Many of us assume that we’ll retire at some point in our mid-60s, but that doesn’t stop us from wishing we could end our working years a bit earlier. Is that unrealistic?
Not at all! With the right strategies, an early retirement is possible for many. Take the following steps, as early as possible in your career, and you might have a shot at it.
Live more cheaply than you could actually afford to. “Living within your means” is good advice, and can prevent you from overspending and digging yourself into debt. Take it one step further, and live below your means. If you’re doing it right, you’ll have extra money left over covering expenses each month.
Open and contribute to a retirement fund early in your career. Even if you believe you could save more later, when you’re earning more, don’t underestimate the power of compounding interest over the years. It can provide a significant boost to your overall savings.
Know your worth. It goes without saying that those with higher incomes likely have a better shot at an early retirement, provided they plan appropriately. Don’t sell yourself short; ask for raises regularly, and develop competitive skills so that you can advance in your career.
Avoid emotional decisions. If you’re ever tempted to make a big financial decision on short notice, take a pause and ask yourself why. If your decisions are driven by fear or other negative emotions, they are more likely to be costly mistakes.
Play catch-up. The IRS allows catch-up contributions to qualified retirement funds after age 50, with tax advantages. Max out your regular contributions and make those catch-up contributions, too.
Don’t accumulate credit card debt. You don’t want to enter retirement, still making payments on purchases from years ago. Don’t charge more than you can pay off each month, and you won’t have to worry about wasting money on credit card interest throughout the years.
Downsize to retire earlier. Once the kids are grown and out of the house, downsize to a smaller one. As you get ready to retire, investigate the cost of living in other areas. You no longer need the proximity to your job, and are free to live somewhere less expensive.
Save on income taxes. Look into methods to lower your taxable income, such as contributing to a qualified retirement account or health savings account. You can prepare for the future while also lowering your tax bill.
For more information on retirement strategies, give us a call. We can clarify any information you’ve heard or read, and help you create a strategy to possibly retire a bit earlier.