If you hope to retire early, there’s a lot to think about. For example, if you stop working before you’re eligible for Social Security, you need to plan how you’ll draw from retirement accounts — assuming you can access those funds without penalty. On top of that, if you’re not Medicare eligible, you’ll need to consider healthcare costs. Orchestrating your early exit from the workforce can be empowering, but it also requires planning and preparation. Here are a few ideas that can help you retire early.
Be specific in your early retirement plan. The earlier you start, the more successful you’re likely to be. Begin your planning with well-defined goals in mind. Figure out your desired age for retirement and work out how much money you’ll need to achieve the lifestyle you want. In many cases, it’s about starting with your end point and working backward. A WellCents financial professional can help you review your goals and set a retirement timeline that’s realistic. With specific and measurable goals, it’s possible to retire sooner as long as you stay on track.
Downsize ahead of retirement. The single biggest expense most people have is housing according to data from the Bureau of Labor Statistics. Downsizing ahead of retirement can reduce your housing expenses, free up money for other costs and make your goals more attainable. Plus, if you own your home, selling and downsizing can provide you with additional capital to fund your retirement.
Cut back on large costs. In addition to reducing housing costs, look at other big-ticket items you spend money on. Transportation and food are significant costs for many households. Look for ways to reduce what you spend on these expenses, especially eating out, as they can compromise your ability to live comfortably in early retirement.
Make catch-up contributions. If you’re at least age 50, the IRS lets you make additional contributions to your tax-advantaged retirement accounts. The more funds you can set aside now, the earlier you can retire. Additionally, check if you might be eligible for a Health Savings Account. This is additional tax-advantaged money that you can use for healthcare costs before you’re able to enroll in Medicare.
Pick up a side hustle. If you’re looking for a little extra cash to set aside for retirement or to make catch-up contributions, a side hustle can help a lot. Whether it’s Ubering on the weekends or freelancing on Fiverr, you can generate extra funds to help you retire early or provide you with enough income so that you don’t need to work full time.
Plan to live in a less-expensive area after retirement. Geoarbitrage can be a great way to reduce living expenses and retire sooner. In some cases, retiring outside the United States is one way to reduce costs to the point where early retirement becomes possible. Just do your homework about healthcare, taxes and other important financial aspects of being an expat wherever you plan to reside.
Early retirement can become a reality if you plan ahead and take steps toward reducing your cost of living. Contact your WellCents financial professional to discuss your timeline and goals for retirement. As you approach early retirement, more frequent check-ins can help ensure that you remain on track.