Looking to retire early? You have company. For many Americans, early retirement is the ultimate dream. It gives you the opportunity to enjoy your free time while you’re still healthy and relatively young. You can use that time to travel, pursue new interests or even launch a second career.
However, retirement itself can be a challenging goal, let alone early retirement. A Gallup poll recently found that more than 50 percent of Americans are concerned about not having enough money to stop working at traditional retirement age. Early retirement is an even greater challenge.1
The good news is that early retirement is possible if you’re disciplined and you plan ahead. Below are a few tips to consider as you begin your planning. You may also want to meet with a financial professional to help you implement an early retirement strategy.
Decide on what sacrifices you are willing to make.
Compromise is a key component of any financial plan. You have to choose between certain goals and expenses and determine which trade-offs are acceptable to you. To retire early, though, you may have to make even greater compromises.
For instance, you may have to make deep cuts to your current standard of living to fund an early retirement. Even typical retirees can expect to live an additional 20 to 30 years after they stop working. If you retire early, you may live even longer in retirement. You will need to accumulate a significant amount of assets to fund that kind of longevity.
Look at your current budget and think about areas in which you can make cuts so you can save more. Perhaps you can cut back on traveling or dining out. Maybe you can even take a second job to help you save for retirement. These kinds of sacrifices can give you the savings boost you need to reach your goal.
Stick to a budget.
For many retirees, the first few years of retirement can be challenging. You may have more free time and more money than you’ve ever had in your life. It’s easy to fill that time with costly activities such as travel, shopping or new hobbies.
It’s important to enjoy your retirement, but it’s even more important to use a budget to control your spending. Evaluate your assets and determine the safe withdrawal amount you can take each year to fund your retirement. Then develop a budget based on that withdrawal amount and follow it carefully.
If you overspend in the early years of retirement, you could face serious challenges later. For instance, you may not have enough assets to pay for health care as you get older. You may be forced to downsize to a smaller home or make other spending cuts. You may even have to go back to work. Manage your spending in the early years so you aren’t forced into difficult decisions in the later years.
Don’t rule out part-time work.
The idea of work may go against the entire point of retirement. After all, you retire to leave the working world, not to get a new job. If you retire early, however, you may want to consider a part-time or seasonal job that allows you to enjoy schedule flexibility. A side job can provide some income so you can limit withdrawals from your savings. That can make your assets last longer.
Look for opportunities that are aligned with your interests and skills. For instance, if you have a special talent, perhaps you could consult or teach lessons. You may be able to work as a freelancer. You could even drive for a ride-sharing service. Even a little extra income can help protect your savings.
Ready to plan your early retirement? Let’s talk about it. Contact us at Legacy Retirement Services. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
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17596 - 2018/4/19
Terry L. Tyler