Retirement and Financial Independence

How to Retire Early: The Changing the Definition of Retirement

how-to-retire-early

There is a new face of retirement these days and it doesn’t include being over 65 and never working again. That kind of retirement kills, people! Don’t believe me? Take Freakonomics word for it. Let’s talk about the changing the definition of retirement and how to retire early.

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So maybe you start your own business when you aren’t required to show up at an office forty hours a week. Or you can volunteer. You can go back to school, maybe become a teacher and give back to your community.

Social security can be a relic of the past by the time Millennials reach the age of eligibility. We all need to take our retirement into our own hands. And you don’t have to spend the whole prime of your life slaving for the man.

So you need to fund your own retirement through 401K’s, IRA’s and investing. The earlier you start, the better. If you are getting a late start, hope is not lost. That’s my situation and I wrote about what we can do to catch up here.

The point is, retirement doesn’t mean sitting around after age 65 and waiting to die.

Invest early, invest wisely, and you can retire when you want, on your terms.

Evaluating your retirement plans

The following are several points to consider as you plan for retirement years:

how-to-retire-early-Retirement-planning

1. Think about your retirement plans

You cannot plan for your retirement unless you have some idea of what you want it to look like.

Do you want to build your own home to live in off the grid? Maybe you want to purchase a condo in a vibrant urban center. Or buy 16 cats and live in old Mr. Gunther’s shack on the hill?

There’s no wrong way to enjoy your retirement, but you need to assess what you will need to sustain your lifestyle when you retire. Perhaps retiring at 50 is doable for you if you want to stay in your current home and keep your spending to a minimum, but you might not be able to retire that early if you plan on indulging in all of life’s luxuries.

That’s not to say that you must lower your expectations for retirement, but rather that you should be honest with yourself about what you want and what you will have to do to get there.

2. Make a sample budget

It’s difficult to determine the feasibility of your retirement plan unless you start putting figures on paper. Make a budget that outlines your anticipated expenses that you need have to pay for the duration of your retirement.

This budget does not need to have precise numbers for each expense, but you should do your best to at least estimate how much you will need to have saved annually to retire when desired.

Fortunately, there are numerous online and mobile tools you can use to plan your retirement budget. Betterment has an awesome retirement calculator that will tell you what you need to save to have enough for whenever you want to retire. It’s pretty awesome. Go ahead, give it a whirl.

Also, it’s a good idea to look for online resources that will inform you about some unexpected or frequently forgotten expenses.

3. Weigh your financial status against your retirement goals

Now that you have determined what you want your retirement to look like and the expenses you will have, you should assess your current financial situation to determine whether you are poised to meet your retirement goals.

It may be helpful to sit down with a financial advisor and discuss your plans. It’s also important for you to think about whether making certain sacrifices now is worth it so that you can enjoy the early retirement that you want in the future.

Creating a lifestyle that fits with your goals

Take the following into account when planning for a lifestyle you’ll truly enjoy once you retire:

how-to-retire-early-goals

1.Do something about your debt

Before you can retire, you will need to get your debt under control. Think about debt consolidation or snowballing as a strategy to make payments more manageable and effectively tackle your debt over time.

If you’re struggling with debt or have trouble making payments on time, the best thing to do is to put a freeze on your credit use and reevaluate your financial situation to determine what you can do to move out of debt. It may be helpful to work with a financial advisor or use a debt management tool to get serious about debt minimization and management.

2. Get spending under control

Many people don’t realize how much money they spend on discretionary purchases. It really adds up! Find some way to track your spending, whether it’s collecting paper receipts for your purchases or using a budgeting app.

Seeing a record of your spending on paper will allow you to spot areas where you can improve and cut back. Try out a bare-bones budget that limits spending beyond essential purchases as much as possible. Make a conscious effort and keep yourself accountable to your budget.

3. Consider downsizing your retirement budget

If you are feeling like your retirement goals are too far out of reach, you might need to think about modifying your retirement budget.

By making certain cuts to your retirement budget, you can retire earlier while still meeting your savings goals.

Swap out paid hobbies like golfing or scuba diving with affordable activities like fishing or gardening. Making small reductions to different parts of your budget, like the amount you spend on clothing or groceries, can make a big difference over time.

4. Get a side hustle

Just because you are retired doesn’t mean you will want or need to stop working entirely. Consider doing some contract work or small jobs so that you can stay busy and continue to bring in a little income to offset your costs after you retire.

If you don’t want to work when you retire, consider taking on a part-time job now. Even working an extra few hours each week could earn you several hundred dollars each month, which adds up to several thousand dollars every year.

Try to channel this extra income directly into your retirement savings and avoid the temptation to increase your personal budget based on this increase in your income.

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How to retire early?

Although each person has different retirement goals, many individuals would like to retire early. Your retirement years can be the most exciting time of your life. Those who plan properly can spend their retirement traveling the world, volunteering for different organizations and spending quality time with their loved ones.

After decades of hard work, you deserve to spend your retirement doing the things you love. By taking steps now to build up your retirement savings and improve your financial health, you can spend fewer years working and more time focusing on doing what you want to do.

Show Notes

Bulleit Bourbon: This is the whiskey that Andrew was drinking on the rocks. One of my favorite Bourbons for the price. The Bulleit Rye is excellent too.

Social Security is worse than you think: The NY Times did an article about what we talked about in this episodes. Don’t count on social security being available to us.

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