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How to Retire Early: 3 Steps to Success

April 17, 2023

Early retirement is a lofty goal, but the path is paved with clear and simple steps that just about anyone can follow. Setting clear intentions, securing post-retirement income, and living more frugally in the present are the three keys to a brighter future, and today’s the perfect day to get started.

  1. Set Your Retirement Intentions

    Retirement looks different for every individual, and if you’ve lived a life of intention, there’s no reason to assume that you should limit your outlook in retirement. So, be sure to spend time thinking about how you’d like to spend your golden years.

    More to the point, those who retire early may have more energy for vacations and adventures, or more time for hobbies and projects. If your goals for retirement look similar, then remember to pad your savings as much as possible. Early retirement is easier to achieve if you have more modest goals for the next stage in your life—but there’s absolutely nothing wrong with aiming high.

    Whatever path you end up taking, having a clear idea of how you want your retirement to look is the first and most important step. Without a plan, early retirement might not feel as satisfying as you’d hoped. 
  2. Secure Your Retirement Income

    Most experts recommend that you save roughly 10 to 15 times your annual income in order to secure a comfortable retirement. However, standard goals may not apply if you plan to retire early. To think in more flexible terms, start with the assumption that
    your monthly retirement income should be equal to roughly 80% of your monthly income prior to retirement—if you want to maintain something resembling your current standard of living, that is.

    Seen from a different angle, you can most likely stretch whatever retirement savings you have for up to 30 years if you can stick to the 4% rule. This rule says that you should spend no more than 4% of your retirement savings in the first year of your retirement, then stick to that number (adjusted for inflation) in each year thereafter.

    Part of your post-retirement income will likely come from fixed income sources, such as social security. On that note, it’s important to point out that retirees in the U.S. can start claiming social security benefits as early as age 62. However, the longer you wait to start claiming benefits, the larger your monthly payouts will be.

    For this reason, early retirees would be wise to treat social security as a benefit of last resort. Focus on building sustainable income through other sources, via savings, investments, and/or part-time work. Importantly, you may wish to adjust your investments as you enter retirement. Many decide to move away from riskier investments and toward more stable ones, especially during the first few years, when setbacks can be particularly devastating.

    How much income you need will depend on the intentions that you’ve set, and it’s a good idea to talk through any plan with a certified financial advisor.
  3. Cut Expenses & Maximize Your Savings

    If you want to retire earlier than the average American, you’re going to need to save more and spend less than the average American household. That’s easier said than done—but it’s far from impossible. Here are a few tips to help you get started:
  • Break annual savings goals down into smaller, more manageable chunks. If possible, put money toward your savings and investments on a daily basis.
  • Reduce your living expenses wherever possible, for example, by choosing to drive a used car instead of a new one, or by moving to a more affordable location. 
  • Compare your expenses with those of the average American household to find out where you’re doing well and where you could stand to improve.

    Depending on where you start out, you may also wish to consider consulting or part-time work during your retirement years. That isn’t all bad news: people who embark on a post-retirement career or spend time volunteering may find that they retain their mental faculties for more time and live longer than those who don’t.

We’ll Help You Reach Your Goals

No matter where you’re headed, working with a dedicated financial advisor is the best way to ensure that you can reach your goals. The experts at IntentGen Financial Partners specialize in helping others live out their intentions to the fullest—and we’d love to do the same for you. Contact us today to get started.

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