Achieving an early retirement may be the life dream of many workers but it takes more than dreaming to actually reach such a goal without already being independently wealthy. There is actually a lifestyle associated with planning for an early retirement and planning is a key element in that lifestyle.
Here are some valuable questions you need to ask yourself as you plan to achieve an early retirement:
What Is Early Retirement For Me?
In order to live a lifestyle of early retirement it is essential to first identify when retirement would come early. There are workers who would like to see themselves retire by their early 40’s while others are aiming for the age of 60. Regardless of how you identify the early age of retirement, it is essential you do by considering a few factors like your specific life expectancy to ensure you would have enough cash; whether or not you can afford continued health insurance for the necessary period of time; and when you’ll actually be ready to put your career behind you.
What Kind of Income Will I Need in Retirement?
There can be so many factors that influence once ability to survive financially after retirement. Once you pinpoint your age desire, you’ll need to calculate your cost of living plus all the other expenses such as hobbies, entertainment, and even travel. This is not an easy calculation to determine but estimates are necessary to begin aggressive planning, especially if you are fast-approaching your designated early retirement age. It may be necessary to sit down with a financial advisor who can highlight the expenses to consider in retirement if the concept is too overwhelming. Many people skip the financial pre-planning process of planning for retirement simply because there is just too much financial information to ingest.
Can I Live Like I Am Already Retired?
In order to guarantee a successful early retirement, it is essential to have the financial means. This translates to starting to live like you’ve already retired. It will be very important to set goals that allow for the most money to be put into retirement accounts and investments. Living like you’ve already begun retirement will include balancing a frugal lifestyle but still living efficiently. Budgeting will be required to ensure the allocation of funds into retirement accounts is adequate. Depending on one’s income, it can be hard to put that cash towards retirement goals when other needs must be met. Those who hope to retire by 45 but have a family to support may find it difficult to meet all of their financial goals for retirement at a younger than average age.
What is My Investment Plan?
Retirement funds are solely created for the purpose of saving for later in life. Depending on early contributions as well as those after early retirement goals have been set, your retirement funds may not be enough to sustain you for long. Employer-offered retirement accounts should be utilized effectively to ensure that paychecks are sufficient but contributions are consistent. Those who invest their income into various vehicles to earn additional retirement funds are always at risk for losing money. It is essential to have an investment plan for now as well as for the future. You must be able to choose investments that will provide the funds you need in your retirement years. It is extremely important to research and plan investments wisely so they will fulfill that purpose. Mistakes can be made easily which can hurt your chances for achieving an early retirement.
Living an early retirement lifestyle also means living a progressive, forward-thinking life where early retirement remains a priority. Being willing to sacrifice now for what you can have in the future can be a hard commitment to live with especially if early retirement is still a long way of for you.