Retiring early is a dream for many people, but few are sure that they’ll be able to reach. Many people prefer to retire early — between the ages of 61 and 65.
Eliminate Debt and Retire Early
Debt weakens one of your most powerful wealth-building tools: your income. Debit payments reduce your cash flow, slashing into the amount of money you have available to save and invest for retirement.
Cut Household Expenses
If you want to retire early, you might need to make some short and long-term sacrifices. Dramatically cutting expenses benefits you in several ways:
- It frees up more money to pay down debt and set aside for savings
- It conditions you to live on less money – which will come in handy when you lose earnings in retirement
- It greatly lessens the amount of money you require to live on, thus lowering the amount you need to save
Dramatically Reduce What You Spend on Housing and Transportation
Remember that housing and transportation are some of the largest costs. While standard advice is to keep housing costs at no more than 30% of your income, if you want to retire early, you should aim as low as 15% to 20%.
Increase Your Savings Rate
Every time you cut an expense or get a bonus or free up money in your budget one way or another, make sure that money is redirected to either:
- Paying down debt
- Saving for retirement.
Create Guaranteed Income Streams
Research has shown that retirees who get guaranteed income in retirement tend to be happier than those whose retirement income is vulnerable to stock market fluctuations. Two ways to create guaranteed income are pensions and annuities.
Plan for a Retirement Job
For many early retirees, retirement isn’t really about never working again. It is about having time and freedom to pursue hobbies, start a business, or travel. The right retirement job can provide an income stream and possibly other benefits while giving you the flexibility to pursue your passions.
Retire . . . But Only Temporarily
For a long time, the “norm” was working for 40+ years, then taking the time to enjoy yourself. But with more people working well into retirement age, why not find a way to inject bursts of freedom and fun into your career path?
Create a Really Good Early Retirement Plan
To retire early- with enough money to stay retired- is a tall order, but it is doable. Stay out of debt. Live simply. Save money. You may even need to change your definition of retirement. Early retirement will require tough choices and a strong plan.
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