Having the desire to retire early is common. What’s less common is implementing the necessary changes to make it happen. Financial independence might be around the corner and the tips below can help you achieve it.
Determine your retirement expenses
One of the first things you’ll need to do is determine how much money you need to retire. It’s important to note that you’ll likely have to purchase personal insurance because often retirees are not retained on the employer’s insurance policy.
Identify the amount of savings required
How much money do you need to save before retiring? The general rule of thumb is that you should have 25 times the amount of money you plan to spend annually before retiring. Another consideration is the ability to withdraw a small percentage of your invested savings throughout the first year of retirement. Based on the current rule, you can withdraw 4%.
Reduce or maintain your expenses
Retiring often means reducing expenses to accommodate an adjusted budget. If you’re someone that prefers to live lavishly and you’re unwilling to compromise, there’s little chance that you’ll retire early. Reducing the amount of money that you spend on a monthly basis isn’t as difficult as it sounds. In some cases, by simply maintaining the lifestyle that you had while working and not increasing your expenses, you’ll be able to retire early without any issues.
To maintain your expenses at the same level, you may need to keep the same vehicle. You’ll basically need to develop a different mindset. For instance, if you’re accustomed to shopping without thinking about prices, this will need to change.
Retiring doesn’t mean that you stop investing. In fact, it will become even more important to invest in a way that you receive a higher return. It’s evident by turning on the news this week that some events that occur in the world can drastically impact the markets. It’s the reason why you should have a portfolio that’s balanced and focused on long-term growth. This is an approach that’s less risky and accommodates fluctuations in the markets.
If you’re interested in learning how to retire early, you should seek guidance from a trusted financial adviser. You should be able to clearly see what’s required to retire early and make a decision regarding the lifestyle you want to live. For some people, the freedom to travel and live without the pressures of a job is worth the sacrifice.