Five Tips That May Help You Retire Early

Jim Mcnaughton profile photo

Jim Mcnaughton, MBA, CFP®

Financial Advisor
Momentum Independent Network Inc.
Schedule a meeting

While most people retire in their 60’s it doesn’t stop us from dreaming of an early retirement. What stops so many from implementing that early retirement? It could be a combinations of factors, from a lack of saving, to relying on Social Security and Medicare which are age-dependent. Or it could simply be the worry of outliving the money that you’ve saved. If you’re still in the saving phase for your own retirement, here are a few tips that may help you take the leap into an earlier retirement.

When you're hoping to retire early, try these five tips to prepare yourself.

GETTY

Save As Much As You Can

It seems obvious, but if you’re trying to retire earlier rather than later, you’ll want to save as much as you can. If you’re currently saving just to meet the minimum in a 401(k) account, save enough to max it out and then go beyond that. Where you’re putting these savings may vary, from investment accounts to high yield savings accounts, depending on your needs and situation. To retire early, you’ll likely need to dramatically increase how much you’re saving – which means you’ll also need to adjust how much you’re spending.

Adjust Your Spending

When you’re saving as much of your income as possible, you’ll need to reduce your spending as much as possible. Look for savings in your expenses, such as cutting any streaming services that you’re no longer using, or using coupons for your groceries. You may also want to look for larger savings where you can, such as changing where you live if possible or taking public transportation. If you find that you can’t adjust your spending down further than you are, you may want to see if you can increase your income.

Increase Your Income

The more you earn, the more you can save for an early retirement. Earning more may be as simple as asking for a raise or picking up more hours at your current job. If your current job isn’t providing enough income for you, think outside of the box and see if you can generate additional income through a side-hustle or contractual work. If you have the opportunity, you may also want to explore career opportunities that provide a higher income. With this additional income, make sure you’re investing it to maximize your potential returns.

Maximize Your Potential Returns

With whatever you can save and the extra amount you can earn, make sure you’re maximizing the amount that you can invest in your investment accounts. If you have an employer sponsored investment account, such as a 401(k), and you get any matching amount, it’s a good idea to make sure that you’re contributing enough to get the matching amount from your employer. You will likely want to max out your other employer accounts, such as an IRA or health savings account if they are available. With what you have left, you’ll want to invest it carefully, and you can do that with thoughtful planning.

Create A Financial Plan

When you’re trying to retire early, it’s particularly important to have a financial plan. You’ll want to plan to have enough money to last you for a longer period of time than if you were retiring at a more traditional age, and this may take more planning, and you may need to adjust more factors within your plan. A financial advisor can help you to assess your risk tolerance and to develop a plan that fits your specific needs and lifestyle, taking into account your hopes for an earlier retirement. You’ll also want to plan for the idea that while an earlier retirement may be exciting, it may put more pressure on you in the years leading up to your retirement, so you’ll need to weigh the pros and cons to ensure that it’s a right fit for your lifestyle both now and in the long term.

By Andrew Rosen, Contributor

© 2024 Forbes Media LLC. All Rights Reserved

This Forbes article was legally licensed through AdvisorStream.

Jim Mcnaughton profile photo

Jim Mcnaughton, MBA, CFP®

Financial Advisor
Momentum Independent Network Inc.
Schedule a meeting