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.
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.
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.
Cut Expenses & Maximize Your SavingsIf 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.
IMPORTANT: Advisory Person(s) may use proprietary financial planning tools, calculators and third-party tools and materials ("Third-Party Materials") to develop your financial planning recommendations. The projections or other information generated by Third-Party Materials regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Results may vary with each use and over time. Thrivent Advisor Network, LLC and its advisors do not provide legal, accounting or tax advice. Consult your attorney and or tax professional regarding these situations. The return assumptions in Third-Party Materials are not reflective of any specific product, and do not include any fees or expenses that may be incurred by investing in specific products. The actual returns of a specific product may be more or less than the returns used. It is not possible to directly invest in an index. Financial forecasts, rates of return, risk, inflation, and other assumptions may be used as the basis for illustrations. They should not be considered a guarantee of future performance or a guarantee of achieving overall financial objectives. Past performance is not a guarantee or a predictor of future results of either the indices or any particular investment. Investing involves risks, including the possible loss of principal. Investment advisory services are offered through Thrivent Advisor Network, LLC, a registered investment adviser. This material, in and of itself, does not create an investment advisory relationship subject to the Investment Advisers Act of 1940. The purpose of the report is to illustrate how accepted financial and estate planning principles may improve your current situation. The term "plan" or "planning," when used within this report, does not imply that a recommendation has been made to implement one or more financial plans or make a particular investment. You should use this Report to help you focus on the factors that are most important to you. Review the Financial Planning Disclosure Document and the Financial Planning Agreement for a full description of the services offered and fees.Thrivent Advisor Network and its advisory persons do not provide legal, accounting, or tax advice. Consult your attorney or tax professional. Representatives have general knowledge of the Social Security
tenets. For complete details on your situation, contact the Social Security Administration.