By Annette Brooks
Are you planning to retire early? So many of us dream of kissing the work-a-day world goodbye and spending more time pursuing healthy activities, traveling, enjoying hobbies, or getting more involved in our community.
If this is your goal, the time to start planning for it is right now. There’s no one size fits all approach to early retirement, but it usually means making changes regarding how you earn and spend money and how you grow and nurture your financial nest egg. Here are a few tips to help you get started.
The first step is to consult with an experienced financial advisor. Look for someone with whom you can develop a trusting, long-lasting relationship. They will get to know you, understand your current lifestyle, financial situation, and goals, then work with you to develop a plan. Meet with your advisor regularly and let them steadily guide you through market ups and downs and fluctuations in our economy to help you get to the end game.
Determine the age at which you want to retire and how much you’ll need to live comfortably, then identify what you must do to get from where you are currently to your financial goal. Develop a monthly budget, savings goals, and a plan to live well within your means, then stick with it. Your financial advisor will recommend how you should invest your savings, ranging from stocks and bonds to annuities and other investments, including 529 college savings plans.
Remember that living within a reasonable budget doesn’t necessarily mean you have to be so frugal you can’t enjoy life. Sure, you must manage your spending money wisely. Still, it can be as simple as driving the family from Texas to the Colorado Rockies and staying in a nice rental condo versus flying to Europe with the kids and splurging on expensive hotels and restaurants.
If you work for a company that offers a 401K, incorporate it into your early retirement strategy. Max out your annual contribution and leverage the company match. Once you turn 50, take advantage of the extra catch-up contribution you’re allowed to make. Be aware that unless you become permanently disabled or otherwise unable to work, you must wait until you’re 59 ½ years old to withdraw funds from your 401K account to avoid paying a penalty.
Consider contributing to a SEP (simplified employee pension) IRA if you’re self-employed and without employees. If you have employees, talk with your financial advisor about the best retirement savings plans for yourself and your staff. Ask them to compare and contrast your options in detail.
Plan for the unexpected, in other words, death, and disability. Review life insurance options and investigate long-term care insurance.