Tips for Making Early Retirement a Reality
For years people have been conditioned to think that retirement starts once you’ve hit the age of 65. Today people would prefer to retire while they’re still young enough to enjoy it. These tips for making early retirement a reality might help you retire a few years early, too.
One thing anyone considering early retirement will have to do is to live frugally. You can’t expect to be able to save a good deal of your income if you’re spending every penny you make. Choose to live well below your means now and you’ll have a better chance of saving enough to retire early in the future.
Do you really need the newest car on the market? If you’re thinking about retiring early, a good, used car will probably be just as good. Not only will you save money on the car itself, but you’ll probably also save money on the insurance for it, as well.
If you’re buying a home, consider paying at least one extra mortgage payment toward principal each year. By making just one extra principle payment per year, you can shorten the length of your loan by a good bit, saving you a considerable amount in interest alone.
Besides not spending all your money each pay period, you will also want to put some of those savings to work for you. At the age of 20, if you’re able to keep out 20% of your yearly income, place it into a fund that follows the S&P 500 Index, and leave the money to grow long-term, you could feasibly retire around the age of 40. Of course, the more money you can place into a fund like this, the better off your retirement portfolio will look.
To help these tips on making early retirement a reality along, you might consider having the amount you’ve decided to save taken out of your paycheck and automatically deposited into a savings plan. Check with a Certified Public Accountant or Financial Counselor to help you make the necessary arrangements.
Of course, you’ll want to participate in the 401(k) at your place of business. This will be an additional savings plan. Your employer may match your contributions, but the amount they contribute will be much less than you would like. Any extra they contribute will help meet your retirement goals, however.
You might also consider putting money into a ROTH Individual Retirement Account. The Roth IRA has a limit on how much you can save per year. You will also have to pay a 10% penalty if you retire earlier than 59 ˝. If you retire after that age, any funds you have saved will be penalty-free when you make the withdrawal.
Although these tips for making early retirement a reality aren’t going to guarantee that you’ll have a sizeable nest egg, they might give you ideas of what you can do to start saving a little bit more. Who knows, with some planning and saving, you may be able to retire earlier than you originally thought.