Best Way To Retire Early
Question: How old are you this year?
Chances are you’re not very close to retiring, but regardless of your age, saving for retirement is something you need to think about now, rather than 30 years from now.
People call our later decades in life the “golden years” for a good reason: they’re meant to be a time of travel, being with family, hobbies, and generally relaxing. Retiring early is a dream most of us share as we look ahead.
Who wants to be stuck behind a desk as they approach the age of 55? Or are you slaving away at a demanding physical job after 50? The answer, of course, is none of us.
Maybe you’re shrugging your shoulders and dismissing retirement planning as something you don’t need to think about until you’re far older. But the truth is, the sooner you start planning for your retirement, the better position you will be in as you approach your 50s and 60s. Plan ahead for those golden years!
Before you launch plans to stash away money for your later years, determine what you will need to retire, as well as what kind of lifestyle you plan to have. What are your dream plans? Travel around the world? Start an herb garden? Help your grandchildren go to college? Donate to the local library?
Obviously, each of these options carries different price tags. Next, calculate what your income will be from all sources including pension, Social Security, and any smart investments you’ve made (see below). This is kind of like envisioning your future budget now, and having those numbers written down is far better than estimating or guessing!
Here are 8 Tips to Retire Early:
1. Create a budget and stick to it.
Create a budget that includes socking some money away for a retirement fund. Yea, maybe that means skipping the latte every morning on the way to work or having dinner at home on Saturday nights. But having a budget will benefit you in every facet of your life.
Like all things in life, moderation is key here. If you map out a too rigid budget, you will want to rebel in the same way you scarf down Snickers bars at 2 a.m. after a day of kale and unflavored mineral water. Keep your spending plan doable by building in flexibility.
There are times of the year – like the month of December – in which you will spend more, but make up for it with a lean January. A budget can be a very positive addition to your life because you will have a better handle on your finances. No more throwing money away on things you can’t even account for. What’s more, a budget can help you squirrel away money for that retirement account.
Consider your expenses. Expenditures are what it costs to live your life. Some of these expenses fall into the category of fixed, such as rent or car payments. Others are variable, like weekly groceries and weekend entertainment. Take a long hard look at your variable expenses and see what you NEED vs. what you WANT. Chances are good if you steer clear of those things on your “want” list, you’ll have a decent amount to start building up that retirement account and shooting for your goal to retire early.
2. Invest your spare change.
Put your spare change to good use. Many of us, ok, most of us, consider pocket change insignificant, and it ends up collecting dust on a dresser or sitting in the cup holder in your car. But there’s something really cool called micro-investing that puts those pennies and nickels to good use.
Acorns is an online platform that helps you sock away as little as one cent. Buy something for 99 cents, and it is rounded up to $1, with that extra coin tossed into an investment account you can grow and save for retirement. We know you can’t buy much for 99 cents, but you get the idea. You can add to your wealth by making one-time investments from anywhere.
Got an extra $10 from skipping your daily stop at Starbucks? A shuttle that right into your Acorns account and watch it take root. If you’re super organized, you can schedule weekly or monthly transfers from your bank account into your Acorns investments.
Acorns Later are also offered to help you set up an Individual Retirement Accounts (IRAs) both Traditional and Roth IRA. Acorns experts will recommend an IRA for you based on your goals, employment and income, then keep you posted on how it’s doing. IRAs allow you to save money without all the tax implications of other investments. More than 250,000 smart people have already signed on as Acorns Later investors. And if you already have an IRA or 401k, experts will help you roll it over into Acorns Later. As you approach retirement, your investments will begin to shift to line up with your goals.
3. Start a side hustle.
Smart people are turning their extra time into extra money with a job on the side while holding down their full-time employment. The list of what you can do is almost endless! Here are a handful of ideas to get you started:
- Mow lawns, shovel snow, trim tree branches, weed gardens. In other words, sell your services as a landscaper.
- Have a wealth of knowledge? Put it to good use as a private tutor, teach a continuing ed class, or set up a course online. This works for everything from guitar to foreign languages to calculus.
- Buy and sell stuff. Research items worth more than they’re usually sold for, jack up the price, and sell on Amazon. There are plenty of sites where you can sell niche items like used kid’s clothes, leather items, or designer footwear.
- Blogging, resume writing, editing college research papers, and anything else you can come up with that applies to the written word.
- Website design. This is a hot commodity these days because small business owners lack the time and know-how to take this on themselves. You can charge by the project or by the hour, but either way, you’ll be pocketing some serious coin.
- Put your skills at organizing to use by catering, party planning, helping pack items for a move, or decluttering closets.
- Walk, visit, and wash pets.
4. Buy a passive real estate investment.
Invest what you can afford towards passive income in real estate. Buying into real estate with small amounts of money is called crowdfunding, and it’s taken the industry by a storm. Crowdfunding is passive income at its best. This means that after your initial investment, you just sit back and let the work get done and the dividends grow. We recommend reinvesting that earned money into more shares, rather than going out and spending it! When you invest in real estate, you’re tapping into the potential for long-term appreciation, along with regular, consistent cash flow.
One popular crowdfunding option is Realty Mogul. The platform has seen enormous success: to date, members of the public have invested over $400 million through Realty Mogul, financing more than 300 properties valued at over $2 billion.
As a stakeholder, you will receive monthly or quarterly distributions. Once invested, you will have access to an investor dashboard, giving you 24/7 access to watch your money grow and proliferate.
If the daily challenges of buying and managing a rental site give you a migraine, you can still benefit from investing via a Real Estate Investment Trust. REITs are privately or publicly held companies that use the money from investors to buy and lease properties.
REITs are simple to buy into – just open a brokerage account – and they yield lots of the benefits of actually owning properties, such as regular income in the form of quarterly dividends, without the headaches of daily work fixing leaky pipes, collecting rent, and so forth. One caveat: Experts design REITs to build wealth in the long run, not overnight. You won’t wake up tomorrow and see your investment has quadrupled, but you will grow in net worth over time, and that profit can be set aside for your retirement account.
5. Become a landlord.
Everyone wants in on the game because it’s becoming clear that investing in real estate will grow your net worth exponentially, and while you won’t become a millionaire overnight, you will see your riches grow over time. Start small! Don’t be tempted to buy a larger property than you can maintain without staying up all night worried about what’s going to happen.
Buy a single apartment, condo, or smaller duplex while you learn the ropes. Once you start seeing a profit, reinvest those funds into more units. You may also want to hop on the Airbnb train by looking for a prime location that will draw tourists and other visitors. For example, a cottage near a beach, a small apartment close to a popular skiing site, or a room in the middle of a busy city such as Chicago or New York. Market and manage your Airbnb wisely for repeat guests who will spread the word among family and friends.
6. Live below your means.
This may be easier said than done because it forces you to take a long, hard look at your lifestyle. Where is it written that you need to live in the best neighborhood, drive the newest model car, send your kids to private schools, wear designer clothing, and dine out every night? Whose standards are you trying to live up to?
Ask yourself these questions about where and how you spend your money on significant living expenses. Consider the following smart moves: Buy a pre-owned vehicle and sock away the money you save monthly on car payments into an IRA. Downsize your house and slash your mortgage expenses. Take a cooking class and start making international cuisine in your kitchen. Pay off your credit cards before you accumulate interest, and resist the temptation to charge more items you don’t need.
7. Take advantage of your employer’s 401(k) plan.
Save at least 10 percent of your pay, including any employer match, in a tax-advantaged retirement account, such as a 401(k). Many full-time jobs offer a retirement benefit, and you should know whether you’re automatically enrolled or if you need to set it up.
Some plans include an employer’s contribution and may even match the amount of your salary you’re putting into the 401(k) now. Talk to your HR people at work and make sure you understand your options. Don’t settle for the minimum amount you can have deducted from your paycheck. Make sure to increase your contribution or at least set up an auto-escalation so that you put in more each year.
8. Remember, it's a group effort.
Keep in mind that you and your spouse/significant other need to be on the same page. It won’t help your retirement savings (or your relationship) if your partner spends money like water while you are determined to stay frugal. Maybe you can find a happy medium. But it all starts with a conversation that includes facts and figures, not guesswork.
Retirement may seem far away, but by putting these tips into action, you will not only have an early retirement, but you will also have a happy retirement.
Once you get into the habit of saving where you can and sticking to a budget, you will reap the rewards in every facet of your life, now and in your future.