Having an early retirement from work for some people, they look forward to enjoying. In fact, retire early is a major goal for most working Americans. Some people retire after 60s some other in 50s, but no matter specific age there should be preparation. Here is how.
Know the ‘number’
Money is one of the major concerns of being retired, what source to depend on during this period of time. This should not be because the key is figuring out precisely how much money needed to retire comfortably. Track down the spending habits to know how much money spent. By this, you will be able you make the calculation for the retirement.
An US couple, Carl and Mindy plan to retire early. They traced down their spending thoroughly. Based on their expense note, they could live in $24,000 a year and they added a $6,000 cushion and estimate up to $30,000 a year. They are using “4 percent rule” — the slightly controversial rule of thumb used to help to conclude the amount can be withdrawn from the retirement savings each year without running out. “Based on the 4% rule, I need about $800,000 to retire with no debt,” Carl wrote on the blog in 2013. “However, I’d like very much to be able to help my children through college, so I’m going to bump the number up to $1,000,000.” They dedicated to putting $2,000 a month toward their investments, which stood at $570,000 when they started, in order to build their portfolio up to $1 million in 1,500 days.
Also in the retirement calculation, it is wise to consider the inflation into the mix. Inflation occurs time to time and it decreases the value of the amount of money that we have today. Using the inflation calculator, we can see that $1 million in 1995 will require $1.54 million to sustain equal purchasing power in 2015. Keep also that in mind, because it will decide how much money saving for the retirement.
Ready to downsized, a more minimalist lifestyle
Essential part yet powerful for strategies to retire early is to downsized. Lower the basic cost of living will assist the saving effort. The logic is the less money you need to live on, the more you’ll be able to save, and the sooner you’ll be able to retire. Keeping the basic cost of living to a minimum will provide with the extra cash needed to save for retirement.
This may mean driving older, less expensive cars, moving to the smaller house, moving to the area that less costly, avoiding restaurant meals and costly entertainment, and keeping vacations close to home, or not taking them at all. Hey, everything needs some kind of sacrifice right?
This is the exactly Carl and Mindy do. Shortly after making they made decision to retire early, the couple sold their 5,000-square-foot lake house in Wisconsin, then purchased a 1,400-square-foot fixer-upper in Colorado. They aims for significantly smaller mortgage. Plus, “those extra 3,500-square-feet added absolutely nothing to my happiness,” Carl adds.
Next, is about money management, and this includes not taking any debt, increasing more income and making the smart investment.
Debt is no doubt another one of those bad habits that will sabotage early retirement efforts. Debt decreases cash flow, and that will hack into the amount of money that you’ll have available to save for retirement. Try to reduce as minimum as you can having credit card.
Another is focusing on earning more income by doing additional work/jobs. Learning from the couple, Carl’s main side gig is blogging, but he also fixes up homes and writes smart phone apps. Mindy, who was previously a stay-at-home mom, landed her current job as a writer for a real estate investing website through their blog. They both plan to continue working on the side in retirement.
Lastly, is about making the smart investment. The investment that the couple takes includes buying the $176,000 fixer upper home that they estimate is now worth over $400,000. Another major investment medium for Carl and Mindy is the stock market. Although they don’t recommend picking individual stocks — which is much riskier than investing in low-cost index funds — they did have success buying shares of Facebook. Whether you choose to invest in real estate or the stock market, or neither, the point is that focusing on increasing earnings is just as important as saving.
So, are you ready to retire young?