If you’ve ever heard of someone who has achieved early retirement and now lives on their own or read an article about it online, you know that there are a lot of them, having the time of their lives. Travelling the world, living abroad, or pursuing passion projects are all reasons they have moved abroad. You’ve probably been intrigued by these early retirement stories.
Perhaps it has made you curious about how you might retire early, right? So, before you dismiss the idea of early retirement because it seems impossible, consider this possibility: You may be able to!
Even though it will not be easy, and it will require discipline and hard work, the rewards are worth it. As a result of your efforts, you may be able to retire early It’s not too late!
So let’s get into exactly how to retire early so that you can start working towards your goal now!
What age is early retirement, and what does early retirement really mean?
What is the age of early retirement? Different people have defined early retirement differently over the past few decades. According to the government, 67 years old is the official retirement ago for everyone born after 1960. On the other hand, among millennials and Gen Z, early retirement has taken on a whole new definition.
In place of looking forward to when they can retire and receive pension benefits, younger generations focus more on retirement prospects and finding out when they will cease to work for their own gain, whilst still generating an income. This makes all the difference.
Today, people are retiring as early as 28 years old, and many people in their 30s and 40s are following this path as well. While they may no longer be working a traditional 9 to 5, they are pursuing their passions, and a lot are making more than most and being “retired” as well. Before you start on early retirement planning, consider what age is early retirement is for YOU!!
So, how much do I need to retire early?
In a nutshell, the best way is to multiply your expenses by 25 – 30 times.
According to Investopedia, the 4% rule is a rule of thumb used to determine how much a retiree should withdraw from a retirement account each year. This rule seeks to provide a steady income stream to the retiree while also maintaining an account balance that keeps income flowing through retirement.
1. Calculate your annual retirement spending.
If you really want to begin building your retirement income needs, here are some things that you should do:
- Keep an eye on your spending. It’s essential that you understand what your monthly household expenses are, and you should avoid making drastic lifestyle changes that could rob you of your income in the future.
If you’re unsure of how much you spend per month, track your expenses. This is the easiest way to determine the estimates of what your spending will be.
Key Items that you want to track include: Rent/Mortgage, food, utilities, transportation, insurance, clothing, entertainment, and any donations that you may make. Download our Personal Finance Toolkit and you will find everything you need to create your tracker.
2. Determine your current net worth.
Before you start making plans for early retirement it’s important to note what your current financial status is. Knowing your personal net worth position will help give you a better understanding of where you are with your finances.
To get your head around it betters, you can simply do it on paper, or you can use our net worth tracker.
What you are trying to figure out is your assets (minus) your liabilities. This metric is important to know, especially if you have a negative net worth.
A negative can be made up from many factors, what’s imp0rtant to understand is that the more positive your net worth, the better position you will be come the time to retire. Remember, your net worth will increase as you earn more over your working life and having a money management plan.
3. Create a budget and strategy based on what you know.
One of the key points to be successful in early retirement is the ability to be able to live within your budget. As you go through creating your budget, be sure to make realistic assumptions when thinking about your spending habits. If you know that you eat out a lot, include that in your budget as opposed to trying to create one based on future lifestyle choices that you may make in the future!
Key Tips for Early Retirement.
- Create Clear Goals For Your Retirement
- Watch your expenses and try and cut back on your biggest costs.
- Automate and diversify any investments that you may have.
- Create multiple streams to increase your income
- Start a side hustle
- INVEST – Property Investment is a less risky form of expanding your portfolio based on its many benefits. For investing newcomers, the property market is a great area to commit to as its familiar and more tangible than other assets.
Start Planning Early Retirement NOW!!
It doesn’t need to be a far-fetched idea, regardless of your income or age. To achieve it, it’s important to first set the intention and your thought patterns and head towards achieving your goal.
Our retirement planning strategies aren’t just for those retiring in the next 3-5 years. They are ultimately, your financial end-goal.
Finding the right financial planner to assist you with your retirement can transform your investment strategy, your results, and your retirement. A team of trusted professionals are better qualified to understand the full scope of your financial needs while balancing the risks.
Early planning is key to an enjoyable retirement. Understanding your goals, timeline, and super contribution strategies is a great way to plan for the future.
Although this can be done by yourself, talking to one of our advisors about a sound investment strategy comes highly recommend. This person will work with you to help craft a strategy that is right for your current and future circumstances.