If given a chance to retire early, wouldn’t you grab the opportunity without question? Many want, long and dream about early retirement. It’s that season in life when you can stop working without worrying about how you’ll fund the same or an even better lifestyle. The problem is, sufficient funding is hard to come by at any age. If you really want to retire in your 50s, you need to start saving regularly as early as you can.
Building your nest egg for retirement takes time and dedication. It must start in your 20s or earlier if possible. If you have your eye for an early retirement, there are key strategies to keep in while on various stages of your life.
Your 20s is the time when you should develop good habits and smart planning of your wealth. Some people may think this is too early for planning but it’ actually the ideal time to get a head start. Your 30s are vital for early retirement planning. This is the season where your investments will likely have the greatest impact on your finances. The 40s, on one hand, is the time to be more aggressive but also careful with your saving and investment decisions. Once you hit your 50s, employ smarter moves with your finances to keep moving toward your early retirement goal. To help you further, below are some of the best strategies to fund for early retirement:
Just like any major goals in life, retiring early requires thorough and detailed planning. Remember that early retirement means different things for other people. To define what it is for you, there are key questions to ask yourself. Two of the most questions to ask are these: What age does early retirement mean for you? And how much retirement will you need to support the lifestyle that you want?
If you think that 45 years old is the perfect age to retire then you’d need to compute the amount of money you’ll need to live comfortably. You may want to work with a professional planner to be able to develop and establish a solid plan.
Maximize Savings and Investments
Retiring at 45 is an ambitious goal but it’s not impossible. Again, the key to retiring early and in style is planning. This covers maximizing your savings and investment opportunities. You cannot simply rely on your employer’s benefits and retirement plans. To get ahead of the game, you must explore other opportunities like mutual funds and stock investments as they offer high returns. But at the same, be careful with how you invest your money because some investment products are high risk.
In addition to savings and other investments, you should also consider looking into how to earn some passive income. Earning a substantial amount of passive income may be difficult to obtain and it takes time but the rewards are worth it. The key is to choose the right investments. Some retirees, for instance, live off through the income they earn from rental properties, business or stock dividends.
Work Part Time
If you’re going to retire at age 45, don’t consider withdrawing from your retirement fund just yet. From this age up to 59 1/2 years old, aim to use passive income and other forms of investments to support your lifestyle. If these sources of funding aren’t enough, be ready to work part time for now. Just choose a job that you’ll enjoy or you may even try some outsourcing jobs online depending on your skills.
As much as you want to withdraw from your retirement funds, hold it off. It’s not always a good idea to do because it will reduce your total funding. While you can still work, take advantage of the years and look for a part time job that you’ll enjoy.
Know the Tax Rules
Aside from reducing your retirement, early withdrawal also means that you’ll get charged an early withdrawal penalty. The penalty is typically 10% which is already a lot of money. You don’t want that hard-earned money to just go to the government. It’s your and you’ve earned. All you need to do now is withdraw the funds at a time when there’s going to be no strings attached.