Did you know that the average retirement age for Americans is by age 66?
But about half of them quit working between the ages 61 and 65. Only about 18% of these people retire earlier than that age. Don’t fall into this trap – retire early!
If you’re looking to retire early, there are a lot of ways for you to stay afloat after the decision. You can try reading this post about online side hustles that can help you earn cash, for example. But if you’re planning for early retirement, the key is to manage your finances.
Are you ready to learn some great financial tips? Read on and find out more today.
1. Pay Your Debts
If you’re in debt, chances are, your income becomes weaker as time goes by. After all, payments toward debt will affect your cash flow in a negative manner. The less money you have, the fewer resources you’ll save or invest once you’re in retirement.
The first step toward your early retirement is to get yourself out of debt. You need to start this by paying off any high-interest credit cards you might have. Take an inventory of all your debts and arrange them from the highest to lowest interest rate.
While paying everything off, reduce your monthly spending. That will put a stop on your debt balance increases. The sooner you stop overspending, the sooner you can redirect the money to your retirement savings.
2. Consider Your Future Retirement Budget Needs
While cutting your expenses will augment your saving capabilities, you still need to think carefully. Ask yourself about the things you’re spending for once you’re retired. Doing this will ensure you have a solid plan and retire earlier.
The general rule is that you need fewer savings if you have less to spend in retirement. There are a lot of retirement planning calculators on the internet. Some of these will help you set different spending levels for various time periods.
3. Get a Grip on Your Current Spending
It’s important to have a solid idea about your current spending. This helps you know if you have the means of retiring early. The best way to get a grip of your own finances is to make a realistic budget.
Track the way you spend using laser focus. After all, you can have a good idea of where some of your earnings go. But once you take a closer look, you might get surprised where the rest goes.
At times, even a $2 coffee will add up to $480 a year when bought each day. If you often opt for specialty coffee price can double or even triple without difficulty.
4. Cut Household Expenses as Early as Possible
Investing for early retirement needs both short and long-term sacrifices. Cutting expenses in major ways can benefit you the most by freeing up more money for paying your debt. After all, the average American will owe about $38,000 in personal debt, excluding possible home mortgages.
Another benefit of cutting expenses early is to make you more accustomed to living on less money. This will help you a lot once you lose your earnings upon retirement. It also reduces the money you need for living, lowering the total amount of what you need to save.
5. Use Catch Up Retirement Savings
Take advantage of catch up retirement savings once you start cutting your current expenses. Catch up contributions make saving easier for people aged 50 and up. It’s from the IRS, so you know it’s a legitimate way of tucking enough savings for retirement.
This lets you go beyond the usual limit of funds you can save in tax-advantaged retirement accounts like IRAs and 401(k)s. If you’re interested to learn more, there are a lot of resources out there you can use.
6. Make a Solid Retirement Investment Plan
It’s not enough to save money for retirement alone. It’s also important to come up with a solid investment plan. But you don’t need to outsmart the market or trade at every opportunity.
All you need to do is to come up with a strategy that keeps you safe from inflation. With this investment plan, you’re assured that your money isn’t at risk for years to come. Read this post from Navigation Wealth Management to know how much money you need for retirement.
7. Understand Your Own Reason for Retiring
Having an earlier retirement is not only about money but also about time. As soon as you retire, you’re trading your dependence on earning money. What you get is the freedom of spending your time as you see fit.
That’s why It’s important to have a concrete idea of what you want to do with your life. Sometimes, it might get difficult for you to think of anything once you’re free from your job. But in most cases, people retire to reinvent themselves and find something they’re more passionate about.
Having a plan of what you want to do will make your early retirement will be a success. If you’re not sure where to start, do your research online and find possible ideas. Take your time and make an informed decision.
8. Plan for Healthcare Costs
One of the most prominent disadvantages of retiring earlier is finding healthcare funds. It’s especially difficult before you become qualified for Medicare. A good financial move is to look for early retirement insurance options in case you get into a life-threatening situation.
Another alternative is to start adopting healthy habits as soon as you can. Eat well, exercise, avoid getting stressed, and stay connected with friends. This lets you live longer while decreasing your health expenses.
Learn Financial Tips to Retire Early!
There are a few things you need to think about if you’re thinking about retiring early. The most obvious thing is the amount of cash you need to retire early. That will play a large part depending on the age you’re retiring.
Do you need to get more money from your work? Check out our guide here and learn how to ask for a raise at work.