The average retirement age in the United States is 62. Some workers get to 69.
But let’s be honest. Who, especially among millennials and GenZ, wants to work into their 60s? Don’t we all want to call it a day on our careers much earlier and do more meaningful things like traveling the world and, you know, watching Netflix all day?
The only problem? Money!
If you don’t save enough money for retirement, you cannot afford to retire early. Heck, you might not even retire at all.
The good news?
This how to retire early guide will help ensure you’re one of the early birds.
Know How Much Money You to Retire
Doing some research, you’ll quickly learn that experts recommend a nest egg of $1 million to $1.5 million.
Well, on paper, that’s a tidy bundle, but it doesn’t necessarily mean it’ll be enough for your retirements. First, it’s challenging to establish the exact amount of money you’ll need, simply because of life’s uncertainties.
You could have $1 million in your retirement kitty, but then you develop a serious illness a few years into your retirement, which wipes out the money. This being said, there are ways to take care of these uncertainties, such as purchasing adequate health insurance.
So, how can you determine how much money you’ll need?
Let’s crunch the numbers.
Begin by setting your target retirement age, say, 55.
Life expectancy in the U.S. is 78 years.
This means after retiring at 55, you’ll have 23 more years to live. But if you’re a tough cookie, you could get to 90+!
Next, what are your current living costs? If you spend $50,000 a year, you’ll need at least $1.15 million to retire at 55, and assuming you don’t live past 78 years!
Bear in mind living expenses tend to significantly increase as one gets older, so you should factor in that too.
Starting Saving, NOW!
A recent survey established that most Americans in their 40s have saved up a meager $63,000 for retirement. Considering that the ballpark figure is at least $1 million, it’s fair to say this lot is dangerously behind, and, ironically, they are the ones dreaming about early retirements!
A mistake many people make is starting to get serious about saving when they’re very close to the retirement age. Maybe this is when the reality of retirement hits home, or they simply believe they’ll be earning a lot more money in the future, so saving will be easier. Don’t be like these people.
If you want to retire early, you have to start saving right now. The earlier you start, the more time you’ll have to raise the amount of money you need to retire.
Let’s say you just turned 30, want to retire at 55, and you need at least $1.15 million for retirement.
So you have 25 years to save $1.15 million. In this case, you’ll need to put away $46,000 every year till you turn 55. Quite a challenge, but certainly doable.
If you start saving at 40, the amount you will need to save every year climbs to $76,000. For most people, this isn’t possible.
Again, start saving now.
Invest NOW
Let’s face it:
You can hum on about numbers as much as you’d like, but the hard truth is the average American isn’t going to raise a million bucks through savings alone. What will happen if, for instance, you lose your job? Your savings plan will be thrown into disarray.
This is why you need to start investing today.
Investing, as long as it’s done right, is a sure way to build wealth and get rich.
The question is: where should you invest your money?
If you’re anything like most Americans, you’ll want to put your money in the stock market, and for good reason. Folks who invested $1,000 in Amazon 10 years now have over $20,000, assuming they didn’t sell off their shares. If you’d put in $10,000, you’d have over $200K.
Looks all rosy, right? Not so fast! A stock market crash can wipe out your investment!
This means you have to diversify your portfolio. Another ideal investment market is real estate.
Unlike stocks, the value of real property cannot be wiped clean. Sure, the Financial Crisis of 2008 negatively affected the real estate market, but values will drop and start climbing back up after a couple of years.
Also, another selling point about real estate is you don’t have to invest in physical properties. You can put your money into Real Estate Investment Trusts (REITs) and wait for your profits at the end of the financial year.
Get Advice from Retirement Professionals
Planning for retirement might look easy on the surface, but it’s incredibly challenging when you dig deeper. In fact, left to your own devices, you’ll likely make costly mistakes that will only delay your desire to retire early.
It’s advisable to seek retirement plan services. These experts will evaluate your financial status and help you set smart savings goals and develop investment strategies that suit your needs.
Also, a retirement professional will help you develop the right mindset about retirement. You’ll learn that retiring early isn’t necessarily about age, but how well-prepared you are to hang up your spurs when you’re ready.
How to Retire Early Simplified!
It’s one thing to desire an early retirement, and it’s quite another to actually retire early. For most people, this will remain just a desire.
But with this guide on how to retire early, you now have much of the information you need to turn your desires into an actionable, achievable plan.
All the best and keep tabs on our blog for insightful financial advice.
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