The Golden Years are supposed to be your time to relax and reap the benefits of your hard work. Decades of saving and putting off trips so you can enjoy your retirement are finally in your reach!
But then, when you really think about it, you start to question what you’ve always been told about retirement.
You’ve probably done the math yourself. With the typical retirement age today raised to 67 and a global life expectancy of 72, the numbers don’t quite add up. Why work hard for decades, just to have five years of enjoyment?
This question is prompting more and more people to choose the path of less work, more play. They want to work smarter, not harder, and set up their future to quit the job force sooner.
You, too, can pave the way for more freedom in your life. These tips will set you on the financial road to early retirement.
1. Take a Look at Your Numbers
Before you can make any goals for retirement, early or not, you need to take a good, hard look at the numbers involved.
Financial guru Dave Ramsey has an investment and retirement calculator you can use for this. Plug in a few numbers, play around with your preferred retirement age, and the math will show you how much you will have saved.
When you find the savings you think you’ll be able to live your retirement life on comfortably, that should be your target goal.
2. Get Investing
Ramsey’s calculator includes both saving and investing for a reason. The average savings account has an annual interest rate of 0.05%. This minuscule return will not help your money grow.
Smart investing, on the other hand, will expedite your savings. You don’t need a huge starter pool of money down to get involved. Today’s new investors can find lots of safe opportunities in fields like real estate for as little as $500 to get them started.
You can always play the stock market if you are comfortable doing so, or look into other ways to make your money do the work for you. But sticking it in savings, while keeping it “safe,” isn’t going to help you grow your assets.
3. Pay Off Your Debts
Anything that you owe money on and is paying back with interest needs to disappear, fast. The sooner you pay off those pending debts, the quicker you can use that money for investments.
Start with your highest interest rate debts or your lowest balances. Focus on paying off one at a time, and then move on to the rest. Use the monthly payments for each paid off the card to add more on to the next one you’re getting rid of.
Eventually, this snowball effect will result in your debt-free self!
4. Consider Your Health
When you turn 65, you are eligible for Medicare. Until then, you’ll need to ensure that you have healthcare coverage or a plan for unexpected medical issues.
Health insurance can be costly. Between the premiums, deductibles, and copays, it’s not always cost-effective for a healthy person to pay into an insurance policy.
However, all your good intentions towards retiring early could disappear if an unexpected health issue comes up. If you don’t want to invest a lot in insurance coverage, a supplementary plan like AFLAC is a good idea. These policies will give you a layer of protection in the event of a covered illness or injury, and they are inexpensive.
In addition to your healthcare coverage, if you want to retire early, you need to keep yourself in shape! This will keep you from developing expensive chronic illnesses and health conditions.
5. Make More Money
The common-sense strategy to retiring earlier is to work harder now. If your primary job is paying all your bills, consider getting a side hustle and putting that money towards your future.
If you’re careful about how you use your extra funds, you can pay off your debt with them. Once that debt is gone, that same income can be used to diversify your investment portfolio.
Working harder now and being disciplined with your spending will pay off in dividends when you’re ready to retire early.
To prepare for early retirement, you have to get your mindset right first. Do you want to work hard now and have more time to enjoy life later? If so, you’ll have to live as you mean it!
With these savvy financial planning tips, you’ll be on the path to early retirement in no time!