Tips for Retiring Early
Typically, the retirement age in the United States is 65. However, for many of us, this doesn’t cut it. Most of us do not want to work until we are 65 years of age. For those in this category, the knowledge of ways to potentially retire early is crucial.
There are many tips for retiring early. Invest smarter is a mantra that comes to mind. Another is to save money and reduce taxes. However, there’s so much more that goes into early retirement. That’s what we explore in this blog.
Together, we’ll highlight and explain effective tips to help retiring early. Furthermore, we’ll show you how to save so you can potentially retire early.
But first, why an early retirement?
Why Retire Early?
The obvious goal of retiring early is to live happier. Retire early means we suddenly have the time to do all of the things we have always wanted. From traveling with spouses to engaging in that longtime hobby, retiring early could offer the opportunity to do what we love.
Other benefits that come with retiring early include:
- Allows the pursuit of newfound interests
- Save more money
- Better health and quality of life
- Ability to explore other sources of income
- Achieve goals outside of career.
Ways to Potentially Retire Early
Early retirement is more than just signing a slip of paper at age 35. It’s a long process that starts the very day the decision to retire early is made. Here are ten tips to helpretire early:
Adjust Your Budget
Wondering how to save so you can retire early? Start with your budget. Early retirement means having to make changes in spending habits. The key is to spend less and invest more in the retirement plan.
For example, it’s possible to make changes to transportation and housing costs. Renting a one-bed apartment instead of a two-bed can free up some money toward retirement.
Estimate Annual Retirement Expenses
Part of retiring on your terms is understanding how much it will cost you. It’s essential to know how many yearly expenses will be in retirement. This way, we can set proper financial milestones while saving and investing for retirement.
To do this, we can use current monthly spending figures as a benchmark. However, be sure to account for possible inflation.
Determine Overall Savings Goals
Top of the list of tips for retiring early is to know how much will be necessary for comfortable living — in retirement.
To know this, simply multiply your annual spending figures by 25. This way, there’ll be motivation to make budget cuts to hit this number faster.
Learning how to retire early means understanding that the period during which it’s possible to save is shorter. Hence, the best option is to invest in long-term growth in mind.
For example, investments in low-cost index funds and stocks offer the propensity for long term growth.
Pay Off All Debts
Knowing how to save so you can retire early is pointless if the debt is still in the picture. This includes housing and other real estate assets.
Monthly mortgage payments will eat into the allocation for early retirement. Also, if there are still debts to pay off after retirement, it will be impossible to enjoy it.
Get a Side Job
“Reduce taxes” and “save money” are not the only answers to how to retire early. In the big picture, getting extra income is key to a successful early retirement.
Say there’s a side gig that brings in as much as $250 every week. In a month, that’s up to $1000 that can be added to the retirement kitty! Now, imagine doing that over 10 years.
Consider Health Costs
Here’s another tip for retiring early — take charge of your healthcare. If the plan is to retire early, consider health insurance. To ensure that you are well taken care of after retirement, you may have to consider private health insurance.
Manage Income Streams Carefully
To retire in comfort, optimize tax reductions, and save more money. To do this, careful management of income streams is essential.
Whether it’s real estate holdings, 401ks or IRAs know when to take from income streams. It’s possible to get substantial tax penalties if money is withdrawn at specific periods. Also, take advantage of possible tax deductions to maximize saving potentials!
Think About Retirement Location
Before early retirement, we must consider where we’ll be retiring to. To reduce risk, the best bet is to live in a state with attractive tax breaks and a low cost of living.
Keep Expenses To a Minimum
For couples that retire early, the temptation to enjoy life to the fullest is there. First, they throw a superb retirement party. Then, they go on vacation.
However, more time shouldn’t equal spending more money. With early retirement, the goal is to stick to budgeting estimates.
The tips we discussed above are just the beginning of the long journey to retiring early. There are many other factors that have to be taken into consideration.
Not to worry, we cover ways to potentially retire early in our periodic newsletters. To get them, simply join our mailing list! Take the first step to early retirement today!
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