There are a lot of people who wish to retire early for a number of reasons. One of them is so they get the chance to enjoy life while they still can. Retiring at a very old age limits the activities you can do in retirement. You might have a challenging time exploring different places or even going out and enjoying time with family and friends.
Having the ability to retire the soonest gives you a better quality of life in retirement. Here are a few things you can consider to help you pull that retirement date closer to you.
Create a retirement plan
The first thing you need to look into if you want to retire early is having a plan. This is the goal you will aim for to know when you can retire. Simply put, this is the amount you need to be able to retire ar a certain age. Gallup shares that a lot of Americans see themselves retiring at the age of 66 years old or older.
Some experts say you have to replace anywhere between 70% to 85% of your current income. This means that if you are earning about $100,000 pre-retirement, you would need anywhere about between $70,000 to $85,000 in retirement every year. This can be a great starting point but you can plan for a different percentage depending on your need.
After you have determined how much you need, you can now plot out how long it will take you to get to that amount. Considering you have other financial obligations and payments, you have to plan your retirement savings as early as possible. The earlier you start, sooner you can retire. One thing that can help is to make sure that your household budget is in line with your retirement goals.
Max out your 401(k) contributions
One of the best things you can do to help you retire early is to make sure you have a 401(k) account. You can use this to save money directly from your paycheck every month. Getting started on this early on can help you maximize the compound interest it can earn over the course of time. Your savings will earn on its own and keep on growing because of interest.
A lot of experts suggest that you max out your contribution every year especially when your company has a matching program. The way it works is that the company matches whatever you save in your 401(k) up to a certain percentage. This means that the bigger you save, the higher they put in your account. That is free money on the table you can get.
Aggressively save for retirement
If you aggressively save for retirements such as maxing out your 401(k) contributions or saving in an Individual Retirement Account or IRA, it can help you to retire early Saving more as early as possible can push you closer to your goal. However, being aggressive with your savings can be a challenge it is easier said than done.
Looking for ways to increase your income can be a great way to help you save for retirement better. You can use the extra funds to put more in your retirement fund. This will help you pull your retirement target date much closer. You also get to earn more in compound interest as you put more in your retirement fund.
This is possible if you incest part of your retirement money in various but safe investments. You have to understand that risk will always be a part of any investment and you just have to manage your investment risk exposure. A good rule of thumb is that the younger you are, the higher the risk you can take. However, as you get older, you need to gravitate towards safer investment products to help protect your money as you get closer to retirement.
Know what you will do once you retire
If you have a desire to retire early, you need to understand what you will do exactly when you get to that stage of your life. This decision will not only affect the way you plan and save but will also direct your future efforts in life. Take your housing situation at the moment – if you own your house, do you play to stay there in retirement or move to a new place?
When it comes to your income, are you going to rely on your investments or will you look for a side hustle to give you extra cash? Are you going to use your hobby to earn money in retirement or do you want to do something else? Is it a skill you need to start learning now or can you figure it out before you retire?
These are just some of the questions you need to figure out before you retire. This is because it has an immense effect on the amount you saved up. You might start visiting family and friends in retirement and the travel can eat into your retirement money. But if you plan for that as early as possible, you can include that expense in your budget.
Start earning from your hobbies
This is one way to help you save more and retire early. Take a look at what you already love to do and focus on that. If you love to take photos and you have the tools necessary to earn a few dollars from it, go ahead and book some clients. What you earn from that can go to your retirement fund and make it grow faster.
Do you bake and love to feed family and friends with your sumptuous creations? You can try selling that online so you can bring in more income. If you are someone who is gifted in drawing or designing, offer your services to people and businesses around you. There are a lot of things you can do with your hobby and it will feel like you are not working at all.
Pay down your debt obligations before you retire
If you want to retire early, you also have to pay down your financial obligations early as well. This is because if you let them spill over to your retirement, a large portion of your nest egg will only go to debt payment. You could have used that to travel, buy things you need around the house, or even help out a grandchild with student loans.
Think of the interest payment you are making as well. Rather than using that same concept to help your investments earn more money, you are paying your lenders and losing money in the process. There are debt relief options you can consider to help you address and take back control over your debt obligations.
You can look at debt consolidation where you simply combine most, if not all your payments under one account. This will not only help you manage the payment better, but it will also give you the chance to make smaller payments. This is true especially when you are using a 0% credit card to consolidate your debt obligations.
Stay as healthy as possible
One last thing you need to keep in mind is that you have to be as healthy as possible. For one, it can help you improve the quality of life you will have in retirement. If you do this, you get the energy to do more of the things you love to do. On top of that, you also get to save money from completely avoidable medical expenses.
It is a good idea to try and retire early so you can have more time doing the things you love. It will take a lot of work but you just have to keep at it so you can see results.