While most people like to maximize their working years, some people would like to retire early. This means fully leaving the corporate rat race at an earlier date than usual, which is 60 or 65. Most early retirees do so in their 50s. But some hit it rich and retire much earlier like their 40s or even mid-30s. If you plan to follow in their footsteps, here are a few pointers.
FIRE Is The Key
If you want to retire early, then you need to plan for it. Normal retirement already requires large amounts of planning and pushing up the timetable by 10 to 20 years makes the planning even more important. The idea behind a lot of early retirement plans is a simple acronym: FIRE. This means Financial Independence Retire Early. Financial independence means you don’t have to earn money to live your life. This usually involves a target amount. Usually the total amount of expenses you think you will be spending multiplied by the years of retirement. All your efforts are to reach that amount in your savings or investments so that you can say bye to work.
Be Aware Of What You Want To Do
When planning your retirement budget, you need to be clear about what you plan to do when you retire early and how much money you will be spending. This will greatly influence your choices when it comes to savings and investments. For example, if you plan to have a quiet and minimal life in the country, you won’t be spending much money. This can make your retirement plans easier. However, if you plan to do world tours or sail off in a yacht, you will likely need more money than you initially planned. These can get expensive, and they will only get more expensive as the years pass. Besides those expenses, you have to think about your medical bills and expenses as you get older.
Maximize Retirement Accounts And Savings
The main fuel for your retirement is all the money you saved up during your working years. You will likely be living lean during your working years. Your money should be going into various retirement accounts, savings, and investments. Your 401(k) and IRA are a big help, and if you put in the max contribution, your employer will also match that. That means you can potentially double your gains from them.
Think About Where You Want To Live
Another issue that you have to worry about is where you will live. Unless you want to go full nomad and live on a yacht or an RV, you will likely have a retirement home in mind. It is always a good idea to buy it way before retirement. With the help of the best mortgage lenders out there, you can clear up the mortgage before or around the time you plan to retire, which should allow you to live in it worry-free.
Think Of Passive Income Opportunities
Retiring early doesn’t mean that you stop earning money. It just means that you aren’t actively working. The best way to earn money during retirement is through passive income. Own several rental properties to let out and you can potentially be earning a decent income still. Combine it with investments that pay out dividends, and you will come out okay.
Early retirement gives you a lot of options. You can travel, have fun, or even learn new things. You will be able to enjoy the fruits of your work a lot earlier. It doesn’t even mean that you stop earning money. If you do it right, your early retirement can be just as rewarding as your working years.