rate on your FIRE date, check out the classic post, The Shockingly Simple Math Behind Early Retirement, by the legendary Mr. Money Mustache. By looking at the chart in that article, you can easily see that saving 20% of your income will result in Financial Independence in 37 Years.  Wow, that’s a long time.  Yep.  It takes years of diligence and patience to achieve Early Retirement.

  • Don’t like 37 years?  Bump your savings up to 25%, and drop your FIRE date to 32 Years.
  • Go to 30%, and drop your timeline to 28 years.  See how that works?  Save more, retire sooner.

Yep, 20% is the minimum if you want to retire early.  Then, you have to patiently wait (and enjoy life) for 37 years.  As I said, early retirement takes years of diligence and patience.

III. Increase Your Income

The path to Early Retirement is, at its core, a simple math problem.  It it’s most basic form, it’s:

Inputs – Outputs = Savings

Yes, you all know that simple formula.  But stop and think about it for a minute, as you decide if “Early Retirement” is right for you.  If you can either “Increase The Inputs” or “Decrease The Outputs” (preferably both) you’re moving in the right direction.

The logic for emphasizing “Increasing The Inputs” is based on the mathematical reality that income is, in theory, infinite.  You can only “Decrease Outputs” to Zero (in reality, somewhat higher than that to survive), but there’s no mathematical limit to how far you can “Increase The Inputs”.

Therefore, focus on increasing the Inputs.  Crush your career.  Earn that promotion.  Work that side hustle.  Earn multiple income streams. Drive for Uber.  Maximize the inputs, and make it a high priority.

IV. Live Modestly

As Commandment III begins kicking in and you generating higher income, don’t succumb to lifestyle inflation. This demon can suck all of those extra dollars you’ve worked so hard to build, and bind you in chains that last for decades.  Don’t be tempted to buy that new car just because you got that promotion.  Buy a smaller house than you can afford.  Live a life of Stealth Wealth.  Keep your living modest, and watch your investments grow as your increasing income fuels the FIRE.

V. Invest In Stocks

Don’t worry about “the over-valued market”.  Don’t even think.  Just invest your “surplus” every month (automated, please) into a low-cost index fund in a widely diversified stock portfolio.  Think global, and maximize your diversification around the world.  Never sell, and don’t try to time the market. Target something like Vanguard’s Total World Stock Index (VTWSX), with an expense ratio of only 0.11%.  For the record, that’s the fund we established for our daughter’s investments when she started her career.  Our actions mimic our words.

Over time, stocks have historically earned the greatest return. (past performance no indication of future performance.  Smiles) , so just load up on a few high quality,  low-cost index funds, automate it, and forget it.

VI. Track Your Progress

Now that you’re well set up and dollars are starting to flow, it’s time to start tracking your progress.  Use my Free Net Worth template (save a copy to your drive to make changes) and build your first Net Worth Statement.  Read my post “How Much Fuel Is In Your Tank”, to learn how to build your Net Worth statement, and why it’s so important.  What you measure matters.  If you measure nothing else, measure your Net Worth.  Do it every Dec 31, and watch your wealth grow.

VII.  Manage Your Own Wealth

I’ve got several friends who are financial advisors, and I appreciate that there are times when it makes sense to pay a financial advisor to help in your wealth management.  However, I believe that the primary path to early retirement is paved by those who walk alone.  If you really want to retire early, you need to self-educate yourself to the point where you’re comfortable managing your personal finances.

You’re obviously a blog reader, so you’ve taken a great first step.  Continue to pursue self-education through blogs, podcasts, books and other targeted media.  There’s tons of good content available for free, you just need to make it a priority to take the time to learn.  If you’re new to the game, start with the awesome Stock Series by J.L. Collins, written to teach the basics to his daughter.  JL’s big on keeping things simple and his approach works.

Take ownership of managing your own wealth, and realize that no one cares about it more than you.

VIII.  Optimize Taxes

Ok, now we’re getting to the boring stuff.  No one likes taxes, but they are a major consideration for those attempting to retire early.  While the standard “rule of thumb” is to maximize your tax advantaged retirement accounts (IRA, Roth, TSP, etc.), think through the issues before blindly directing your paycheck into these accounts.There are implications for where you direct your money through your career, and it’s important that you’re making intentional decisions to optimize taxes.

For example, if you’re young and expect to make bigger money in a few years, maximize your Roth now while you’re in a lower tax bracket.  If you’re in your peak earning years and expect your income to decline in retirement, max out your pre-tax IRA’s, allowing you to pull the money out after retirement when you’re in a lower tax bracket.

In our case, we’re intentionally delaying our pension for a few years to “force” our W-2 income down to $0.  We’ll then use this delay to convert some of our pre-tax IRA money into a ROTH, which will be a taxable event and count as income in the years that we do the conversion.  The forced distribution of your Before-Tax IRA’s at Age 70 1/2 (Required Minimum Distribution) can be costly, and you should take steps to minimize the tax bite.

An excellent book on this topic is Dana Anspach’s Control Your Retirement Destiny, one of the best books I’ve read on retirement planning.  Dana dedicates an entire chapter to tax optimization, and it’s from her work that we’ve designed our pension delay strategy.  Thank you, Dana, for your “Best In Class” work on the topic.

IX.  Save Big $ In After-Tax Accounts

If you’re going to retire early, you have to plan to have sufficient investments in after-tax accounts to bridge you to the age at which you can access your retirement funds.  While “tax-advantaged” money typically comprises the majority of retirees portfolios, the reality is that it’s difficult to access prior to Age 59 1/2 (there are options, as noted in this post from White Coat Investor).

Do the math, and make sure you’ve “built your bridge” with a sufficient pool of after-tax funds to cover you to the point where you can access your tax advantaged accounts. Don’t be surprised if you find yourself increasing contributions to your after-tax accounts in your final few years of work to ensure it’s large enough to fund your lifestyle through your 50’s.

X. Delay Social Security

One of the risks folks need to consider when they’re approaching Early Retirement is longevity risk.  What are your contingency plans if you’re one of the lucky few who lives to Age 100?  Have you built that scenario into your retirement cash flow?

In my view, delaying Social Security is one of the best tools you can utilize against longevity risk. Not only do your payments increase 8% for every year you delay, but the inflation adjustments each year will now be based on a higher denominator.  In essence, you get two big benefits by delaying your Social Security, and both work as excellent hedges against living to 100.  There are few other tools which offer these benefits, and I’d encourage you to build in sufficient cash flow to delay your Social Security as you finalize your plans for early retirement.  The majority of people take Social Security as soon as their eligible. This writer is shaking his head in disbelief.  Take time to understand this issue, and be intentional in your decision on when to start drawing from Social Security. My wife and I won’t draw a dime until we’re Age 70.  If you’re planning on drawing it sooner, make sure you really understand the decision you’re making.


If you’re thinking about an early retirement, recognize that it takes years of diligence, patience, and strong savings to make it become a reality.  Don’t let that be an excuse for inaction.  Instead, focus on these Ten Commandments Of Early Retirement and apply as many as you can into your life.  With a focused effort and a bit of luck, perhaps you can be one of the fortunate few who is able to retire earlier than normal.

If you’re starting late, there’s also value in these 10 Commandments.  Regardless of your age, apply as many as you can, and you’ll likely retire years earlier than you otherwise would.  Sacrifice a bit now, and you’ll benefit for many years in the future.

Ultimately, it’s a math problem.  Dedicate yourself now to building your portfolio to the point where you can generate sufficient income from your investments to cover your living expenses.  Once you’ve done that, you’ve achieved Financial Independence, and an Early Retirement is yours for the taking.


PS – I realized after I completed this post that I’m not the first to write an article with this title.  After doing a Google Search, I came across this gem from Early Retirement Dude, and wanted to give him credit for having the idea before me!  It’s interesting to compare our Commandments (they’re quite different from each other), and I’d encourage you to check out his post. Apologies for copying the title, please consider my imitation as a most sincere form of flattery.


  1. This must be the season for dusting off those tablets, Fritz! 🙂 Great list! I give you credit for suggesting 20% as a starting point for how much to set aside and save. It’s incredibly hard coming out of college to save much more than that, based on my experience sharing an apartment and eating Lipton Noodles for meals.

    The 11th Commandment? XI: Stay Healthy! You won’t have much to retire to, nor will your runway be very long, if you don’t work it, baby. Gotta hit your home gym, be active, and eat healthy. Healthcare costs remain the big bogey in our early retirement equation.

    1. Hey Cubert, great point on staying healthy. Health brings many benefits, including healthcare costs and your ability to truly do all that you want to do in your retirement! Great addition to the discussion, thanks for stopping by!

  2. Fritz – This is all great advice!

    The one thing I would add is marry the right spouse. If your spouse is a spender and you’re a saver, you’re screwed.

    I got lucky and married well. 🙂

    1. Mr FF, you’re SPOT ON!! There’s no doubt that “the right spouse” will improve your life in many, many regards. I got lucky as well, and married a woman who is better than I deserve. She’s a wonderful woman, and we see eye to eye on all of the important stuff. Our lives are better for it, without a doubt, and I’m thankful. Great point, looks like I’ll have to expand this to at least 12 Commandments….

  3. Hi there. Thanks for the mention!

    Yeah, as you allude to in your closing I’m the original author of the Ten Commandments…and in fact, even Moses plagiarized me. My position is therefore that I’m due a big slice of royalties from every sale of the Bible that’s ever occurred, but it’s proven difficult to sue the authors of Exodus and Deuteronomy for infringement. I remain hopeful.

    Silliness aside, I like that your take on the rules is different from mine. I wish more bloggers would chime in with their own perspectives. This lifestyle we’re in is indeed totally different for everybody.

    Yer pal…

    Early Retirement Dude

    1. Oh My Gosh, who IS this guy? Dude, you’re HILARIOUS! I’m still LOL (co-workers probably think me insane as I sit here and chuckle at my monitor….)

      Thanks for a great laugh this morning. Good luck with that lawsuit. If you win, the $$ would be huge, but I think you’d have a higher price to pay at the Pearly Gates. Careful who you challenge, you may win the battle, but HE always wins the war….smiles.

  4. One thing we were not very good at was optimizing our taxes – so I love that you included that here. We were “good” – but we could have been “great” at it if we took more time and moved some money/deductions around 🙂 My husband just turned 59, so we will definitely need to look at Social Security and whether to delay payments or not. It’s hard to turn down the money that is coming to you, but if we really don’t need it then – delaying makes so much more sense. It’s not a part of our plan to take it early – but our plan is in its early stages too.

  5. My mom is considering social security withdrawals currently. She is 63 and my dad is 75. He started drawing at age 70 and has worked a longer career then her (higher SS payments). We are going to sit down and figure out what her survivor benefits to her would be (we hope he lives another 25 years, but it does factor into the equation). I have been pushing for her to delay taking payments and she has done so for the first year, but now I am not sure, particularly since my dad is already drawing them. It is quite complicated as discussed here by the Social Security folks.

    I will let you know if I ever figure it out. Couldn’t agree any more with the rest of the commandments….I would put stay healthy as an 11th one. Health care is a real cost and the best way to hedge against that cost is living a healthy life from age 30 and on.

      1. I agree delaying SS to 70 is great against longevity risk. But it isn’t an automatic decision for everybody. People need to assess the breakeven point before deciding to delay. In the past, collecting early before 65 was based on the breakeven at age 78. From 65 to 70, it may turns out your breakeven point is higher and could be around 82-84? People may need to consider their odds of living beyond mid 80s or wanting to leave higher SS benefit to spouse as the reason for delay, not just that they will collect forever more starting at 70.

        1. Great point, Martin. Certainly, if one has health issues and expects to die early, it’d be best to start SS as early as possible. Like almost everything in personal finance, decisions are 100% dependent on your situation and objectives. Thanks for weighing in!

  6. I never saved a fix percentage, but looking back it averaged maybe a third of gross income. I became FI in about 17 years. 20% is great for a traditional retirement but I would recommend much higher for the early retiree.

  7. Great list, Fritz! As others have mentioned staying healthy is another big one. Staying physically healthy, by staying active and eating well, but also mentally and emotionally healthy by continuing to learn and engage with others and having some fun!

  8. Thanks for posting those commandments. I agree with all of them. For me, starting down this path at an early age helped. The longer that you are able to apply these commandments, the better your financial situation will be.

  9. Haha – when I read the title I thought of ERD’s as well! Great minds think alike…even if they think differently. 🙂 I have quite of few of these covered but the taxes are a major pain in the ass. I have read and listened to enough to know I don’t want to think about that right now. I am taking advantage of all the pre tax accounts I can, as well as Roth IRA, and the brokerage but thinking about drawdown plans makes me limp in the brain. Thankfully I have people like you and all those that FI before me to walk me through it when I am ready!!

    1. I don’t think taxes are something you have to think about too seriously until you’re approaching FIRE. Until then, you’re smart to take advantage of the pre-tax and the Roth. Just make sure you’re spreading your money around in different tax buckets, and start looking at the detail when you’re ~3-5 years out. The community is amazing in it’s generosity, I love how we all learn from and support each other.

  10. I liked your basic 10 commandments, and definitely agree that being healthy should be added to the list. So many people in my generation missed the memo to start early, while time is still on their side. I look around and wonder if they will still think in 10 years that the extra $50/week in alcohol was better than the 401k deposit they didn’t make…

  11. Agree with em’ all!!

    Regarding SS, big ERN also showed us how it can increase your SWR by as much as 0.4% by having a future income stream(s) that’s a solid percentage of your portfolio when you retire. That 0.3-0.4% can mean a very nice extended foreign vacation every year and much more potentially. As you say, where else can you get that 8% annual increase in an annuity.
    I am amazed how so many retirees even in early 50’s dismiss the potential future FIREpower of SS.

    1. A 0.4% increase in SWR is HUGE (and Big ERN is incredible, isn’t he?). I share your amazement at how many folks underestimate the impact of making poor choices regarding the start date of Social Security. Hopefully we all can influence that in time….

      1. Oh, thanks for the mention! Yes, exactly, Social Security is the one annuity I really like: COLA and the “actuarially fair” calculations make this a good way to hack your retirement finances without any adverse selection penalties. Delaying until 70 is probably the way to go to insure against longevity.

  12. This is a good list of guiding principles of a financial life. There are others out there that resonate with each individual on there path to financial independence.

    One of my personal favorites is ” Just because you can, doesn’t mean you should”

    An application is just because you can buy a bigger house or a new car, doesn’t mean you should.

    1. Jim, I’m honored to have you on my site, and you are (of course!) correct. I decided to keep my commandments more general, and I did think about getting into the “before Age 59 1/2” options as I wrote the post but decided to simplify.

      Your article “How To Get To Your Money Before Age 59 1/2” is an excellent resource for those wanting to get into the specifics. In our case, we’ll actually be accessing our 401(k) at Age 55, but it’s a pure tax play (too detailed to get into here, but outlined in our Withdrawal Strategy post).

      Thanks for contributing to the conversation, and clarifying the details on pre-Age 59 1/2 options!

  13. I believe that the primary path to early retirement is paved by those who walk alone

    I’m totally with you on this Fritz. I read the most disturbing article the other day suggesting that couples with money stress can “fix” their issues by getting a second mortgage. Surprise, surprise, it was written by a lending agency with convenient links to their mortgage products.

    Anyone who wants to be successful in this world has to be dedicated to learning and being responsible for their own success – financial and otherwise.

    Great list!

    1. It’s concerning to think about how many folks are misled into doing something not in their best interest. Thanks for pointing out a horrendous example. ESI just did a “Locker Room” piece that also supports this commandment. Lots of examples – no one cares about your money more than you! Thanks for stopping by!

  14. Great post! When you decide to take your social security benefits can make or break your retirement. We saw 3 financial advisors before we retired 2 years ago. None of them really wanted to help plan or explain why or when to take SS. Mike Pipers book “Social Security made Simple” really helped us make that decision… my husband will not pull his benefits until age 70… but he will file restricted access and pull a spousal at age 66….

  15. All excellent tips, and LOVE your honesty about starting early. We’re mentoring a young family friend right now about this very stuff. And re-reading The Millionaire Next Door for fun. Man, PF nerds are weird. 🙂

  16. Totally agree with the notion of starting early to let compounding work for your bottom line. Wish I’d paid more attention to that in my 20s. But even when you start late, saving something is better than saving nothing.

    Did you ever read the wonderful story about Benjamin Franklin and his legacy to Boston and Philly? He left each city what amounted to about $4,400 in today’s currency. There were a couple strings attached, though. Nobody could touch the money for 100 years, and then only half. The amount in Boston grew to $400,000. Philly wasn’t as astute financially, and only grew their pot to $100,000.

    The cities couldn’t tap the remaining half for another hundred years. When the time was up (sometime in the 1990s), Boston had a pot of money worth well over $4 million dollars, while Philly came in at more than $2 million.

    Now, I don’t expect to live for 200 years…but who knows?? The fastest-growing age group, from what I’ve read, is the 100+ cohort. So if I start now, I still have 40 years to let compounding work for me. (That should fund some wild parties at the Senior Center)!

    1. GREAT story about Benjamin Franklin. I had never heard that before, but it definitely shows the power of compounding, and the impact of the return rate on investment growth! I’m planning on making it to 100, I’ll look for you at the party.

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