Early retirement is a dream of most people. It is a dream to end your career and begin a life of freedom to travel, spend time on passion projects, or pick up a few hobbies. While retiring early means you will have an easy breezy life, preparing for early retirement can be difficult. You need to prepare for financial independence and ensure you have enough savings to live out a long retirement. Continue reading for 7 tips to retiring early.
1. Adjust your current
Cutting your budget to
only the necessities will allow you to save money for your retirement. One way
to lower your budget is to work on paying down your debts, starting with your
high interest debt such as student loans and cars. Then continue to pay down
your mortgage. You should also look at what unnecessary expenses you are paying
for, such as subscriptions you do not need or use.
2. Calculate your estimated
If you are saving up all of this money to use in retirement, you have to have an understanding of how much you will spend a year. Analyze your current monthly spending and see what expenses will go away and which expenses will increase. When you have your final estimate, multiply by 12 to get your annual spending in retirement. To have some extra money, increase the annual spending amount by 10 to 20%. Keep taxes and healthcare in mind when estimating your spending. Health Care can ultimately be the costliest expense in retirement.
3. Have a savings goal
To successfully retire early, you need to have an overall retirement savings goal. One rule of thumb for calculating your estimated total savings need is having 25 times your planned annual spending in your retirement savings accounts before you retire. This rule assumes that your retirement savings is invested so it will continue to grow each year. Using a financial advisor to help you estimate your savings goal is a great way to establish a reasonable savings goal.
4. Invest, Invest, Invest
Investing is a great way to grow a plentiful retirement savings. Since you are planning to retire early, you have a shorter amount of time to build a retirement savings and a longer amount of time that your retirement savings needs to sustain and support you. Having a balanced investment portfolio will assist in long term growth to fund your retirement savings.
5. Pay off and avoid
Avoiding debt is one of the best ways to save your money. Any loan that you take out takes money away from your retirement savings. You are also increasing your expenses by having to pay the interest on the loan. Try to avoid high interest debt as much as possible to save your money.
6. Have multiple streams of incomeWhether it is having income generating assets such as rental properties or having a side hustle, having multiple sources of income helps cover your living expenses so you can allot more money to your retirement savings. These alternate streams of income can continue while you are retired so you continue to have more money than solely your retirement savings.
7. Use a qualified financial advisor
Using a financial advisor can make or break your chances of retiring early. Your financial advisor can give you specific advice for your financial standing on how you can retire early. Having a trusted financial advisor on your side will help you be able to successfully retire early.
Using a financial advisor when you hit retirement can help you maximize
your wealth. They can provide investment options, life insurance advice,
and help you minimize expenses. Set up your appointment today to start
maximizing your wealth in retirement with Genesis Financial Group.