Want to retire early but not sure where to start? It’s a lot easier than most people think to save up the necessary funds.
How Much Is Needed?
The first step is to determine how much money to save. Some people won’t be comfortable with a 1 million dollars, while others can happily get by on half that sum.
A good rule of thumb is to take one’s average annual cost of living and multiply it by twenty-five or thirty to come up with a target number.
The person in question should then make it to reach this amount by a set time. (Of course, people who have better math skills may want to use far more complex equations to come up with a number that works for them.)
Reaching Savings Goals
To reach their savings goal, individuals should eliminate any costly habits that they have and look for ways to reduce their spending in other areas. The good news is that people who live below their means already are ahead of the game.
Prospective retirees may want to consider using a savings program with a high compound interest rate to maximize their inactive earning potential.
They may also want to pay off their mortgage before quitting their job. After all, doing so will help them avoid problems when it comes to finding a place to live in the future.
Even so, some people have gone ahead and sold their homes to fund their early escape from the workforce partially.
Most retirees additionally put some of their savings into a “diversified portfolio of low-index mutual fund”, which are then supervised by a fund manager.
However, there are many different ways to invest retirement money, and the subject is indeed one that prospective retirees will want to investigate further.
Post-Retirement Success Tips
Investing Social Security checks once they start to come in is a financially savvy move. It also pays to have some funds available in the form of actual currency rather than in investment portfolios.
Putting aside a year or two’s worth of the money will undoubtedly help protect retirees from stock market fluctuations and possible stock market crashes.
Of course, it pays to live a frugal or as so-called “simple” lifestyle after leaving the workforce. This is why many seniors choose to retire to countries outside the United States that have more affordable living and medical care costs. Others use their newly acquired freedom to travel around.
These folks may still save money by renting out properties back home. Or they may choose to stay in one place for long periods of time to get heavily discounted rates on their accommodations.
Many retirees nonetheless follow the 4 percent rule where they are only allowed to take that amount out of their savings every year, with inflation tacked on for good measure in later ones.
It’s wise to carefully keep track of post-retirement spending so that problems can be avoided before they arise. One way to do this is to know precisely how much can be spent on any given day.
Individuals will also need to see the amount that they can pay on a monthly or weekly basis. This allows any planned or accidental overspending to be factored into one’s existent budget without too much of a hassle.
However, people who become bored or broke (but remain in good health) after taking early retirement can always go back to work, should they choose to do so.