Are you one of the millions of Americans who wants to retire early? For many Americans, early retirement is the ultimate goal. It gives you the opportunity to enjoy your free time while you’re still healthy and relatively young.
Unfortunately, many people aren’t in position to retire at traditional age, let alone early. A recent Gallup survey found that more than 50 percent of Americans are concerned about not having enough money to retire. Early retirement is an even greater challenge.1
Fortunately, early retirement is possible if you’re disciplined and you plan ahead. Below are a few tips to help you get started. You may also want to meet with a financial professional to help you implement an early retirement strategy.
Figure out where you can compromise on your planning.
Sacrifice is an important element of any financial plan. You may have to make trade-offs between certain goals and expenses and determine which trade-offs are acceptable to you. Early retirement, however, may require even greater compromise. For example, if you want to retire early, you may need to make deep cuts to your standard of living. You may be forced to downsize to a more affordable home or reduce your car payment.
Look at your current budget, and think about areas in which you can make cuts to save more money now and reduce your expenses in retirement. Perhaps you can cut back on traveling or dining out. Maybe you could 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.
Use a budget.
Do you use a budget? If not, you’re not alone. According to a recent survey, nearly 60 percent of Americans don’t use one.2 That’s unfortunate, because a budget can be one of your most effective financial tools. That’s especially true in retirement.
The first few years of retirement can often be a challenge. You may have more free time and more money than you’ve ever had in your life, but few activities to fill your schedule. Many retirees find that they miss the purpose and friendships that came with their career. It’s easy to fill your newfound free 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.
Work part time.
Since you’re retiring to leave the working world, a job in retirement may sound counterintuitive. If you retire early, though, you may not want to ignore a part-time or seasonal job. 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 Benefit Resource Partners. 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