Typical retirement age is 65. But you’re not typical, are you? You want to retire early, leaving the marathon office meetings, conference calls and scheduled days behind you. After all, life is short and you would rather be enjoying yourself with family and friends, travel and adventure or creative pursuits. You may be able to retire early, with devoted financial planning and a commitment to good money habits now.
Financial Planning Tips for Early Retirement
Set Your Early Retirement Goals
Consider why you want to retire early. Define your personal goals as clearly as possible. Write them down if you need to. These early retirement goals will serve as your inspiration to follow through with your financial planning.
Budget Now, Retire Early
If you spend every dime you make, you cannot expect to retire early. Figure out your current budget to discover how much “extra” money you have that you could be saving and not spending. If you can’t see the extra money in your murky budget, record your actual expenses for an entire month, including everything from the electric bill to your morning coffee. This will give you a clearer picture of where your extra money is currently being spent, and sometimes wasted.
Increase Your Income
If the current amount of money you can save for an early retirement is limited, there are two basic approaches to take. One is to decrease frivolous spending. The other is to increase your income. Find a second job, pick up part-time work, or find a way to turn use your skills and talents to start your own business and get paid.
Invest in the 401K as Early as Possible
As soon as you have some extra money burning a hole in your pocket, invest it in your company’s 401k. The earlier you start investing, the more money you will have when you retire, thanks to compounding interest.
Max Out Your 401K
Invest as much as you can in your 401k in order to set yourself up for an early retirement.
Get Aggressive with Investing
If you can handle financial risk, both financially and emotionally, take more risks with your investment portfolio. Some of the more risky mutual funds also have higher rates on your investment. Only you can decide how much risk you can afford and how much you can stomach.
Open an IRA Account
Open an IRA account which suits your early retirement needs.
Don’t Do Debt
Resist the urge to carry any debt. Make exceptions for a home mortgage, since owning a home is one way to increase your financial worth. The other exception is a car loan. As for credit cards financing home furnishing or electronics, skip them all.
Expand Sources of Income for Retirement
Consider income sources for retirement which take little or no future effort, including dividends from stock, royalties on intellectual property or passive income from a website.
Retirement Planner, http://www.socialsecurity.gov/retire2
Retirement benefits by year of birth, IRS http://www.socialsecurity.gov/retire2/agereduction.htm