27 Jun When does early retirement make sense?
Many people want to retire early but making it a reality is another question. If you are capable of retiring in your 40s because you have enough funds stored away, that is indeed a blessing. You can freely choose a change of career or pursue a passion project that was left on the backburner for some time.
There’s no secret to early retirement because it really boils down to earning a good income. You must be able to save a large part of that and invest these savings wisely. The opportunity and ability to earn enough to save more should provide you with modest money for early retirement. Let’s take a look at some other factors as well:
Don’t fall into the lifestyle trap
Be aware of your needs vs. your wants. You probably don’t need to acquire the latest gadgets. It would be such a shame to spend your income on items that may help you look good but deplete your retirement fund in the process. Live simply and spend prudently. You’ll be able to retire early.
Save consistently and avoid splurging
The saving part is a no-brainer. Sorting out your priorities may take some effort. You need to save about 40-60% if you don’t have an inheritance or humongous salary. Purchases like a new house or a new car may have to wait.
The longer life expectancy
With the advancement in healthcare and the growing awareness on proper diet and exercise, people are living longer than usual. Please prepare for another four decades if you plan to retire in your 50s. The irony in this might be your retirement years can grow longer than your working years.
So, until you reach 59 and a half years of age, have some taxable investments and savings to depend on. Your 60s will hopefully bring in some social security benefits.
Should you remain single after resigning from your job, that means you have no spousal support in case of sickness. Medicare only kicks in when you reach 60.
Try to be debt-free as you approach retirement. This may be a daunting financial goal. But, without debts — student loans, mortgage fees, credit card loans and car loans — during your retirement years means more money in your pocket.
The future is something to think about.
Being employed by the same company has not been the usual road to retiring early. It’s more advantageous to be flexible and acquire new skills so that you remain relevant and marketable. Build your nest eggs and be more aware of what you hope to happen in your retirement years. It will involve a lot of sacrifices and focused intent, but early retirement makes sense when you prepare for it well.
Don’t be fooled and give in to the latest trends. Grow your savings consistently and be in tune for a longer retirement existence.