Find out how to retire early with these five expert tips.
The mid-60s used to be the default retirement age for most employees, yet recent trends reveal that more individuals are choosing to retire earlier and younger than ever. However, fears about unexpected expenses, lower social security, and running out of savings can keep many from achieving this goal.
Don’t want to wait until you’re 60 or older to retire? The good news is that it’s possible to stop working in your 50s, 40s, or even 30s while securing a comfortable retirement at the same time!
Use these 5 early retirement tips to get started
1. Establish what retirement looks like for you.
How you want to spend your retirement years has a massive impact on your preparations. Some people plan to live a minimalist lifestyle on a lower income, while others dream of traveling the world and pursuing their hobbies. If your plans require having massive funds, then you have to adjust your retirement strategy accordingly.
2. Build passive income streams.
If your early retirement plans include quitting work permanently, then you need to secure passive income opportunities while you’re still a full-time employee. This can be in the form of starting your own business on the side, investing in real estate properties, or buying stocks. The key is to have a continuous flow of cash that will keep you financially secure no matter how early you retire.
3. Master your burn rate ASAP.
The financial burn rate means how fast you spend your money versus how much you earn. You’ll start using your savings much sooner than the typical retiree, so you must learn how to control your spending as early as you can. An effective way to do this is to keep a detailed budget for every paycheck. Jot down every single expense, no matter how small.
Once you have a complete expense list of a typical salary month, start evaluating your budget. Where do you spend the most money? Are there any unexpected expenses you can cut from your budget? What costs can you negotiate down, such as lower car payments? Mastering your burn rate will allow you to optimize your retirement savings and make every dollar count.
4. Contribute the maximum amount to your retirement accounts.
Maximizing your IRA contributions and 401(k) is essential to early retirement. Hit the contribution limits every year to build a sizable retirement nest egg. At the same time, start paying off any outstanding loans and clearing up debts such as car loans, credit card debt, and your mortgage. You want a fresh start for your early retirement, and being debt-free with maxed out retirement accounts will help you accomplish that.
5. Downsize your lifestyle.
Early retirees testify to the power of downsizing both your possessions and your lifestyle ahead of retirement. Doing so, especially while you’re still working full-time, can help you reduce your debt, such as the expensive monthly payments on a big home. Consider selling any possessions you don’t need, and use the money to pad your retirement savings further. Aside from boosting your savings, downsizing can also help you lead a more flexible lifestyle upon retirement.
Early retirement can help you live the life you’ve always dreamed of, but it takes serious, deliberate planning to make it happen. The best part is that you can get started while you’re still fully employed. Create a strategy, consult a financial planning expert, and use the five steps above to begin the journey to retiring early. (See Related: Retirement Advice: How to Boost Your Retirement Savings)
Tycoono, LLC and its affiliates do not provide financial, tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, financial, tax, legal or accounting advice. You should consult your own financial, tax, legal and accounting advisors before engaging in any transaction. Please refer to our disclaimer for more information.
