How to Plan for Early Retirement
Early retirement is becoming more and more popular, but it takes a lot of planning. Many people think that just putting a little money away every month is enough of a plan for early retirement. This couldn’t be further away from the truth. By retiring earlier that means that more money needs to be saved than if the person was going to retire later in life. They many need to save as much as twice as much! Such an important thing such as planning for early retirement needs to be planned out in detail or else the money may come up short.
Write Your Dream Down
The first step to planning for early retirement is to take note of when you want to retire, exactly, and what you want your retirement to look like. Try to be realistic. If you want to live in a mansion and drink umbrella drinks by the pool you better have the income to do it right now, or else you can probably shoot a little lower.
Sum it All Up
Next, try to sum up how much money a year you will need to live on after your early retirement. Try to think “downsized”. Since the kids will probably be grown and moved away you can live in a smaller home, drive a smaller car, and buy less food. This will all make your expenses less per year, but don’t forget to factor in inflation.
After you have an idea of how much money it will take to live on, then come up with the total. This is the amount of money that you will need for the rest of your life after you retire. Say you retire at the age of 50, that still leaves at least 30 years of life after retirement. Multiply 30 by your yearly living amount and you will have the total amount of money you will need to save for early retirement. The amount may shock you. Now you understand the importance of planning.
Take it to the Next Level
Now that you know the amount you need to save, you may be looking for more ways to sack away the money. A good way to boost your retirement fund is to look into the benefits your employer offers because many companies, even smaller ones, offer 401ks, stock options, and more and they may have a plan to match what you invest, dollar for dollar, up to a certain amount. You can’t beat that deal anywhere else.
Also, see what your bank has to offer. Many banks have extensive early retirement planning services and plans that can help even the tightest of budgets.