How To Plan For An Early Retirement Now

How To Plan For An Early Retirement Now

Many of us dream of leaving the workplace while in our 40’s or 50’s instead of sticking it out until age 65. Early retirement is a tempting goal, but it can be tough to achieve.

There are four major obstacles to early retirement:

1) You have less time to earn money. If you start working at age 20 and retire at 65, you have 45 years to produce income. If you retire at 45 instead, you have only 25 years to achieve the same results.

2) Your investments have less time to compound. Just as early retirement gives you less time to earn money, it also gives that money less time to grow. That means a smaller nest egg when you call it quits.

3) You’ll be drawing on your savings longer. The average American lives to be nearly 80. If you retire at 65, your savings need to last 10 to 20 years; if you retire at 45, they need to last more than twice as long.

4) You’ll skip some of the traditional perks of retirement. If you retire at 45, it’ll be years before you have access to Medicare or Social Security. You’ll also face stiff penalties if you tap your retirement accounts early.

This is not to say you shouldn’t plan to retire early. It’s a laudable goal, but if you’re serious about early retirement, you need to be particularly smart with tomorrow’s money, today.

For many, semi-retirement, in which you continue to work part-time or seasonally, is a good compromise. Though semi-retirement may be more realistic than early retirement, it’s still not for the faint of heart. You have to work hard to make it happen.

You’ll need:

– Ample savings. Semi-retirees plan far in advance, building a large nest egg before they make the leap.

– Modest living. Live below low means, so you can save more for retirement and retire sooner.

– Ongoing work. Though semi-retirees don’t have full-time jobs, they keep working for a variety of reasons. The added income means they don’t have to tap into their savings as soon (or as deeply), and the work gives them the chance to spend time with others while doing something worthwhile.

– Purpose. Most important, semi-retirees tend to pursue projects and passions that align with their core values, which makes those extra years of work that much more meaningful.

The bottom line: Whenever you decide to do it, retirement can be whatever you want it to be. You can go back to school, travel the world, work part-time on a pet project or write the great American novel. But in order to afford any of these things then, the time to start planning is now.

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