I want to retire early. What steps will get me there in 10 years?

If you want to retire early, you’re following a well-blazed trail of people looking to quit the rat race and live life on their own terms. While it may not be the easiest goal, retiring early is a real possibility, as the acolytes of the FIRE movement — Financial Independence, Retire Early — have shown.

But if you aim to do it in 10 years, you’ll need to make early retirement a top priority. You also may want to hire a financial advisor to help craft your plan.

Here are the steps to take if you want to retire in the next decade and what to watch out for.

How to retire early: 7 steps to get there in a decade

If you want to set yourself up for retirement in a decade, you need motivation above all. Given the difficulty of this task, you have to make it a priority, and that priority has to shape how you live, how you spend and how you invest. In sum, retiring early must permeate every financial aspect of your life if your goal is to achieve it in the short period of a decade. You’re going to need this relentless focus if you’re going to prioritize the tough decisions that will get you there.

Your target: Build up a big enough nest egg that you can sustain yourself indefinitely without the need to work or at least without the need to work on projects that you’re uninterested in. To achieve that, you’ll need to focus on a few important financial areas:

• Income
• Spending
• Investing

Those are your key levers to achieve your goal, and you’ll need to laser-focus your efforts on them. In the short term, your income and spending will be the biggest drivers of your wealth gains. But in the long term, you can make much more money from the money you’ve invested. The sooner you get started building a nest egg, the sooner you can get that money compounding for you.

To start out, you don’t need to estimate how much you’ll need to retire. You need to get started doing the most important things that build your wealth today. And anything that could derail your motivation — such as a big audacious wealth goal — can be left until later. You’re going to have plenty of time later to fine-tune how much you’ll need to make your retirement dreams a reality.

Need a financial advisor to get your wealth on track?

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1. Start building your wealth today

Time is your biggest ally when it comes to building wealth, and that’s why it’s important to start literally today, if retiring in just a decade is your goal. Go open an account at one of the best brokers for investing because that’s what you’re going to need to achieve your goal. While the best high-yield savings accounts are fine for an emergency fund and other money that you need ready access to, you’re going to need the turbocharged power of a brokerage account.

After you’ve opened an account, connect it to your bank account and move some money there, regardless of the amount. You can get this entire process done in 30 minutes or less. Your brokerage account will be the place that houses most of your wealth for your goal.

2. Max out your income

Let’s get the obvious out of the way: Earning a higher income is going to help drive your wealth. But it’s going to be important to stretch that income further if you can. Take the promotion, do the extra overtime, set up the side hustle or establish passive income — whatever it takes to boost your take-home pay.

If you’re living on what you make now, then any extra income can go straight to your investments, allowing you to build wealth faster. And that’s really the secret here: This incremental income increase can quickly boost your overall savings rate.

It’s going to be much easier to find an extra $20,000 a year to earn than it will be to cut an extra $20,000 a year from your spending. And if you are cutting costs to minimum levels, you won’t have a real possibility of trimming a further $20,000 anyway.

3. Pare your expenses to the bone

Savers need to live below their means, whereas early retirees need to live well below their means. Some super-savers target socking away between 60 and 80 percent of their after-tax income. There really isn’t a savings goal that’s too ambitious unless it’s getting in the way of your health. And the more you earn, the higher your savings rate can be, if you keep your expenses in check.

Super-savers need to examine every area of their life, but it’s important to remember that the largest expenses are going to create the greatest opportunities. Cutting big expenses such as housing, a car or transportation, travel and insurance will get you furthest. But don’t underestimate the cost of little luxuries like eating at restaurants, where you can easily spend four or five times what you could for a comparable meal at home. If you need the little luxuries, then put yourself on a reward schedule and dole them out infrequently to celebrate sticking to your budgeting goals.

4. Work in the city, live anywhere else

One of the best consequences of the move to working from home is the potential to earn city wages but live in a low-cost location. This can save you tens of thousands of dollars due to the much cheaper cost of living outside the big urban areas. Given the lower cost of suburban and rural areas, buying a home is also much more affordable, so you can further build equity in your own property instead of paying elevated rent in the city.

Of course, you’ll want to consider the potential costs of a remote work lifestyle, including income that you could otherwise have made in the city, perhaps due to a foregone promotion. Even if city costs are high, wages are also high, and if you can increase your wages there, it may still make sense to earn more in the city while keeping your other expenses there in check.

You get bonus points if you move to a state with no income tax, which may cut your taxes 5 to 10 percent. (Here are the states without an income tax.) You can really stretch your dollars by moving to a rural or smaller town in these states, benefiting from taxes and costs.

Even if you don’t make this move during your working life, doing so in retirement will dramatically extend any budget. You don’t want to face urban costs if you’re not making an urban salary.

5. Invest in high-return assets

The biggest driver of your assets over a longer period is your investments, so you need to invest in high-return assets if you want to retire in just a decade. And the more you shovel into good investments early, the higher your wealth will likely be a decade down the road. Yes, you need a bank account for day-to-day spending and an emergency fund, but all of your investable capital needs to be earmarked for the turbocharged returns available in the stock market.

What are good investments? Legendary investor Warren Buffett has long recommended buying a fund based on the S&P 500 index, a collection of America’s best companies. This diversified basket of stocks has returned about 10 percent annually over time, and you don’t need investment expertise to own it. You buy and hold, invest more and keep holding.

But early retirees may also want to take advantage of dividend funds, since they pay out regular income, potentially allowing you to avoid tapping into your capital. The best dividend funds have annual increases in their payouts, growing your income each year just for holding on. 

Investing in stocks has other advantages, too. You won’t owe taxes on your unrealized capital gains until you sell, allowing you to defer taxes for a long time. Of course, you will owe tax on any income such as dividends from your investments. 

6. Skip the retirement accounts (mostly)

If you’re trying to retire in the next decade, you may want to avoid most tax-advantaged retirement accounts such as 401(k) plans and traditional IRAs. That assumes your retirement date is before age 59 ½, the age at which you can tap most retirement accounts penalty-free. Still, it can make sense to contribute to a Roth IRA, which provides you with a few extra benefits.

With a Roth IRA, you can deposit money after-tax and avoid taxes on your gains inside the account. And, importantly, you can access your contributions — but not your earnings on those contributions — at any time without tax or penalty. So you could use a Roth IRA to help you amass tax-free retirement gains and subsequently withdraw your contribution before age 59 ½ if you need to. Your earnings can still compound in the account and be withdrawn tax-free later.

7. Find a financial advisor to keep you on track

A financial advisor can be a great resource for helping you achieve your financial goals, whether that’s early retirement or a more traditional retirement. A good financial advisor has seen it all and can navigate the ins and outs of the issues you’ll encounter in retirement. Importantly, a good advisor can keep you on track when the going gets tough — for example, during bear markets. 

A financial advisor can also help you shape an affordable retirement based on your needs. That can include getting your budget and expenses in alignment so that your wealth will last you. Bankrate’s financial advisor matching tool can match you with advisors in minutes.

Bottom line

Retiring early is a dream for many, and it’s a real possibility if they’re willing to make this goal a priority and restructure their lives accordingly. But it’s important to understand that you’ll need to maintain your motivation over an extended period to successfully achieve this ambitious goal.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.