Does the idea of early retirement sound appealing? For many Americans, it’s a lifelong dream that can become a reality with smart financial planning.
Achieving early retirement often means making sacrifices throughout your life. During your working years, it’s crucial to avoid the temptation to keep up with others and instead focus on saving for retirement. To ensure you don’t run out of money post-retirement, you might have to trade luxury vacations for more affordable experiences.
The most important advice for early retirement is to start planning today. By reading this, you’re already taking a significant step toward turning off that early morning alarm for good.
We consulted numerous financial professionals to gather insights and tips on actions to take now and in the future to retire early with enough money to last a lifetime. Their advice covers a range of topics from saving and investing to choosing a cost-effective place to live.
First, define what “early” means to you—whether it’s age 55 or 65. Then, consider the costs of retirement: Will you really spend less, as some financial advisors suggest? What income will you have from Social Security or a pension? What savings and investments do you have to support your retirement lifestyle?
Answering these questions requires a comprehensive retirement and financial plan, which can help you see where you stand today and outline a path to early retirement.
Traditionally, retirement means leaving a regular job to do something else. Many people retire because they dislike their jobs. However, redefine what retirement means to you and be specific about what you want to do. This clarity will help you work with a financial advisor or plan on your own to achieve your goals.
Knowing if you have enough money saved is crucial for early retirement. While there’s no guaranteed way to determine the exact amount needed, many free retirement calculators can provide a close estimate based on your age, savings, and annual spending. This can give you the confidence to leave the workforce when you’re ready.
If you’re aiming to retire in your 40s or 50s, your financial preparation will need to adapt. Early retirement doesn’t mean you’ll stop working entirely; you may just work fewer hours. You’ll need to bridge gaps in income and benefits, like health insurance, which makes working with a financial professional beneficial.
For those not in the high-net-worth bracket, getting a second job can accelerate your path to retirement. Overemployment, where people work multiple remote jobs, can double your income and help you retire sooner.
Meal prepping can also save you money and reduce food waste, contributing to your retirement fund. Additionally, having a side hustle can boost your savings and investment goals, helping you retire early.
Relocating to countries with a lower cost of living, like Mexico or Ecuador, can stretch your retirement funds further. Investing your money wisely, especially in low-cost investments like index funds, can also grow your wealth over time.
Instead of always seeking the lowest price, focus on buying fewer but higher-quality items to avoid frequent replacements. Also, consider the “savings location” for your money. Saving in the right types of accounts, especially taxable ones, can offer more flexibility and tax benefits.
Increasing your earnings through self-advocacy, entrepreneurship, and side hustles can also significantly impact your ability to retire early. Simple actions like canceling unused subscriptions, renegotiating bills, and selling unused items can free up more money for savings and investments.
Having a financial advisor who specializes in early retirement can help you avoid common mistakes and optimize your financial plan. Investing outside of retirement accounts can provide more accessible funds before the age of 59 ½.
Practicing retirement by adjusting your lifestyle and budget years before your planned date can make the transition smoother. Ensuring you have a solid healthcare plan before leaving your job is also crucial.
Delaying Social Security benefits can increase your lifetime payments, and working part-time can bridge income gaps. Hiring a qualified financial advisor can help you navigate these decisions.
Ultimately, consistency in saving and investing, keeping a simple but fulfilling lifestyle, and having an emergency fund are key to retiring early. Pursuing a passion project as a side hustle can also provide additional income and enjoyment.
Planning is essential for early retirement. Focus on cash flow management, investment management, and tax planning to build wealth and retire sooner. Enjoying vacations through cost-effective means like timeshare rentals can also help you save money.
Knowing your retirement number and investing wisely can set you on the path to early retirement. Balancing paying off debt with investing can maximize your returns and savings.
Setting up multiple income streams, committing to living below your means, and starting a side hustle can all contribute to achieving early retirement. Building an online brand or following can also provide passive income.
Funding a brokerage account while saving for retirement can offer financial flexibility. By starting today and understanding what it takes, you can increase your chances of retiring early.
No matter your stage in life, applying these tips can improve your financial health and make early retirement more attainable. If it feels overwhelming, remember that preparing for retirement is a marathon, not a sprint. Resources like books, blogs, and financial advisors can help you develop a personalized plan.
Brian Thorp, founder and CEO of Wealthtender, emphasizes the importance of getting help with money matters from trusted sources. With over 25 years in the financial services industry, Brian is dedicated to helping people enjoy life with less financial stress.