Early Retirement: What You Need to Know
For some people, living a life of all work and no play is simply not appealing. Working up to 12 hours a day for around 50 years is certainly not everyone’s idea of a good way to live, and this is causing more and more people to look into early retirement.
If you are thinking about trying to retire early, here is a helpful guide to help you understand just what early retirement is and how you can do it.
What Is Early Retirement?
Simply put, early retirement is when somebody stops working earlier than the typical retirement age. Most people in the US retire in their mid to late 60s, but people who retire much earlier than that can be said to be taking early retirement.
Retirement usually refers to the time when somebody stops going to work because they have reached a certain age and are now financially able to live without earning a lot of money. Early retirement means that somebody has reached that stage earlier than expected.
Financial independence is key for early retirement, and it can be incredibly difficult to become financially independent before the typical retirement age. The less time you spend at work, the less time you have had to save up money to add to your pension fund.
Why Do People Retire Early?
There are many reasons why people want to retire early. Life as a retiree means that you will have more time to spend on things you enjoy doing, because you will not be spending your days at work. Many early retirees want to travel the world while they are still young enough to have plenty of energy.
Retiring early can also bring about numerous health benefits, especially if you work a dangerous or highly stressful job. Going to work every day at a job that causes stress, anxiety, or unhappiness can cause long-term mental health problems, so retiring early is a great way to avoid these issues.
How Can I Retire Early?
If you think that early retirement would suit you, here are some steps you should take that will help you to achieve your goal.
Start Saving Young
One of the best ways to ensure you will be able to retire early is to start saving immediately. Contribute as much as you can to your pension plan, and open high-interest savings accounts. Set up monthly standing orders or direct debits to make sure you are paying into these accounts and earning as much interest as possible – every little helps!
You should also try to make smart investments to grow your capital quickly and effectively. It should go without saying that any kind of investment means that your money will be at risk, so weigh up your investment options carefully and make sensible and informed decisions. Talk to a financial advisor if you are not sure what to invest in or how much money to risk.
Take steps to save as much as possible as quickly as you can, because the sooner you start saving money, the earlier you’ll be able to retire.
Generate Passive Income
Another great way to increase your chances of early retirement is to generate some form of passive income. Passive income is a source of finance that you do not have to work at regularly. It usually takes some time and energy to establish, but once you have put the work in, you can reap the rewards without investing too much of your time.
If you have capital to invest, one option would be to buy a property to rent out to tenants. This can be a huge money-maker, but it does take a little time each month to fulfil your landlord duties.
Another option is to build a website or start a blog. Once you have generated a good amount of monthly traffic, you can generate income in a number of ways. Add affiliate links to any products that you are proud to be associated with, or allow advertisers to buy add space on your site.
If you are a keen writer, you could even write an e-book to generate passive income. Once you have written and self-published an e-book, you can sell it on any online platform and earn a regular monthly stipend.
Passive income is a great way to boost your earnings during your retirement years without having to work at it constantly. Find a few sources of passive income and let them work for you.
Minimize Outgoing Costs
Once you have managed to start saving money, you should also plan out how you will keep your weekly, monthly, and yearly expenditure to a minimum. Here are a few simple tips for reducing your outgoing costs:
- Pay off your debt. Debt incurs additional costs, so pay off all of your debt as quickly as you can.
- Pay off your mortgage. Again, this will save you money in the long run and will mean you have a guaranteed place to live if money is tight in the future.
- Compare your household bills to other suppliers and save money where you can.
- Eat out less often.
By cutting costs wherever you can, you will not only increase your savings more quickly; you will also be able to make your money last longer once you retire.
Plan for Your Future
Unfortunately, as you get older, you are likely to face challenges that you may not have been expecting. Whether it is a health issue, the loss of a loved one, or difficulty with mobility and activities of daily living, aging brings with it many obstacles and complexities that can be hard to plan for.
To counter this, try to set money aside for the unexpected, and make sure you have an emergency plan in place. Look at senior living facilities before you need them and make sure you work the costs into your retirement budget. Belmont Village Senior Living offers versatile retirement community options in a variety of locations around the US. Find the right facility for you and make sure you will be able to afford the care you may need.
Early retirement is only possible if you plan ahead, save up enough money, and work hard to ensure you will have enough to live the life you want. There is no point in retiring early if you will be heading straight for financial difficulties, so make sure you have thought about it carefully from every angle.