We can only think of early retirement when we have enough money to secure our future. Isn’t it? You can think of early retirement when you don’t like your job or have travel goals! But that requires money! You can neither withdraw money from your retirement account unless you are of 59½ years of age nor you can take partial Social Security before 62 years! So if you are wondering what steps you should take to complete your bucket list, these tips will definitely come in handy!
Set retirement goals
The first step is to set some achievable retirement goals. You need to decide when you want to retire. After that is figured out, calculate your budget that you will require in the first year of your retirement. You can make an estimation of the following things:
- Cost of living in your dream retirement location
- Travelling budget
- Medical expenses
- Loans and mortgages
This overall estimation will help you to calculate the money you need to save by adjusting your current budget. A retirement calculator might come in handy if you want to calculate how much you need to save every year to meet your goal.
Curtail your living cost
By lowering your living expenses, you can contribute more towards your retirement fund. Chalk out a budget and see if you can live comfortably by curbing $10,000 or maybe $20,000 dollars from your current budget. Here are some suggestions:
- Eat less at restaurants
- Buy a second hand car instead of buying a new car
- Lower your electricity, water and telephone bills
Pay your debts
Having debts can be a big hindrance in your retirement plan. For example, the student loans can take up to 6% while new credit card can take up to 17.2% interest. Any debts, especially those with 6% or more interest can decrease your returns to a large extent. So paying off these debts can help you to save more for your retirement.
Optimizing retirement account
The main reason behind not retiring early is due to lack of savings. When people do not have enough savings, they cannot imagine retiring early! So your focus should be on savings first and then optimizing it. You can consider the following tips to optimize the savings for your retirement:
- Open either a Roth or a traditional account (you can even open both!)
- If you fall in low tax bracket, you should take advantage of the Roth IRA
- Do not withdraw early
- Do not take 401(k) loans
- Purchase mutual funds which have fees lower than 1%
Become a businessman
Opening a business can serve two purpose:
- After you retire in your 50s, you will be mentally and physically active by looking after your business.
- If your business becomes successful, you do not need to rely on your investments to provide you income.
You can open a business in your professional field or maybe something completely new! However the pro tip is to open a part time business, while you are still working full time to let your business grow by the time your retire.
With these tips in your list, you can now retire early and complete your bucket list! Optimize your earnings, spend efficiently and above all stay healthy, because medical expense can be huge and jeopardize your plan!