Retiring early is a very attractive goal for a lot of people. What retiring early means depends on the person. For some, it’s retiring any time before they are able to claim Social Security benefits. It could mean retiring at 55 or even as early as 40, or maybe even earlier. To stop working, you need to have enough income from other sources to make working unnecessary. This is why many people assume early retirement is only for well-off people. However, retiring early could be more attainable than you think. There are ways to plan to retire early, whether it’s by a few years or perhaps a decade or more.
Set a Retirement Goal
If you’re thinking about retiring early, the first thing you should do is set a goal. When do you want to retire? What do you want your lifestyle to look like in retirement? A modest lifestyle is obviously going to be more attainable than one where you’re traveling a lot or eating in expensive restaurants. You need to determine how much money you will need per year, as well as roughly how many years you will spend in retirement. This will help you to determine how much you will need in total.
Work Out Your Current Expected Income
To get started with planning for early retirement, you need to know what your expected income will be. Looking at what you could expect now, without changing anything, will help you to set goals and start making some changes. What income would you have if you stopped working at your target age? Will you be getting a FERS supplement until your Social Security benefits come through? Do you have any investments, pensions, or savings accounts that will provide you with income? Work out how much you have to support yourself so you can set targets.
Save and Invest for Your Future
Once you know how much you can currently expect to have to support yourself in early retirement (even if it’s currently nothing), you can start thinking about how to save and invest. You will need to be able to support yourself in early retirement, either with savings, investments, or passive income of another kind. You can explore different ways to ensure you have income when you’re not working. There are lots of options, from dividends from investments to income from businesses that can run without you.
Plan to Pay Off Debts
As well as thinking about your income, it’s also worth thinking about any debt you have. It’s best to pay off debt before you retire, so you definitely want to consider removing any major debts. For example, paying off your mortgage before you retire is generally a good idea. If you’re debt-free, you won’t have payments eating into your income. You’ll be able to live more comfortably when you have more money to spend on other things.
Retiring early doesn’t have to be impossible. It could be something you can achieve if you aim for it.