Retiring early is a dream that many people have, but a dream that few can actually bring to fruition. In today’s world, where many retirees are their retirement savings, retiring early seems out of the question. However, if you are smart with your money, retiring early isn’t merely a pipe dream, it’s a reality quite easy to realize.
1) Craft your plan
Before embarking down the path to any savings goal, you must have a plan in place. Write down how much you think you will need to retire on. If you want to retire by the time you are 45, you’ll need to account for inflation, rising health care costs and your cost of living from then until you turn 100 –you want to make certain you don’t outlive your money.
Calculate this carefully, and come up with a lump sum number.
2) Create multiple streams of income
Next, you need to figure out how you are going to make the most of your money and how you are going to make that money last. Design a plan using stocks, bonds and multiple streams of income you can collect on well into your retirement. Consider the vast expanses of entrepreneurship and add some business ventures to your portfolio. You can be retired as a silent partner, but still reap financial benefits.
Add your annual projections together from now until the day you want to retire. If that lump sum exceeds your planned living expenses, you are sitting pretty. However, you must also consider your projections.
Project your guaranteed income against your living expenses. Never count on variable sources of income when you are planning for retirement. Use variable income as “filler” or extra money, but never rely on it. If your projections meet your life expectancy, early retirement is in reach. If not, go back to the drawing board and re-work a new plan. It is important that you don’t fall into the temptation of using your variable income to account for a number you want to reach. Your goal is long-term financial security, do your best to reach that without jockeying numbers into position.
The key to retiring early isn’t a magic formula, it’s planning. Proper planning leads to perfect results in life and in retirement. Create a plan you can stick to that helps you generate income now and in the future, stick to that plan and enjoy your retirement as early as tomorrow. When you realize that you control the numbers, the numbers stop controlling you.