How much does someone need to retire early? If you are wondering about the approaches you can take to make your early retirement a reality, then here are seven factors you can consider.
- Minimize Your Cost of Living
The less money you’ll require to live on, the higher are your chances of saving more. Keeping the basic living costs to a minimum will ensure you have extra cash which you can save for your early retirement. Moreover, this approach will condition you to depend on less money, which is essential when you reach retirement.
- Access to funds
If you are planning on retiring early, make sure you have adequate access to funds. It’s always advantageous to have about three years’ worth of expenses in liquid assets or cash. This all boils down to your income goals and distribution rates, and you can make these estimates by having a talk with your advisor.
- Avoid Lifestyle Creep
People tend to increase their spending once their income increases. When you get a big raise or a promotion, it’s imperative to direct about 50 percent of the additional funds to savings. The idea is to spend wisely and not feel deprived.
- Stay Out of Debt
Staying out of debt is an effective approach to ensuring your cash flow is intact. Debts will certainly sabotage your plans to retire early by cutting into the funds which you have to set aside to cater to your retirement plans.
- Increase Your Income
If you feel that achieving your investment portfolio by the time you retire is next to impossible, you may want to consider ways to increase your income. If you have an extra income, make sure 100 percent of it goes into your retirement savings.
You may opt for a second or a part-time job to add a little extra to your earnings. If you are uncertain of where to begin, here is a list of money-making ideas you can consider.
- Social Security
You could have a vision of a deeply satisfying retirement lifestyle, but if you are not wealthy, then achieving the vision could be next to impossible. While you can get a financial cushion from a part-time job, earned income is crucial for those wishing to retire young. Additionally, a part-time job can help in delaying your claim for Social Security until later years, an approach that will end up boosting your payout. On the other hand, you need to note that the payout of your Social Security is based on the top thirty-five years of earnings. Therefore, you may need to consider working for such many years if you’re planning on early retirement.
- Set A Date
This is as simple as it gets. Stated goals help an individual to focus and accomplish more. Setting a retirement date will give you the energy to work towards your goal.
Although planning for early retirement is never easy, these seven steps will get you closer to your goal. Even when you are not planning on an early retirement, incorporating these steps will make you wealthier and financially stable in your years to come.