Planning for Early Retirement

If you really want to retire early, you have to start planning when you're young. Unless you win the lottery, if you wait until you're 40 to start planning for an early retirement, you will seriously limit your choices. You can't start planning and saving soon enough if you want to retire early.

There are some unique things to consider if you want to retire early. Most people want to retire early so that they can enjoy things they don't have time for now. That means that you will probably need more income on an annual basis than you would if you wait until you are older. Taking trips and enjoying activities will cost money. These things will be expenses over and above your regular living expenses.

You also need to consider that most retirement funds have a penalty if you withdraw from them before you are 59 ½. There are some exceptions to the rules, but you should plan to have funds available outside of retirement accounts to use prior to that age.

If you aren't willing to live well below your means now and put away a considerable portion of your current income into various savings and retirement accounts, then you probably shouldn't plan to retire early. It takes commitment to deny yourself things now in order to get something better later. Many can't deny themselves when the later is only a couple of months, never mind years down the road.

But if you're determined, the best way to save is to put money away monthly into several types of accounts. Take full advantage of any retirement accounts you have available. Don't neglect to put money away into a regular taxable account as well. Those non-retirement accounts are going to provide you with money to live on until you are old enough to withdraw money without a penalty from your retirement accounts.

Within your various accounts you should invest wisely. Whole books have been written about what to invest in. The younger you are, the more aggressive you should be. Don't be overly risky and stupid, but don't waste your time in investments that are too safe. Most people need that fairly decent return to help them reach their goals.

Another key is to get out of debt as much as possible. Cars and credit cards are obvious, but even having your house paid for gives you a lot of flexibility. It is usually a huge relief for a retiree not to have to worry about a mortgage. Also, paying interest is usually wasted money. Now it can be earning more money for you instead!

This article isn't designed to convince you that you shouldn't aim for early retirement. However, it is designed to provide you with a more realistic view of what you'll need to do. Try out calculators such as Retirement Expenses Calculator and the Retirement Income Calculator. They are a good place to start to see what you will need to do to help you retire early. Many say they want to retire early but they have no idea of what that really involves. Now you do. Write up a game plan and stick with it!


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