Do you want to start getting ready for retirement sooner with your current income? Or do you have early retirement planning? It requires careful planning to make it more than a pipedream. Getting retirement planning services from a knowledgeable resource is one option. They can provide early retirement planning advice based on your current financial situation to give a solid plan.
We’ve compiled best practices on retiring early here that you can use for guidance as well. Read on to learn more about getting ready for retirement if you plan to retire early.
How to Retire Early
If you want to retire with your current income, you need to have early retirement planning. It’s critical to know how much money you need to have saved. Decide what kind of lifestyle that fits your retirement goals. For example, do you plan to travel often? Or is spending your time leisurely at home more your dream?
If you start thinking about how to retire early, take inventory of all your assets to determine your net worth. Figure out how much you’re spending based on your credit card and bank statements. Decide how that spending will change when you retire. Make sure to account for paying higher health premiums too. Put together all this information to establish how much you need to save up. This target is what your early retirement planning is going to be based on.
Retirement Planning 101: Start to Invest for Retirement
The most critical thing is many people will tell you that you need to work with retirement planning services to maximize your investments to retire early. When you invest for retirement, look at your IRAs and employer-sponsored retirement plans first. They offer one of the best investment growth and tax advantage opportunities out there.
You can contribute up to $19,500 in 2020 to a 401(k) and $6,000 ($7,000 if you’re age 50 or more) to IRAs. Keep in mind that penalties apply to money taken out of 401(k) if you dip into it before you’re 59 and a half years old. Roth IRAs are funded with after-tax money, and you can withdraw contributions without penalty and tax-free.
Saving for Retirement
Having non-investment money on hand is useful, especially if you want to retire before you have access to some of your investments. Have an emergency saving account that can cover expenses for six to nine months as a cushion when saving for retirement.
When planning to retire with your current income, making the most of your money is important. Effective salary management strategies include paying down as much debt as possible and cutting back on your expenses. Start with paying back your credit cards first since those typically have the highest interest rates.
Getting Ready for Retirement
As you prepare for early retirement, put together a realistic retirement budget. Reevaluate how you are currently spending money and what that means for you in retirement. We tend to idealize what we plan to do in retirement. For example, we may think that we will do all the home repairs and maintenance when we retire. It might make more financial sense to downsize your home, lower maintenance needs, mortgage payments, property taxes, etc.
Medicare won’t kick in until you’re 65, so you might need to start shopping for health insurance options. If your spouse is going to continue working, then consider joining their employer-sponsored plan.
Tips for Retirement
Unexpected things happen all the time. When we want to retire early, unfortunately, there are some additional challenges we face. Here are a few tips for retirement to consider if you find that you don’t have the money you hoped to retire:
Get a second job. Take a weekend or night job that’s earnings you can leverage for putting away in an investment. The gig economy has opened the doors to many flexible opportunities like delivering groceries, renting out a spare bedroom, and completing one-time tasks.
Adjust your retirement lifestyle and budget. Consider cutting back on your hobbies or taking fewer trips a year to make the numbers work.
Eliminate all your debt, including your mortgage. Debt is your worst enemy in retirement because it keeps you from getting to enjoy it. Please get rid of all your debt, so you’re no longer tied down by it.
Consider a later retirement. Working a few more years will allow your investments to grow more and give you more time to get debt-free. You get the retirement lifestyle you wanted without the worries of running out of money early.
About the Author
Anjana Paul is a banking professional who is passionate about helping others make better choices when it comes to money. In her spare time she is a freelance writer with years of expertise in the financial industry. She primarily writes about topics such as student loans, building credit, budgeting, retirement and other personal finance topics.