Five Ways to Plan for an Early Retirement
Early retirement might sound like a pipe dream, but with the right budget and a lot of personal discipline, it could be a reasonable option. There are a variety of methods and strategies people use when working toward an early retirement. The key is finding a plan you’ll enjoy working on.
1. Financial Independence/Retire Early (FIRE)
There’s an entire movement that’s based around the challenge of saving for an early retirement. It’s called FIRE. People who practice the FIRE method choose to live a minimalist lifestyle while they’re still young so they can have plenty of money to support themselves with later. They cut as many of their expenses as possible while working hard as they can to save money. How much you want to cut out and how strict you wish to be is up to you, but the basic rule of FIRE is that you save 70 percent of your income for the future.
Most people who practice FIRE have the goal of retiring by 40. If the FIRE practices are a bit too extreme for your taste, another option is planning to retire at 50 instead. It’ll give you more time to save, and you won’t have to cut out as many of the luxuries you enjoy.
2. Know What Retirement Means to You
Early retirement means different things to different people. What does your vision for the future look like? Will you head to an affordable tropical country to live out your days relaxing on a beach? Are you interested in doing volunteer work? Maybe you want to retire from your main job, but you’re still interested in doing rewarding part-time work during your retirement. The goals you have for the future will greatly influence the type of retirement plan you should have. No matter what your goals are, always make sure to overestimate your financial needs and count for inflation that will naturally occur over time.
3. Consider the Changing Nature of Human Beings
If you’re a younger person who’s dreaming of an early retirement, it’s important to think about the person you will become in your later years. People tend to increase their standard of living as they age. You might be okay going without certain comforts today, but will you feel the same about those comforts 30 years from now? No one can plan for how they might feel in the future with certainty, but you can leave extra room in your future budget for comforts and necessities you aren’t currently considering.
4. Make Smart Investments
Investments are always a gamble, and you might not want to gamble with your retirement income. However, there are certain investments have a higher probability of success than others. For instance, if you live in a city with a strong housing market, it might be wise to invest in a multi-family property. It would provide you with a place to live while earning you income from your tenants at the same time. Property isn’t a flawless investment plan, but it involves a physical asset that will most likely always be in demand considering our growing population. That makes it a much better choice than some investment options. You’ll need to research the trends in your local area to get an idea of the risk involved.
5. Be Willing to Put in the Work
No matter what path toward early retirement you choose, it’s going to involve a lot of hard work. If you want to do this, make a commitment within yourself to stay the course. There will be times when you will most likely get overwhelmed and want to give up. Keep working hard and focusing on your goals, and you’ll inch your way forward toward the future you dream of.
You only have one life to live, and you don’t want to miss out on your youth because you’re so focused on the future. Luckily, it’s possible to enjoy the finest parts of life without spending a great deal of money. While you’re saving for retirement, don’t forget to make the most of every moment.