In 2020 alone, almost 30 million Americans retired.
The idea of retiring early is one that many people fantasize about. They envision spending their days doing what they want and having time to get everything done.
Before you jump into the world of financial freedom, there are a few things you’ll need to consider. In this blog post, we’ll talk about how to arrange an early retirement, along with some other important considerations when deciding if it’s right for you.
Instead of wondering how to plan for retirement, read on to find out!
Step 1 – Earn More Money
The first thing that people worry about when they start thinking about how to plan for retirement is whether or not they will have enough saved up. If your dreams of retirement include lounging on the beach for twenty years, you’re going to have to earn more money.
If you don’t see yourself getting a raise at your current job, consider starting a second income stream. You could begin a side hustle on the weekends, or find remote work to do during the evenings.
Not sure what type of income you should be aiming for? Reach out for help! An experienced financial planner can help you determine exactly how much you need to bring in for early retirement.
Step 2 – Eliminate Bad Spending Habits
The very next thing that people start talking about is how they need a lot of money saved up in order to retire early. And why do they think they need such a big pile of cash? Because their lives cost a lot of money!
If you want to retire early, it’s not enough to just earn more money and then lose it all by spending too much. You will have to save up some of what you make, and then you will have to save more.
Step 3 – Pay Debts
If you’re living paycheck to paycheck, you may be in a position where it’s impossible for you to save up enough money for retirement. If that is the case, make sure you stick to a budget and start cutting down on unnecessary expenses. You should strive to have all of your debt paid off by the time you plan on retiring. That way, you’ll have nothing to worry about other than earning enough money for your retirement.
This doesn’t mean that you should give up on saving entirely, though! When you pay off one debt, save the amount of money that used to go towards paying it and put it away in a savings account.
Most people who are just starting out can easily get rid of their credit card debts and student loans, start by putting all extra funds toward these balances until they’re paid off. Then start working on getting rid of any car payments or mortgages that you may have leftover.
Step 4 – Find Alternatives
If you’re not able to eliminate some big expenses from your life, consider finding ways to cut down on the costs associated with them. For instance, if you get invited out every weekend by friends, try suggesting an alternative activity that doesn’t cost as much time or money.
Suggest fun get-togethers such as playing cards at your place. Are you wasting $100 or more on a gym each month? Work out at home so that you can get in shape without having to pay for gym memberships and classes!
Step 5 – Always Deal Hunt
Next, another way to save for retirement is by constantly searching for the best deal. People who save money do it so that they can retire early. You can search for local deals on entertainment, gas, or even food. Even a $5 discount here and there adds up over time!
The savvier you can be with your cash, the more you’ll have when it’s time for early retirement. In addition to searching for discounts on groceries, look for ways to save on other expenses like car insurance.
Talk to your insurance agent about bundling your home and auto, or renters and auto insurance. Oftentimes bundling is a great way to save big. Next, see if there are any memberships you can join that offer special discounts. For instance, AARP members can receive discounts on their phone bills and other monthly bills.
Step 6 – Create a Realistic Retirement Plan
Now that you know some of the best retirement tips and tricks, let’s talk about the common pitfalls to avoid. One of the biggest mistakes people make when they’re planning for retirement is that they fail to plan the correct way.
They start saving a little bit of money here and there, but they don’t really do the math well enough to understand how much it will all add up to in the end. Also, people make plans that are based on inadequate projections about their incomes.
To avoid making the same mistakes, we suggest reaching out to a financial advisor. Using the help of a professional you can create a clear picture of what your retirement income should look like.
Instead of living in a fantasy world, or stressing about not having enough cash, you’ll have a realistic idea of what your retirement will be. If your retirement is going to be a lot less than you initially planned on, start thinking of ways to downsize.
There’s flexibility available in the form of reverse mortgages, or downsizing to a smaller home. You’ll be able to make your money stretch further!
Know-How to Plan for Retirement
As you can see, there are many different things that contribute to a successful retirement plan. However, the most important thing when it comes to understanding how to plan for retirement is having a plan in place. A plan that you begin working on now, so when your time comes for retirement, you’re ready to go!
If you need help creating a plan or have any questions about what we discussed today, reach out to a financial advisor today. For more smart strategies, read another article.