It’s many people’s dream to ditch the work routine and live the good life, perhaps to travel or just relax at home. Retiring early requires having a significant nest egg that you can rely on, while also having the spending money and comforts that you have worked so hard to accrue from a career.
Retirement can come sooner than you think if you take the right steps to get you there. Here are 7 ideas to help you get closer to retiring early. You don’t want to make a costly mistake after you retire when the income stream has slowed.
Making these important lifestyle changes now can better prepare you for a stable and happy retirement later.
For starters, you need to know what the ideal life for you is once you retire. Do you want to travel the world? Do you want to invest in a vacation home? Do you want to stay home, play golf every week, or relax by the TV? How much money would you need to achieve the type of retirement that suits your interests? Without that focused goal to work toward, it will be hard to approach retirement without concern.
Think about how much money you would need per year to live the way you like. Be sure to consider groceries, entertainment spending, utilities, clothes, and even an emergency fund. Narrow it down to a monthly, even weekly, budget. You’ll then want to multiply that by several decades depending on the age at which you retire.
Consider the investment income you might also have as well as Social Security and retirement payouts that might be coming your way. These are not always reliable sources of income as there is no guarantee such programs will be operating the same way they do now in the future. It’s good to keep them into account, but you’ll need other sources of income and savings to sustain you in the long run.
Pay Off Big Expenses
It is not wise to turn off the spigot of income (otherwise known as retirement) without having paid off any big expenses or debt first. If you have a mortgage, car payment, or any other type of debt, you will want to pay that off in its entirety before retiring. When a regular income stops coming in, the amount of savings you have can quickly dwindle, and carrying debt is a surefire way for that to happen.
If you have credit cards, never carry a balance where interest rates will pile up as an unnecessary expense, either. The more interest payments you can avoid, the more cash you’ll have to invest for your future.
Make Sound Investments
Invest your money wisely. Middle-aged adults have already lost a lot of momentum in their investment strategy because they have less time to see growth than someone who is just starting their career.
It is wise to look for investments that have larger rates of return such as real estate or certain hedge funds where you can see quicker growth than a bank account or even some stocks.
You’ll want to have at least 15% of your personal investments in some sort of retirement account. Roth IRAs or 401(k) investments continue to grow, and the sooner you invest, the more time you have on your side. When you retire, you want to have a steady income stream to keep you living comfortably, and investment accounts are one of the best ways to do that.
If you begin making subtle changes now to save more money for your future, you can achieve retirement faster than you realize. It’s not about making drastic adjustments to your routines. Instead, find simple ways to put away a little extra money on a weekly basis. Skip the daily Starbucks routine. Take your lunch to work instead of dining out.
Find ways to invest these savings and diversify your portfolio. Put your money to work for you while you’re working now so that when you retire, you’ll have a bigger nest egg.
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Where you intend to retire matters since there are tax implications and varying costs of living in different states and countries. Some places offer potential tax breaks that could keep a lot of extra money in your wallet. You may want to be close to family or friends, or maybe even beautiful scenery like the beach or mountains, but take into account real estate value and the cost of routine activities that can quickly add up when you have less income coming your way.
If you plan to take up a new hobby, sport, volunteer, or even work part-time, where you live can make a big difference. Even if you don’t know where exactly you want to be when you retire, having individual plans for the places you are considering (and the money you’ll need if you live there) can be very helpful.
Prepare for Health Care Costs
We’re all getting older, and it is important to consider potential health care needs that may arise. Retirement savings should have a significant focus on unforeseen circumstances that could quickly drain a bank account. Review current insurance policies to make sure they align with what you want to do when you retire and where you want to live.
Build an emergency fund that can sustain you for 3-6 months should unplanned expenses like illness or hospitalization come along.
Seek Guidance From Professionals
Investment and wealth advisors can provide substantial feedback and advice on how best to plan your estate and retirement goals. They know about investment opportunities that can help you organize the amount of money you’ll need and when you’ll need it. They can also help coordinate your planned giving or charitable donations so that they are timed well for potential deductions.
While it may seem easy to go it alone, professionals that have a proven track record of helping other people retire with ease (and maybe even earlier than they planned) are a goldmine of information that is not worth passing up. They can be the ticket to helping you retire early…and strong.
Save Money with Fetch Rewards
While Fetch might not be as big of a contributor to helping you retire early (unless you win 1,000,000 Fetch points), it certainly can help. Be sure to scan your receipts, utilize special offers, and refer friends and family for massive bonus points and a steady stream of free gift cards.
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(Hopefully) Happy early retirement!