To retire young ideally means lounging all day under the shade of coconut trees or frolicking by the waves on a tropical island rather than being stuck all day in the office feeling trapped under mounds of paperwork. Imagine continuing your career for another 30-40 years of your life. That is, if you retire at the age of 60 or older.
Where do you fit the idea of enjoying your life under the sun if every day for the last 40 years you have been stuck in the office? Can you even say that you have fulfilled most of your goals in life?
To retire young may be the answer to get a jump-start on accomplishing your goals.
You may slave away in your workplace for a number of years, but you do not have to wait until all your hair turns gray before you retire. Sounds good right?
Retiring young is turning into a common goal of the new generation. Of course, with the goal of early retirement comes the fact that when you retire, you will have the time and flexibility to start rapidly crossing things off your bucket list. Yet, retiring young is not as simple as quitting your job when you turn 40 and booking the first flight available going to the Caribbean. If only it was that easy!
If you want to retire young it takes some serious planning on your part that should begin as early as the time you receive your first paycheck, but if you’ve been working for a while already and haven’t been saving, don’t worry too much – you can still retire young.
What it all boils down to is the dollars and cents that you’re going to need in the future to fund your escapades overseas. Another issue is that because you will be retired earlier, you will have more years where you need to draw from your retirement funds so you want to make sure there’s a good reserve to pull from.
For example if you work till 60 and live until 100 years old, your retirement funds will need to sustain you for 40 years – 100 years minus 60 working years = 40 retirement years. If however you live to 100 but retire at 40, then you will need to fund 60 years of retired live – that’s over half your life!
Early retirement planning is the key if you want to retire young. The means to get there is to save, save and save some more!
When planning for an early retirement you have to consider the sources of your retirement income. You cannot simply rely on your social security benefits because they will not be able to support you, not to mention the fact that you will not be eligible to receive these funds until you reach the age retirement set by the government. For those in the USA, the earliest you can start to receive benefits is currently age 62.
What this all means is that you’re going to have to invest a lot more money then the ‘average’ person who is retires at the age of 65. You should start saving as early as you can because time will make a significant difference to the amount you are able to accumulate.
Allot a portion of your salary to a retirement savings account such as an IRA. This kind of account is setup to help you defer tax and fund your retirement. Also, take advantage of retirement plans in your company like the 401(k). Depending on how much money you may you should also try and spend less so that you can save and invest more. You will be successful by adjusting your expenses and avoiding unnecessary purchases. Another thing that can help is keeping track of your expenses. It’s really easy to do this with financial tracking software. I personally recommend Quicken because it lets me quickly and easily see where and how much I am spending so that I can adjust accordingly.
It can be fun to make a game out of saving money with your partner to see just how much you can sock away for your future young retirement. While you are saving, keep in mind that whatever small sacrifices you make today will be repaid back to you at a later date, and when you retire early and start spending time on your own terms you will be glad you stuck to your plan.
By sticking to your plan and putting away as much as possible it means that even if you retire young you’re still going to be able to have a fantastic retirement, and because you are young you will be able to enjoy a wide range of activities that might not be as appealing to you if you retired at 65. Some example activities that come to mind are: hiking the Great Wall of China, scuba diving, learning how to surf, joining a recreational sports league, spending time with your grand kids. Remember – while you may feel young at heart for your entire life, unfortunately your body will continue to age.
We haven’t touched on the topic of how kids factor into your early retirement plan here, but they are another hot topic that will need to be considered as they will weigh heavily on your ability to retire young.
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