Sometimes, we don’t get the opportunity to live the life we want because we are stuck with a tedious job that consumes our time and just makes us tired. However, our jobs can stop being a burden to us when know how to retire early. Retirement should be one of your most important financial goals since that’s how you get to reward yourself after decades of hard work.
Before you know how to retire early, you must understand that it entails different aspects of commitment and focus. You have to get used to sacrificing temporary pleasure to create a financially secure future for yourself and your household.
In this post, I have examined a step-by-step process that will help you achieve early retirement.
What Is Early Retirement?
To retire means to permanently let go of your job. This typically happens between the age of 60 – 65. So when we talk about early retirement, we are simply saying you can relinquish your job before you get to this age. You could retire at 30, 40, or 50. But this depends on how old you currently are.
How Much Do I Need To Retire Early?
If you want to retire early without having to ever worry about money, you should have at least a million dollars in your savings account or 401(k). If this amount of money is properly invested in a high-yield savings account, you could live off the interests alone for as long as possible.
You may also want to check out how to save for retirement at any age.
5 Benefits Of Early Retirement
If your original plan is to retire at 60, that’s commendable. But sometimes, it’s important we push for something better. There’s no harm in early retirement. Here are some of the reasons why you might want to work toward retiring as early as you can:
1. Retiring Early Could Be Good For Your Health
It’s unfortunate that some people don’t even live long enough to retire, especially when they work in a very hazardous environment. Their health deteriorates over time, putting them in a situation where they die untimely due to critical illnesses. Avoiding this tragedy is one good reason you must learn how to retire early.
On the other hand, even if you aren’t working in a hazardous workspace, retiring early can still preserve your health. For example, you are probably not having enough sleep due to the long hours you put in at work. Your mental health is another area to look at.
When you eventually retire, all the panicking, sleepless nights, and physical stress would come to an end. Your health would definitely thank you for it.
2. Retiring Early Gives You More Time To Travel
Having more time to travel to exciting places is one of the early retirement benefits many people crave. I bet there are so many places you would love to visit but can’t go since you must remain committed to your job. Retiring early removes this barrier.
You deserve all the time in the world to travel and explore different destinations across the globe. Mind you, traveling is something you enjoy when you’re young. You can’t just jump on a plane to a remote village in Mozambique when your health starts failing at an old age.
3. Retiring Early Allows You To Start A New Career
This is one of the main benefits of early retirement. Sometimes, people get tired of their careers and would love to switch to something different. However, this is a difficult feat to achieve when you haven’t retired.
You are basically tired of your job, not having the freedom to acquire a new skill set and venture into a different career path. Besides, you might not want to work under an employer for the rest of your life. You could have a business idea in mind that you want to execute. There’s no better time to do this than when you have retired.
4. Retiring Early Allows You To Explore Your Passion
A few years ago, I attended a business seminar where I got acquainted with a 45-year-old Canadian man. While conversing with him, he said he had started pursuing a career in music as a songwriter and instrumentalist. I was amazed. He claimed he had the freedom to do this after retiring from his 9-5.
We usually feel happier and more fulfilled when we do the things that we are passionate about. Spending 8 hours every day at your boring job could prevent you from exploring your passion. Don’t you still think it’s a wise decision to retire early? You sure think so.
5. Retiring Early Helps You Spend More Time With Family
There’s nothing more beautiful and precious than spending quality time with those you love. But sadly, some parents barely spend time with their kids since they are too occupied at work. Of course, you need to keep your job to be able to afford a good life for your family. However, if you want to have a healthy relationship with your kids and spouse, you have to figure out how to retire early.
Quitting your job early gives you enough time to create beautiful memories with your immediate family members.
How To Retire Early In 10 Simple Steps
No one achieves early retirement through wishful thinking. You have to put in the work to get the desired result. Here are 10 basic steps on how to retire early:
1. Define Your Early Retirement Age
The moment you decide your want to retire early, it means you have a goal in mind. Now, one important thing you must do when trying to accomplish a goal is to set a timeline. That is, you must determine when you want your desired goal to be achieved.
Apparently, it’s crucial for you to decide what age you intend to retire. Do you want to permanently quit your job at 40 or 50? Once you know when you are supposed to retire, you can start working toward it immediately.
Another angle to defining your “early retirement age” is to agree on what time you think is best for you to retire. For example, retiring at 50 might be what you consider early. For other people, 40 may seem like the ideal age for early retirement.
2. Imagine The Lifestyle You Want After Retirement
As part of the guide to early retirement, you have to envision the kind of life you want to live as a retired citizen. Create a clear picture of your post-retirement lifestyle. The reason you have to do this is simple; being able to manage your resources when you no longer work is very essential.
So, if you want to enjoy a lavish lifestyle when you retire, it simply means you have to be financially prepared for that. You must have assets and passive income streams that you can rely on to sustain such a lifestyle. But if you get used to a frugal life, then it means you don’t need too much money to retire. But more importantly, you will be able to make the most of what you have.
3. Create A Retirement Budget
As you make plans to retire, one of the early retirement tips that will help you thrive is budgeting.
Bear in mind that planning for retirement will require you to be very intentional about how you spend your money. You can’t claim to be building a retirement fund, meanwhile, you’re splurging a ton of cash every weekend on impulse purchases. That’s a recipe for disaster. Hence, you must take your monthly budgets very seriously.
Have a feasible plan for how you manage your salary. Your budget should allow you to pay for essentials while saving and contributing money to your retirement fund.
4. Make A Post-Retirement Budget
One of the top tips for early retirement is to create a budget. I’m not talking about your typical monthly budget. This is a much larger budget for the post-retirement lifestyle you have in mind.
There are several expenses you must factor into your budget, such as school fees, college tuition, housing, and other expenditures based on your liabilities and responsibilities. In a nutshell, having a budget will determine if you are ready for retirement or not.
For instance, if your overall budget amounts to about $2 million, you already know that you can’t relinquish your job or any major source of income until you have been able to realize this amount.
5. Invest
If you must learn how to retire early, you shouldn’t overlook the right investment opportunities.
Sometimes, saving money every month from your salary may not be enough, especially when your take-home pay isn’t much. So, to achieve early retirement, you have to figure out a way to grow your income quickly without sacrificing time and effort. The only way to do this is by investing.
For example, you can decide to invest 15% of your monthly income in assets like mutual funds, while putting only 5% in a savings bank account. If you are willing to take risks, you can go into the stock market. Allocate more of your portfolio to stocks and other high-risk investments.
6. Create Passive Income Streams
One of the best tips for retirement is to make your money work for you. You need to be able to keep making money without doing any more work even before you officially retire. This is achievable through passive income.
From P2P lending to rental properties and Annuity plans, there are several ways you can generate passive income and make your money work on your behalf. If you can pull this off successfully, you would have the best time of your life when you retire. You’d never have to worry about not having money consistently.
By the way, if you need more guidance on how to create profitable passive income streams, check out these 12 best passive income ideas to build wealth.
7. Get Good Health Insurance
It’s important to invest your money in assets that would help you grow wealth before and after retirement. But there’s something even more essential than assets and passive income streams; that’s your health.
One of the top tips to retire early is to invest in health insurance. Don’t forget that as soon as you retire, you won’t have any employer to cover your health insurance cost. This is why you have to treat your health insurance coverage seriously.
8. Eliminate Debt
Part of learning how to retire early involves getting rid of debt faster or at least reducing it drastically. Stop borrowing money unnecessarily. Taking a loan or piling up credit card debt is like a trap. It prevents you from saving money in the future or even achieving most of your financial goals.
If you are trapped in debt, the money that is supposed to be put toward your retirement fund would be used to clear your minimum balances every month.
When it comes to early retirement, consider debt your worst enemy. Rather than incurring debt, invest in assets and grow your net worth. This is how you enjoy peace of mind when you retire.
Need help eliminating debt? Check out these 10 helpful strategies to pay off debt faster, and how to pay off your mortgage in 5 years.
9. Examine Your Investment Portfolio
Occasionally, it’s advisable to assess your investment portfolio. This is important because you may need to reorient yourself and re-organize your retirement funds according to your age, financial goals, and health.
Assessing your portfolio is also advised since that’s how you can track your progress and see how close you are to reaching your desired amount for early retirement. Sometimes, you may need to speak to a wealth coach concerning this to get more clarity so you don’t make wrong decisions.
10. Track Your Savings And Net Worth
How much are you saving each month, and how consistent are you? Is your net worth improving? What does your cash flow look like? You can only answer these questions when you regularly keep track of your finances every month. It’s one of the overlooked tips to achieve early retirement.
Besides, if you manually deposit money into your savings accounts, chances are that you may not be consistent every month. You could miss some payments, not because you forgot, but because you were tempted to spend the money on something else.
Part of maintaining consistency is by tracking your savings and other aspects of your personal finance as often as possible.
Final Words On How To Retire Early
Before you start worrying about how to retire early, you have to first think about the present. What’s your current age and how much do you make every month? These factors are probably the most crucial things to consider as you chase after early retirement.
You also need to focus on improving your net worth continuously. But this is not something you achieve by working too many jobs. You’ll only keep working hard without getting tangible results. You have to work smart by leveraging profitable investment options, such as mutual funds, US stocks, P2P lending, Gold, Fixed Deposits, and a lot more.
Pin this for later!
