An early retirement sounds like the nicest thing a person of a certain age could ask for. Over the past fifty years, the average retirement age has continually been extended. If you don’t want to be working into your seventies and would much rather be travelling, spending time with family, volunteering, or simply doing whatever it is, you would like to do with your time, early retirement is a goal to have.
Here are some early retirement planning tips and notes on how to retire to consider.
Tip #1: Define Retirement For You
Retirement can mean different things. Define it for yourself. Ask what that looks like. Imagine it. You get to live your retirement the way you want. Before we jump into the numbers, define the concept of retirement.
Tip #2: Average Retirement Period
According to a US Department of Labor study, the average person spends roughly 20 years in retirement. During that time, the big question is how to afford the cost of living, which is why early retirement planning is a concept to start thinking about early.
Tip #3: Look at Spending and Savings as a Long-Term Strategy
Look at your current spending and savings habits. Examine them closely. If you’re not planning for the long term and have more of a short-term goal-planning strategy for adequate retirement planning, you’ve got to shift your thinking to decades down the road and start spending like you’re saving for the long haul because you are.
Tip #4: Refine Your Budget and Cut Spending to Save More
To start saving more, take a look at your monthly expenses. Write out what they are. Identify areas you can cut. Housing costs – rent or mortgage – are an expense you probably can’t shave down much, but perhaps you can under food and entertainment expenses.
Smarter grocery shopping. Limiting fast food purchases. Tackling high-interest debt. You earn retirement by working monthly to limit spending wherever you can and reinvest that money into your long-term savings strategy.
Tip #5: Think Of Your Hopes, Activities, & Possible Costs Associated
Some may want to move to their favourite vacation spot and call it home in retirement. They may want to pursue a new hobby, travel more, or get a part-time job to help with supplemental income. Try to map out your days and the costs associated with your daily living to better understand what you need financially to make it a reality.
Tip #6: How Much To Save For Retirement Planning And Finding Your Number
Most experts recommend saving ten times your annual income to retire comfortably. This will permit most people to retire at 67 years old. If you want to retire sooner and more or less uphold your current lifestyle, you must be more aggressive in your savings goals.
Tip #7: How To Build Savings Is To Put A Little Bit Into Savings At A Time
Treat your savings like a utility bill you pay with every paycheck. Put a little in at a time, even if it’s only $20. This adds up. Provide yourself with a savings number and stick with it. Keep putting a little in at a time, and gradually, you will see it starting to build.
Do your best to never withdraw from your retirement account, either. Let it build. Have an alternate savings account that you can use to take from during emergencies.
Tip #8: Pay Off And Avoid Debt At All Costs
If you suddenly make a lot of income, reserve most of what’s in excess for your debts. Debt costs money. You pay interest every day on it. Before you can comfortably retire, you must pay off your debt, which should be sooner rather than later.
Credit cards, student loans, mortgages, etc. Have a long-term plan to clear all of it and minimize the interest you have to pay.
Tip #9: ‘FIRE’ Number: How To Use It And What It Means
A FIRE number is the money you need to achieve financial freedom. Your FIRE number is based on 25 times your annual expenses and the argument that you require the amount of savings to live on 4% annual withdrawals for up to 30 years.
As an example of calculating your FIRE number, if your yearly expenses were $40,000, a multiple of 25 would mean your FIRE number is $1 million. That’s what you need to save to be able to withdraw 4% every year and live fairly comfortably. This is your benchmark.
Tip #10: You Cannot Rely On Fixed Income Earnings
Fixed income sources are going to help make retirement more financially viable. However, you shouldn’t entirely rely on it. Fixed income is not enough for most people to live off of without significantly cutting their way of life. Any government-issued money or pension plan should be considered as an add-on to what you can put away in savings.