No one wants to work all their lives and in fact, a lot of American consumers are looking for smart ways to retire early. There comes a point where you want to call it quits and prefer to enjoy life in exchange for working so hard in the last couple of years. But the challenge lies in the amount that you need to retire and how far along you have saved.
There are a lot of retirement factors that you need to look into to help you retire comfortably. looking beyond the amount that you have saved up to tide you through retirement, you also need to look at emotional factors that will play a big factor when you already retire. This might not seem all too important but you might have emotional struggles along the way.
Some older consumers are looking at money as their prime consideration but there are other areas in their life that needs to be seriously weighed. They need to be emotionally ready and just as they are financially ready to stop working. Some consumers are not ready to stop working because some of them does not have an idea what to do next.
Gallup.com shares that one of their surveys about retirement revealed that four out of every ten Americans or roughly 37% believes that they will retire when they get to 65 years old. Although it is lower than the 49% who believed that they will retire at age 65 in 1995, this is still a predominantly a financial reason with the need to save up more for retirement.
How to retire early
For consumers who are wishes to retire as early as possible, there will be a lot of financial consideration that needs to be looked into to be able to save a lot in such a short time. Forbes.com recently shared the story of a couple who are able to save about to save more than 70% of their income towards retirement. Not everyone can be this extreme but there are a few things they need to remember.
- Crunch the numbers. A recent report from Leggmason.com shares that consumers need about $2.5 million for retirement to be able to enjoy the quality of life they have today. This is not a small amount and needs to be planned ahead. That is why consumers must look at how much they really need when they retire so they have an amount to aim for. It is hard to just save every month without a goal in mind because you will never know how far you are from your retirement date.
- Save on basic cost of living. One way to save funds for retirement is to look at your basic cost of living and see where you can cut costs. You do not need to eat noodles for months just to save on food but it is better to plan your meals ahead and cook for the week to save on food cost and prevent you from unplanned fancy dinners and expensive take-outs. It will also help to be use common sense around the house when it comes to electricity turning off those that you are not using to prevent the bill from running up every month.
- Keep out of debt. It is important to manage and keep out of debt when you are trying to retire early because debt will only pull you back further away from your target retirement date. Try to minimize debt and pay them as fast as possible. But you need to be smart on what to prioritize just like if you aggressively pay down your mortgage instead of your credit card or student loans they you will have a problem. Looking at the interest alone, you are already making the wrong decision and should pay off high interest debt accounts first.
- Watch out for too big mortgage loans. There are times that you might feel moved to make a downpayment on a big and nice house but you need to see how it plays in your budget. The house payments might own you and your budget in the coming years and you are putting your funds all in your house. There might be a plan to sell the house in the future and put the money in your retirement fund but you need to look at compound interest and how you are losing money by not investing big at the start.
- Look for ways to complement your retirement fund. Retirement fund is already synonymous to your 401(k) but there are other IRA options you can look into and even financial tools to help you increase your nest egg. You can look at investment opportunities that can give you the biggest return but be forewarned that those comes with the biggest risk. What you can do is to lower the risk component of your investments as you get closer to your retirement age to taper of the risk. It is harder to lose on risky investments as you get older because time is against you when you try to recuperate your losses.
- Increase your income. You can also look at increasing your income to be able to put more in your retirement fund. You can probably max out your 410(k) contributions in the office to take advantage of an employer-matching program if you have one. You can also have more money ti invest or even to pay down debt accounts to have more for your retirement.
Creative ways to increase your income
Of course when you want to retire early, you need to look for ways to earn extra income to save more for the future. Here are a few creative things you can do to earn a little extra money on the side.
- Set up an online shop. Nowadays, technology has made it easier for a lot of people to get into business without the need for a physical store. Having an online shop can be easy to manage and maintain when you get the right tools for the job. You can automate the process from customer checkout to delivery. But you need to know what sells and what items consumers rarely purchase online.
- Offer consultancy on the side. Over the course of your profession, you could have gained a lot of insight and knowledge in your industry that you can earn off of those in the form of consultancy. It can even be a great source of extra income when you retire. If you choose to do it while you are still employed, be sure that there is no conflict with your current work and that you are not putting your employment in jeopardy.
- Look for ways to earn compound interest. Investopedia.com defines compound interest as interest that earns on interest and this is one of the things that you need to take advantage of if you want to be able to reach retirement early in your career. This means that you need to start saving as early and as much as possible to take advantage of compound interest.
Being able to retire early should not remain as a lofty dream because with hard work, it is possible. You also need to look for ways to earn extra income to make that dream a reality.