Retiring early -- possibility or pipe dream?
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Setbacks foil best-laid plans
During those years, the Warners' adult daughter, who was living in New Orleans, came back home to live with them following Hurricane Katrina and decided to return to college.

Their homeowners insurance also jumped from $2,000 to nearly $8,000 a year following a spate of hurricanes in the South. "So even though I had budgeted enough for what I thought we needed to spend, all of a sudden our expenses went way up," Warner recalls.

Financial setbacks, of course, are a major stumbling block for any retiree. But they're especially troublesome for those who cash out early, forcing many to rein in spending, chase higher investment returns and in some cases, even re-enter the work force, says Ed Rose, a financial planner for Bayside Wealth Management in Pensacola, Fla.

"If you quit working when you're 55, for example, you've got 30 or more years to make your money last, so you'd better have plenty of assets on hand or be ready to get another job if necessary," says Rose, who manages the Warners' investment portfolio. "You can whittle your money down pretty rapidly."

Early retirement remains an attainable goal for those willing to live within their means. You should plan well in advance, prepare to make sacrifices and insulate your nest egg against life's curveballs, says Rose.

Plan to live to 90
To ensure your money lasts as long as you do, conventional wisdom holds that you should withdraw no more than 4 percent of your portfolio's value each year, leaving your underlying principal untouched, though some experts challenge this idea.

Curt Weil, a certified financial planner in Palo Alto, Calif., says you may be able to withdraw up to 6 percent each year (edging incrementally higher to account for inflation) if you put a financial safety net in place. That means setting aside two years' worth of living expenses in a money market fund or ultra short-term bond fund.

"When the market is down, you pull temporarily from your reserve fund and if the downturn lasts more than two years you start pulling from your portfolio again but give yourself a pay cut," says Weil.

When crunching the numbers to determine how much you'll need, he adds, all retirees should base their financial plan around a life expectancy of at least 90.

"Many people underestimate the length of time they need to provide for themselves," he says. "With medical advancements, people are living longer than ever before."