While many people dream of retiring early, very few end up having the financial resources to retire at age 50. Kevin Bock, of Integrity Estate Advisors & Veterans Benefit Advisors, says the key is knowing you want to retire early as soon as possible.
“When retiring at 50, you need to plan on 40 years of being unemployed,” says Bock. You will need to have a well-thought out plan, especially for bridging the gap between the age you retire and the age at which you can access your retirement accounts.
By following these tips and making a commitment to the goal, you will be in a better position to retire early.
Cut Your Expenses
It may seem obvious, but reducing your expenses as soon as you decide you want to retire early is one of the most important steps you can take toward actually reaching that goal. By cutting expenses now, you’ll be able to not only increase your retirement savings, but you’ll be more acclimated to living below your means when you actually do retire.
“You must cut your expenses dramatically, and I mean dramatically,” says Seth Rabinowitz, executive at Silicon Associates, an international management consulting firm. “That means whatever your considered “essential” in the past may be on the chopping block.” Rabinowitz suggests cutting out restaurant visits, unnecessary car trips to save on gas, cable and new clothes, just to start.
Eliminate Your Debt
Being debt-free is almost essential to being able to retire at 50.
As soon as you decide that you want to retire early, begin paying off any credit card debit that you have. Once you are rid of consumer debt, begin working on paying off your mortgage. Pay cash for automobiles, and consider only buying used for the massive savings involved. By making a commitment to be debt free and stay debt free, you strongly increase your chances of being in the position of retiring at 50 and being able to stay in retirement.
Estimate Expenses and Income
Will you be able to comfortably retire at age 50? Best have a very clear plan of whether you can afford to step out of the workforce at that age. Write a detailed list of your expected expenditures during your retirement years, keeping increasing healthcare costs and inflation in mind. Be sure to plan for health insurance during the years before you are eligible for Medicare and the cost of purchasing Long Term Care insurance.
Make a list of all income you will have during retirement, including social security, 401K and retirement pay. Check with your funds and employer to verify what age you can begin to draw on each account and calculate your income both before and after you can access these funds. Compare your estimated expenses with your income. If the numbers in your plan do not add up, look for ways you can either cut expenses or increase your income.
Consider Alternate Income Sources
Many early retirees have income sources, outside of retirement accounts and social security, during their retirement years. Some find a part-time job in a field that they love, others start a business, and a few even consult in their pre-retirement field a few hours a week.
For those looking to start a business during retirement, Rabinowitz suggests thinking outside the traditional business model in an area that interests you and finding an income source that requires very little capital.
While many people will not have the discipline and resources to retire at age 50, you might be the exception. If so, you will enjoy many years of exploring your interests and relaxing without having to head to work each Monday morning.