With a little bit of financial planning and management, you can retire earlier than the average American. Most plan on retiring in their 60s, but if you’d like to spend more time pursuing your personal interests full-time, it’s possible to retire sooner by taking these important steps.
Step 1: Start as soon as possible
If your goal is to retire early, you need to make a plan and prepare for retirement as soon as possible. The earlier you begin planning for retirement, the earlier you will be able to retire.
Step 2: Get your vision of retirement in focus
56% of Americans don’t know how much they need to retire. Take a thoughtful approach and determine what retirement looks like for you. Do you want to focus on extensive travel or spend more quality time with your family? For a growing number of people, retirement presents an opportunity to start a new business venture, generate passive income (such as rental properties) or work part-time doing something they enjoy.
While the stereotypical retiree moves to sunny Florida, an AARP survey shows that 3 out of 4 people would rather stay in their current home in retirement, citing their community as being important to them. Staying in their home also means these aging Americans plan to make modifications to their living space as needed as they age, and those renovation expenses need to be incorporated into their retirement plans.
Step 3: Get a great financial coach
Early retirement is an ambitious goal, and it is more attainable with the right advisor. Keep in mind: Even the most talented athletes in the world don’t accomplish their ambitious goals solo; they have a team of experts supporting them. Find a financial advisor who will listen to your retirement goals, understand your timeline, gauge your personal risk tolerance and take a collaborative approach to retirement planning.
Step 4: Make a plan
You have a destination and a coach — now it’s time to make the plan. Max out all your retirement accounts, and work with your financial advisor to evaluate your risk tolerance and make additional investments accordingly.
Your plan needs to include long-term and short-term money management strategies, and understanding certain risks and benefits of early retirement will help you create those plans. For example, drawing Social Security checks too early could be a costly mistake. If you start claiming Social Security benefits at age 62, your monthly check will be 76 percent less than if you wait until 70.
Step 5: Track, Manage and Save
Stay disciplined and schedule routine reviews of your accounts and policies with your financial advisor to “inspect what you expect.” During these routine updates, determine if there are any changes with your situation that would prompt a review of the accounts and policies in place to achieve your goals and objectives.
If you want to retire early, your goal is to consistently invest for retirement while simultaneously focusing on other financial obligations, like funding your kid’s college and paying off your home mortgage. While it may be tempting to take your foot off the gas, following these five steps will ensure you have the freedom to retire early and spend time doing what you want.
Any information provided has been prepared from sources believed to be reliable but is not guaranteed, does not represent all available data necessary for making investment decisions and is for informational purposes only.