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The early retirees are by no means all rich. Edith Flowers Kilgo, 52, of Jonesboro, Ga., is a former free-lance writer and a university-press editor at Georgia State University who retired in 1994 to share her special expertise: saving money. Kilgo is publisher of the bimonthly newsletter Creative Downscaling, in which she passes on ideas gleaned from her own life-style, including the best way to purchase used cars, plus tips on buying clothes (wait for end-of-season sales) and making your own snacks. "I grew up in poverty as the daughter of sharecroppers," says Kilgo, whose husband Randal, 55, retired in 1997 after 32 years with the U.S. Postal Service. "But my parents were smart and frugal and taught me how to save money. This kind of knowledge allowed us to retire early and still be secure financially." The Kilgos are earning about 80% to 90% of their previous income.
TIMING IS IMPORTANT, AND YOU SHOULD LOOK BEFORE YOU LEAP
One of the first tricks of launching a new career is knowing when to fold the old one. "Examine if you can really afford to do this, take an honest look at your skills and abilities and hook up with a good financial planner before you run out and do something too quickly," says Sam Cotton, 52, of Arroyo Grande, Calif., who retired in 1996 from his job at Pacific Bell. Cotton wanted to retire two years earlier than he finally did. "I looked at my financial options and realized that it would not be in my best interests," he says. In his two remaining years on the job, he got a promotion from repair technician to business-marketing manager but then was told he had to relocate to San Francisco. Not wanting to leave the area he had called home for 22 years, Cotton opted for a $400,000 cash buyout. With the help of a financial planner, Cotton learned that he and his wife Stacy, 46, who earns about $55,000 a year as a nurse, not only could stay put but also had enough assets to move into a bigger home. He then gambled on a new career--as a mortgage banker working just on commission. Cotton expects to top $60,000 in earnings this year. That's what he was making when he left Pac Bell.
Another important preliminary condition for plunging into a new life is self-awareness. "Be honest with yourself," says Robert Wacker, a San Luis Obispo, Calif., financial planner who worked with Cotton. "Are you the kind of person who wants to travel to Europe after retiring, or would a trip to the lake to fish be enough?"
Then do the numbers carefully. Assuming a conservative rate of return of 7% to 8% on investments, you should plan to be able to live off 4% of your assets, says Ray Russolillo, director of personal financial services with PricewaterhouseCoopers in New York. About a year before you retire, you may want to switch some of your portfolio to more conservative investments, says Paul Westbrook, a Ridgewood, N.J., financial planner. Total up your annual personal expenses--such as rent or mortgage, utilities, food, health insurance, clothes, car, entertainment--and plan to have liquid assets--such as Treasury bills and money-market mutual funds--available to cover three years' worth of those demands, Chasnoff recommends.