5 Ways to Start a Retire Early Strategy
Can’t wait for retirement? You’re not alone. According to recent statistics, 41% of people manage to retire before they’re 60. Think about this a minute. Almost half of the people who are currently retired in the United States are under the age of 60.
If you’re thinking about retiring early like so many others, then you’re going to need a plan. Let’s look at some of the more tried and true strategies people use:
Figure Out Something to Do
To avoid boredom, and bring in some kind of income, there’s always work. While this might seem kind of counter-intuitive, consider this: financial independence allows you to pursue the things you love. Doing those things for money becomes a win-win. Now you’re living life on your terms, and still bringing in some extra income to allow for you to do so.
Know Your Number
What kind of money do you need to retire? Simple. Take your projected annual expenses and multiply by 25. Why such a high number? Remember, you’re trying to cover for at least as many years as you’ll be retired. You can adjust this number to reflect your situation more accurately if you need to. Be sure to subtract out what you already have saved, or other income sources (like social security or a pension) so you know more accurately what you need to save right now.
Don’t Withdraw Quite So Much
If you have an investment portfolio, ideally, you never want to pull out more than 4% of the value of the portfolio in the first year to pay all your expenses. You’ll use this number (adjusting for inflation) for subsequent years. By keeping this number low, you’ll hold back more money allowing for a longer retirement.
One can’t say this enough, especially given how the stock market can shift very rapidly. Don’t use only one investment strategy. Think about bonds as well as stocks, and don’t forget to keep a certain amount in cash. Also, consider many income sources such as a reverse mortgage, pension, etc. You want cash flow coming from as many sources as possible. This is something you’ll want to sit down and discuss with an investment banker to determine what’s right for you.
What about Investment Accounts?
Speaking of that investment banker, you’ll want to go over everything from your 401k to IRAs. Remember, pulling from an IRA before the age of 60 has sharp penalties. If you’re serious about retiring early, you might want to consider a Roth IRA instead.
Again, the key to this strategy is to plan. Retiring early doesn’t just happen. On the other hand, imagine how much the hard work of putting your plan in motion will pay off in the end!