You’ve spent most of your adult life working hard at a 9 to 5 job, and chances are, you’re tired of it. Like many other people in the workforce, you may have dreamt about early retirement.
But does it have to be a dream, or can it be a reality?
Here are 6 incredibly easy tips to planning for early retirement so you’re one step closer to making your dream come true.
1. Start as Early as Possible
The most important thing about retiring is how much time you spend saving beforehand. If you’re in your 50s and have just decided that you want to retire early, it’s not feasible if you haven’t been building up your savings and stocks.
That’s not to say that retiring early is out the question if you’re on the older side. For example, if you’re over 50, the government will let you make an extra contribution of $6,000 a year to workplace retirement programs.
As long as you start planning as soon as you can, with enough saving and smart investments, early retirement can still be in the cards for you.
2. Talk to a Financial Advisor
The best thing you can do when planning for early retirement is to speak to a financial advisor. These people are experts in the financial industry and have helped many people like you invest their money wisely so they can live a good life after retiring.
Outlines like Keystone Wealth Advisors retirement planning can help immensely when you’re looking at retirement. For instance, they give you a basic guideline of how much of your income you need to save, your estimated expenses in retirement, and how much of your income will be spent on retirement.
Financial advisors will also have simple to use calculators so you can play around with the numbers to try and figure out a plan that you can adhere to without much trouble.
3. See if Your Employer Matches Your 401(k)
If you work for a business, your employer can sponsor you for your 401(k), which is funds you can use for your retirement. You get to decide how much of your paycheck you want deducted to go towards your 401(k); since it’s tax-deferred, the more you deduct, the better.
It’s always a good idea to opt for this program since you’ll start saving for your retirement early. If you have any wiggle room with your paychecks, consider putting as much of it as you can into your 401(k).
Also, many employers will match your 401(k) contributions. If yours does, always opt in! There are no downsides to doing so.
4. Max out Your IRA Contribution
“IRA” stands for individual retirement account” and usually, you’ll make contributions to it when you have income. You don’t necessarily need to have an employer to contribute; you can be self-employed and still make contributions to your IRA.
You’ll put yourself on the fast-track to retirement if you put all you can into your IRA account. Not only are you building up your retirement nest egg, but you’re also paying fewer taxes.
Below, we’ll explain what each type of IRA does and how you can maximize the benefits from them.
In a traditional IRA, you contribute money that you haven’t claimed income taxes on yet. While that money is in your IRA, you won’t be taxed on them. Once you withdraw the amount for retirement, then you’ll pay taxes on them; this means it’s tax-deferred.
While it may sound like a bad thing to pay taxes after retirement, in reality, it’s beneficial. After retirement, you’re probably in a lower tax bracket, which means you’d be taxed less on the amount than you would be while employed.
Contributions to Roth IRAs are done through money that’s already been taxed. This means that any amount you put into your Roth IRA will be tax-free, so long as you meet the requirements.
Use a Rollover IRA for New Jobs
On average, Americans change their jobs 12 times during their lifetimes. While people used to stay with one company their whole lives, times are now different. You’ll probably get a few new jobs in the duration of your career.
When you switch jobs, you don’t want to cash out your retirement investments with your old companies. Instead, you can use a rollover IRA; that way, you’ll avoid paying penalties and additional taxes.
5. Adjust Your Current Spending
It may be nice going out to eat every Saturday or splurging on the newest electronics. But do you really need those things?
Take a look at every aspect of your life and see if you can cut down on spending. Even if it’s just a little bit from each part, it all adds up. Whatever you can cut, you’ll be putting away towards your early retirement.
6. Pick up an Extra Side Job
In addition to cutting down on expenses, you can also add some side income to boost your savings. You probably have a few talents in life, and this can be an easy way to express them. Consider building a website to advertise your services.
Not only will you earn additional income, but you’ll also get gratification and satisfaction from doing something you like. It’ll be a welcome change from the monotony of a 9 to 5 job.
Make Planning for Early Retirement Easy
So long as you do your research and keep your goals realist, planning for early retirement can be a feasible thing to do. Just make sure you speak with a financial advisor and do all the correct calculations. Otherwise, your plan may backfire, and either early retirement won’t be attainable or it’ll be hard to maintain a good lifestyle.
So keep our 7 tips in mind and you may be on the road to an easy and early retirement!
If you’re not quite ready for retirement yet and plan on waiting until the average age, you’ll still want to check out these tips on what to plan for.