6 Strategies to Consider to Help You Retire Early

Mike Rivers is a retired small business owner and freelance writer. He was fortunate enough to be able to retire early and enjoys contributing to society through his writing and community involvement. He lives in Texas.

Retiring early is a dream for many people. Who doesn’t want to kick back and relax or have the flexibility to pursue hobbies while they still have the energy to do them? But for most, early retirement is more like a fantasy than a reality.

With life expectancies getting longer and healthcare costs skyrocketing, people are required to work for more years to amass enough to sustain them through their retirement years. Long gone are the days when retiring at age 55 or even 65 was realistic. Consider this: according to Fidelity Investments a 65-year-old couple retiring this year can expect to spend $280,000 on healthcare over the course of their retirement. Plus, that’s not factoring in any unexpected illnesses, injuries, or the need for long-term care.

There’s no doubt that retirement is expensive — and the longer you stay employed, the more money you can save. However, if you commit to making the necessary sacrifices, it is possible to reach your goal of retiring early. Keep in mind, though, that it may require a big change in your current lifestyle in order to reap the future payoff.

With that in mind, here’s a look at six strategies you can employ now to set you up for an early retirement later.

6 Strategies to Try if You Want to Retire Early

  1. Determine Your Number

In order to successfully retire early, you first need to figure out how much income you’ll require for 30 plus years out of the workforce. After all, if your aim is to retire at 50, barring any health incidents, living to 80 is a real possibility, which means you’ll need serious cash. This is particularly true if you want to pursue a certain hobby or spend your retirement days traveling the world.

In order to ascertain just how much you’ll need, create a retirement spending estimate that takes into account your current monthly spending and how much it will decrease or increase when you retire. For instance, you may decide to downsize from a four-bedroom home to a two-bedroom condo, which will reduce your monthly outlays. You’re commuting costs and work attire expenses may be reduced, but you could spend more on activities or travel. Once you come up with the number, multiply it by 12 to get your annual figure.  Add an additional 10% or 20% to give you more of a buffer. If you fear costly health incidents, raise that percentage even more.

Also, when coming up with your calculation, don’t forget to consider taxes and those nonrecurring expenses that crop up from month to month. Including these in your estimate will give you the most accurate picture.

  1. Overhaul Your Budget Now to Save Later

The only viable way to retire early is to save enough money to live off of.  In order to save more, you may have to sacrifice by altering your current lifestyle. In some cases, the changes may be drastic. For instance, people who aim to retire early usually start by reducing their costliest monthly expense, which is usually their housing. The money they save from downsizing to a smaller home or apartment can be funneled into their retirement savings account.

However, that’s only the start. Lots of people who are serious about retiring early will put as much as 50% of their income in savings. Others scale back the extras in their lives and live very frugally for many years. There are many ways to cut expenses to the bare minimum, however, in order for this strategy to be effective, you have to be extremely committed. Living frugally can be tough, but if early retirement is important enough to you, it will be a lot easier to achieve.

  1. Get Out of Debt

Ask most people who were able to retire early what their secret was and many will tell you that part of it was a lack of debt. Unsecured debt, in particular, can be costly, requiring you to pay a lot more to cover the interest. The more debt you have, the costlier and more difficult it is to get out from under it. That’s why it’s important to rid yourself of it if you want to retire early.

The last thing you want to do is have a monthly credit card payment hanging over your head when you don’t have an income to pay it. Plus, the sooner you pay off the debt, the more you can save for your retirement.

  1. Invest for Growth

Retiring early means you will have a shorter time span to amass money to live off of. Saving is one part of the equation, but growing your money is another really important one. In order to achieve your savings goals, you’ll need investment returns that are greater than if you were investing over the course of thirty years. That means considering growth investments that may be riskier but can yield you a better return.

No one is advocating making reckless investments that leave you penniless, however, being too conservative is an enemy of an early retirement plan. Make sure to keep an eye on the costs associated with your investments. If left unchecked, they can eat at your returns, greatly reducing the amount you amass for your pending retirement. Go for index funds and exchange-traded funds to keep costs at bay.

  1. Get a Side Gig

Thanks to the gig economy, there are plenty of ways to earn extra cash that can add to your savings. There are a host of part-time jobs that afford you the ability to earn extra money and are flexible enough to fit into your schedule. While driving for a service such as Uber or Lyft is top of mind for many people looking to raise extra cash, there are also other options — from working at a retailer to waitressing in a restaurant, for example. If you have a marketable skill, you could consult or work freelance gigs on the side. Even selling used goods on a resale website like Amazon or eBay can boost your savings.

If you don’t have the time to get a side gig, try to get a higher paying salary at your current employer or move to another company that is willing to pay you the salary you’re aiming for. The higher you earn, the sooner you’ll be able to save enough to realize your dream of an early retirement.

  1. Accept That You May Have to Re-enter the Workforce

Sometimes even the best-laid plans fall apart, and that can easily happen in retirement. The good news, however, is that if you opted to retire early and ran into an unexpected need for cash, you can easily re-enter the workforce for a period of time. If you’re okay with the idea that you may need to work from time to time, it will be an easier pill to swallow if worse comes to worst.

Of course, the goal is to stay retired — but if times are tough, being willing to jump back into the workforce can make the idea of an early retirement a little less risky.

Final Thoughts

Early retirement isn’t for everyone. However, if you’re willing to make the necessary financial and lifestyle sacrifices during your working years, it can be done. Being able to retire early will require you to amass a lot of money, adopt a frugal lifestyle, and invest with an eye toward growth. That’s why before you take the plunge, it’s crucial that you determine whether or not you’re committed to making the lifestyle changes necessary to achieve this goal.

If you follow smart strategies and adopt the right habits, the dream of retiring while you are still young and healthy is achievable.

Do you plan to retire early? What action steps are you taking to achieve this goal?

About Retire Early Lifestyle

Billy and Akaisha Kaderli retired two decades ago at the age of 38 and began traveling the world. As recognized retirement experts and internationally published authors on topics of finance and world travel, they have been interviewed about retirement issues by The Wall Street Journal, Kiplinger's Personal Finance Magazine, The Motley Fool Rule Your Retirement newsletter, nationally syndicated radio talk shows and countless newspapers and TV shows nationally and worldwide. They wrote the popular books The Adventurer's Guide to Early Retirement and Your Retirement Dream IS Possible.
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