The most common age at which people retire in the United States is 62. It’s also when many people start experiencing more health problems which can make it difficult to enjoy retirement.
For that reason, people have begun to look for ways to retire earlier than that.
It’s a great opportunity to enjoy your life and pursue what you want while you still have your health. However, if you don’t properly plan for early retirement, you may find yourself in some serious financial trouble before long.
Keep reading for 11 tips and tricks that could help you have a happy retirement no matter how early it is.
1. Know Your Target Age
The first step to retiring early is to know at what age you would like to retire. This will help you calculate your costs and determine what your financial goals need to be.
2. Calculate Your Costs
Even more important than knowing when you want to retire is knowing how much retirement is going to cost. You’ll need to consider all one-time and recurring expenses you’ll use throughout your retirement years.
How much you need for retirement will vary greatly depending on your plans. Will you buy an RV and visit all 48 lower states after you retire? Or, will you focus on the hobbies you love but only now have time for?
It’s important to have some type of plan for retirement to stay active and engaged. People that slow down too much after retirement don’t get to enjoy it for as long as those who keep busy.
3. Make a Long-Term Goal
Your primary long-term goal should be the amount you need to save and the age at which you want to retire. Write this goal down and put it somewhere you can see it. Visit it often to keep it at the front of your mind.
It should read something like this: “I need to have $1 million saved for retirement by the time I reach 55.”
While this may seem like a lofty goal, this should include money in all of your savings accounts, retirement funds, and other investments. Assets like your home that you plan on selling can also be included in that amount.
4. Set Up Short-Term Goals
Once you have your long-term goal in place, you can set up yearly and monthly savings goals. This will help keep you on track on a daily basis.
Financial battles are won or lost in the little things. This is why having these smaller goals will help you. A few dollars spent on a daily coffee habit may not seem like it’ll make a difference in your big goal, but it will on your monthly one.
Keep in mind that you may not be able to simply divide the total amount to save by the years and months you have left, so consider other things like debts to be paid and your timeline for selling assets.
5. Eliminate Debts
One of your primary goals should be to eliminate any debts that you have. This is something you never want to take into retirement. You’ll probably even want to postpone saving to eliminate debts, especially ones with high interest rates.
As soon as you do get all of your debts paid off, including your mortgage and any car payments, you can start putting that money into a savings account. It’s money you won’t miss in your budget since it was already being spent.
6. Limit Current Spending
Another way to start saving more money and prepare yourself financially for retirement is to cut back on your current spending habits.
Once you retire, you’ll have a limited budget without money coming in, so it’s important to change your mindset to one of more careful budgeting.
You can also take that extra money you would be spending and put it into a savings account. Take a careful look at where your money is going and start trimming the excess.
An easy way to save extra money every month is to cut the cable bill and use a popular streaming service instead. This will easily allow you to save hundreds of dollars more every year.
7. Take Advantage of Catch Up Savings
If you haven’t been contributing the maximum amount to your IRA or other retirement savings account, now is the time to start adding extra money into it. This account is a great way to ensure you have enough money to retire early.
Check to see how much extra you can contribute every year based on your age and start maximizing that investment. If your employer offers matches for this account, you’re missing out on free money if you’re not using it.
8. Start Investing
It’s never too late to start investing so you can save money for retirement. Before you jump into an investment plan, however, you’ll need to see how long it takes to pay off so you can pick the right one for you.
9. Get Healthy
It may seem strange, but getting healthy will help you prepare for early retirement. There are a couple of reasons why.
First and foremost, you’ll be able to enjoy your retirement more if you’re healthy and able to do all of the things you’ve been waiting for so long to do.
Secondly, you could avoid a number of medical bills in retirement by taking steps now to live a healthier lifestyle. This will also give you more time to spend doing what you want and less time visiting the doctor.
10. Downsize Your Housing
If you had a large family, you probably had a large family home. Now that you’re an empty nester, you probably don’t need all that space.
You don’t necessarily need to jump into the tiny house trend, but finding a one-bedroom home instead of a three-bedroom one can help you save on monthly expenses plus the extra money can be put into your savings account.
11. Save Like Crazy
Although a number of our tips have already covered this, it bears repeating. Once you’ve done everything else on this list, it’s time to start saving like crazy.
Every little bit counts, so even doing something like saving your loose change in a jar can help you reach your goals of early retirement.
Need More Help for Early Retirement?
Now you have 11 tips and tricks that will help you reach your goal of early retirement. As you can see, they all revolve around reducing your spending and increasing your savings to ensure you can live the life you want after you retire.
For more financial help to retire when you want, consider getting a financial advisor. They can help you set up goals and give you the tools you need to reach them.
This material was prepared by an independent third party. Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. Links to external sites are provided for your convenience in locating related information and services. Guardian, its subsidiaries, agents, and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services, and make no representation as to the completeness, suitability, or quality thereof. 2019-83151 Exp 07/21