Many people dream of retiring early, but it takes dedication, planning, and effort to make it happen. Following are some tips that can help you down that path.
1. Get Expert Advice
Unless you’re a financial planner yourself, you’ll probably need professional assistance in developing a plan to help you reach your goal of early retirement. Contact your bank for a referral to someone who can help you get started.
2. Set a Goal for Savings
First, figure out how much savings you need to retire at your approximate target date. A goal will give you something to work toward, beyond simply the abstract idea of retiring early. It's an amount that will give you the confidence to leave work behind.
3. Create a Plan for Savings
A goal is a great start, but it will be extremely hard to achieve if you don't have a plan for how to reach it. Develop a budget that allows you to save as much as possible. Figure out an amount you're able to save each week and put it into your savings account. If you stick to your plan, it will add up quickly…..and earn interest.
4. Leave Room for Flexibility
Leave room for flexibility in your budget, because if your plan is too strict, it might become difficult to save as much as you want. And, if it creates too much stress, you run the risk of giving up on your plan altogether.
5. Contribute to Your Workplace Plan
If your job offers a retirement plan, take advantage of it. If your employer is willing to match your contributions, contribute as much as they match, at the very least. If you can contribute more, do so.
6. Don't Withdraw From Your Retirement Account Early
Resist withdrawing from your retirement account early, even if something comes up and you need money to pay for an unexpected expense. There are likely other ways to pay. Look into a personal loan (1) or a credit card (2), for example.
7. Take Care of Your Debt
Keep your debt under control. Make payments on time to avoid late fees and damaging your credit score. Pay off your loan or credit card as soon as you can, so you’re not wasting money on interest payments that could be better used to increase your savings account.
8. Create New Sources of Income
The more money you bring in, the more you can save, so consider finding new income sources. That may mean working a second job or starting your own side hustle. Whatever fits your lifestyle, an additional paycheck can go a long way toward funding your early retirement.
9. Utilize a Health Savings Account
Consider setting up a Health Savings Account (HSA) with an automatic payroll deduction.
"Health care costs are one of the main concerns when individuals contemplate early retirement, and HSAs are an often-overlooked tool for savings," says John Hancock. (3) "HSA accounts, offered in conjunction with some high-deductible health care plans, allow for you to contribute tax-free, have the assets grow tax-deferred and make withdrawals for qualified expenses tax-free. Contributions made to the account carry on year to year and even carry on with you if you change employers. If you can avoid withdrawing from the health savings account during your working years, any amount remaining can be used in retirement for qualifying health needs. It’s not for everyone, but it’s worth considering and asking your advisor if it makes sense for you."
10. Live Modestly
If you're serious about retiring early, it's going to require sacrifices in the near-term. Evaluate your lifestyle and spending habits, and find expenses you can cut and things you can do without. Choose less expensive options and live modestly so you can live the way you want when retirement comes. The path toward early retirement might not be easy, but you can do it if you make sacrifices and the right decisions, and start as soon as possible.
1. Subject to credit approval. Terms and conditions apply. See a banker for details.
2. Credit cards subject to credit approval. Certain terms, conditions and limitations apply. See Consumer Credit Card Agreement and Disclosures or a banker for details.
3. https://www.johnhancock.com/ideas-insights/8-tips-to-achieve-early-retirement.html