Since the Great Recession, an increasing number of people have been looking into the concept of early retirement. Less than one percent do so before the age of 50, however, and the average retirement age continues to fall between 62 and 65. Retiring early requires some serious financial planning, and here are some tips that can help make it happen.
Those who are interested in retiring early will want to make sure that they start the process early. Starting early provides more time for the power of compounding interest to work its magic. Those who have 20 or 30 years until retirement will see their money turn over several times. On the other hand, those who wait until a decade before they intend to retire might only see their initial investments double once or twice.
Common sense dictates that spending everything that comes in will not lead to retirement riches. This means that those who want to retire early will want to cut expenses as much as they reasonably can. Every dollar that’s not spent is a dollar that can go into a retirement account.
Invest In Retirement Accounts
Many early retirees are able to amass a large sum of money because they leverage their retirement accounts. Many employers will match employee contributions. Additionally, it’s possible to put off some of the taxes that would otherwise erode a retirement nest egg’s value using tax-advantaged retirement accounts. This defers tax payments until a future time and rate.
Pay Yourself First
Most people pay their bills and then save and invest what’s leftover. These people will find that there’s usually little leftover. Those who retire early follow the advice to pay themselves first, within reason. They save and invest before paying other bills, and if there’s a shortfall, they find a way to fund it creatively.
Look At Side Hustles
Many jobs pay the bare minimum that people need to exist. This can make it hard to save for early retirement. Finding a side hustle or a second job will go toward retirement savings. With the advent of technology, picking up a side hustle has never been easier.
Early retirement is a goal many people have. However, relatively few are able to achieve it. Those who put these recommendations into action are more likely to retire early with a comfortable nest egg.