I am already on the downhill slide to the age of 40 — ah, just writing that makes me cringe. At this stage in my life, though, I find myself reflecting more often on my past accomplishments and future goals. My career is very rewarding, yet I don’t want to retire at the “normal” age of 65. I want to be free to enjoy my life in the latter years — free to follow my dreams, take chances, and explore the world. I want to retire young.
Apparently, I’m not alone. According to a survey by Strong Funds, 42 percent of workers today say they want to retire before 65. Early retirement doesn’t come easy, though. Unless you are independently wealthy (or you win the lottery), it requires dedication and a plan. So, with that in mind, I’m sharing the best advice I’ve received from my mentors.
“Top 5” tips for how to retire early:
It’s never too soon to start. This is the best piece of advice I have received about retirement. In my early 20s, retirement was the farthest thing from my mind. I didn’t think it was necessary to worry about retirement at such a young age. I was wrong. It doesn’t matter how old you are. Start planning for retirement now. The more time your money has to grow, the better off you will be. For example, saving $250 a month at age 25 will yield approximately $872,000 at age 65 with an eight percent return. Waiting until age 45 to start saving yields only $147,000 at age 65 — a $725,000 difference!
Invest in your company’s 401K program. Not only do you receive tax advantages by investing in a 401K, but many companies offer matching funds to those who contribute. It’s like getting free money, and income tax is deferred on 401K accounts until funds are removed. If you are serious about retiring early, you should max out this account every year — and start doing it ASAP (see tip #1). If your company doesn’t offer a 401K program, start a Roth IRA instead.
Work with a financial planner. Make your money work for you by finding someone who can actively manage your investments. These people are the experts. They have the time to research the market, understand the trends, and know which funds are the best performers. Most of us think that we know enough about the market to do it ourselves, but let’s be honest, we don’t. I went to college to study marketing. I am an expert in marketing, not finance. These people are experts in finance/money management. It’s their business — their career. Trust them; use them often. Our financial planner knows our financial goals, and she is actively working to help us achieve them.
Get out of debt immediately. I am so lucky that my parents taught me the value of money at a young age. They taught me to use it wisely and never, ever live beyond my means. Debt can single-handedly destroy your retirement plans. You may have to make sacrifices in order to do it, but get out of debt as soon as possible. I can guarantee that you won’t regret it. It’s so liberating. We followed Dave Ramsey’s debt snowball plan, and it works! I highly recommend it.
Use online retirement tools. Determine how much you need to save using a retirement calculator.
If you follow these simple tips, you should be well on your way towards retiring early.