It’s never too early to start planning for retirement, especially if you’d like to retire early. For some, early retirement might seem impossible, however with the right plan it can be easier than you think. Following these 8 tips can help you meet your retirement goals sooner than you may think.
8 Tips for Early Retirement
- Define early retirement
Retirement can mean different things to different people. It’s important to define what you want from retirement and whether that involves doing occasional work or never earning a paycheck again. This step also involves defining your target retirement age in order to plan your fund accordingly.
- Consider your retirement and financial goals
Take some time to consider your retirement goals. Are you comfortable living in a smaller home and having a quiet retirement, or are you dreaming of moving abroad and travelling frequently? Your retirement budget should reflect these goals and take your anticipated living cost into account.
- Examine your finances
Calculate your average monthly expenses, taking into account at what age you want to retire and how long your fund will have to last. Consider how much you currently have saved in retirement accounts, such as IRAs and workplace plans such as 401k.
- Establish your target retirement fund amount
After examining your monthly expenses and creating a rough estimate of how much you should have saved for retirement, you can outline a specific target amount. Early retiree and self-made millionaire Grant Sabatier suggests having between 25 and 30 times your expected annual expenses saved or invested, plus a year’s worth of expenses in cash.
- Reduce unnecessary spending
To increase your saving rate, consider cutting down on unnecessary and large expenses. For example, outlining a stricter food budget or saving on transportation costs can help accelerate the growth of your retirement fund.
- Supplement your income
Try to supplement your existing income with a side hustle such as real estate. Once again, this can help accelerate your savings rate and increase your retirement fund.
- Invest to increase your income
Another way to supplement your income is to invest wisely into the stock market. After outlining your budget and allocating money to your retirement and emergency fund, consider investing the cash that’s left over.
- Consider paying off your mortgage
Finally, consider paying off your mortgage in preparation for early retirement. This can give you peace of mind and provide more financial flexibility during retirement. Depending on your financial situation, this may be easier said than done.
Want to learn how to define your financial goals? Get started here.
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