How to Retire Early
Do you have a goal to retire before the average retirement age? Many people work toward the traditional retirement age without realizing there are other options. There are things you can do now to help you retire earlier than you think.
Six Things to Do Now to Help You Retire Early
Set your personal goal
The first step to achieving your goal of retiring early should be to figure out exactly how much you need to save. Picture your retirement. Where you live and the activities you plan to do can impact your goal amount. The cost of living is very different between settling comfortably near your grandchildren in Iowa and traveling across the country for six months out of the year. Decide what retirement looks like for you. Then, you can adjust your plans to make them realistic. Try putting your information into a free calculator to see how long your money will last at your current savings rate or if your current savings are enough.
Lower your daily cost of living
If you’re going to retire early, you may need to save more and learn to live on less. This can sometimes be a good way to reach your goal faster. Cutting out $100 to $200 a month can have a big impact over time, but sometimes more drastic changes are necessary. It really depends on when you start saving. Start by looking all of your monthly bills and see where you may be able to ask for discounts, bundle services or cut out unnecessary expenses. If you haven’t looked at your household budget in a while, take time to see where you can start trimming your daily costs.
When you lower your cost of living, you may be tempted to spend the extra money right away. Instead, add it to your retirement savings. Try thinking of it as having another bill rather than extra money so you’ll be less likely to spend. If you’re able to lower your monthly bills by $100, invest that amount in a retirement fund or set it aside in a separate account. Find ways to keep yourself from treating it as extra spending money. Retiring early means you won’t have social security to rely on at first. And, you will be pulling from your retirement savings longer, so it is important to think through how long your money will need to last.
Reduce your debt
Interest can add up quickly. If you are spending money each month paying off your debt plus interest, it could delay you from retiring early. Try to get your debt down as much as possible, starting with paying off your credit cards and other high interest loans. Some loans have penalties for paying the balance early, but others may not. Be sure to check for the ones that will benefit you most.
Don’t add more debt
Once you get rid of your debt, don’t add more. If your goal is to retire early, don’t take on extra debt by buying new cars or taking out new loans. The exception to that is if it will ultimately save you money on repairs and other costs. Try to only buy things on credit you know you can pay off that month or that fit within your budget.
Increase your income
If you are looking for ways to speed up your retirement date, try increasing your income for a short time. This has multiple benefits. Not only will you have more in your current budget, it increases the amount calculated for your Social Security benefits. Or, you can take on side projects for extra cash, pick up a part-time, seasonal job during the holidays or even rent out your home while you are out of town.
Two More Considerations for Retirement
If you are planning to retire early, don’t forget to think through your healthcare options. Since you are not eligible for government sponsored Medicare until age 65 and you won’t be covered through an employer, it is an important cost to consider when understanding your retirement needs.
Have you ever considered downsizing? For many, it can be a key part of a retirement strategy. Reducing your mortgage payment, maintenance costs and monthly bills can mean more money for retirement savings. Because the housing market is strong right now, you may want to talk with someone about selling and buying a smaller home to fit your new lifestyle. If you have equity in your home, it may provide you with extra money to help pay off debt or add to savings.
Retiring early can be an achievable goal with the right research and retirement planning.