Retirement Planning Steps
If you plan to retire by the age of 50, follow these four steps:
- Decide On Early Retirement
- Make Lifestyle Adjustments
- Save Money Now
- Make Wise Investments
Decide On Early Retirement
This may be the biggest key towards early retirement: actually deciding on early retirement. If you wish to retire at 50, you need to settle on that number years in advance to give yourself the best chance to make this a reality. Obviously, you will have a much better chance to successfully retire at 50 when you decide on this when you are 25 years old, compared to 45. This is common sense, but it is a very tough goal to set while you are figuring out a career, climbing the corporate ladder, and raising a family all at the same time. Life certainly gets in the way at times, but do not let anything discourage you from retiring when you wish.
It is suggested that you attempt to accelerate your income to maximize your savings at an earlier age. Pick up a part-time job or start a side business. Or, sometimes just asking for more hours/extra work at your current job can result in more income. Always resist the urge to live at or above your means.
Make Lifestyle Adjustments
The good news is making lifestyle adjustments in this instance does not mean anything drastic needs to be sacrificed. If your plan is to retire earlier than most other workers, then normal savings methods do not apply to you. This means you must re-evaluate all your spending habits, current savings and investment options.
Rid yourself of any unnecessary expenses, which generally consist of going out to eat frequently, vacationing or attending concerts. The next step is to pay off any existing car loans, student loans or debts. The amount of money you save today will be used to enjoy retirement tomorrow.
Save Money Now
This is easier said than done, right? Well, maybe it isn’t so difficult to start saving as soon as possible. Use the four percent rule as a guideline here. This is a rule that says your savings should last at least 30 years, as long as you withdraw 4% of your savings during the very first year of your retirement.
For instance, if you plan to live off a total of $25,000 for the next 30 years of your life, then it is suggested that you have at least $750,000 in savings. Determine out how much you can survive off during your retirement to give yourself the best possible estimate at an exact figure.
Make Wise Investments
The experts commonly say the younger you are, the more room you have for risks, financially speaking. Most believe that even if the market crashes while you are in your 20s, you can still regain enough wealth to live happily and healthy throughout life.
If you want to retire early, though, perhaps making some wise investments rather than gambling on risky stocks, etc is the way to go. Take a conservative approach when it comes to the market. Always make sure to diversify and factor in Social Security benefits when estimating a retirement budget.
Need a retirement calculator? Click right here.
How Do I Save For Retirement Without A 401k?
Here are three helpful tips for saving for retirement without a 401k plan:
A solo 401k, also known as a self-employed 401k, is perfect for those not expecting to make a large yearly income. With a solo 401k, you are eligible to contribute twice, once as an employee and once as the employer. Participants are allowed to contribute their entire yearly earnings, as long as it does not surpass $19,500. When contributing as the employer, though, the amount will differ. You are allowed to contribute up to 25% of your earnings as the employer. Spouses of solo 401k contributors are eligible for this plan, as well.
Saving Tax Refunds
Everyone’s gut instinct is to spend, spend, spend when that tax return finally comes back! But, if you can just hold off the urge to spend this money, it could pay off in the long run. Simply saving any tax refunds is the simplest way to invest in your retirement. IRS Form 8888 currently allows taxpayers to deposit refunds directly into two or more savings accounts.
Open An IRA
Opening an IRA tends to be the most popular option for individuals without a 401k. There are a couple different IRA options available. A Roth IRA and a traditional IRA can both be great investment options. The only requirement for anyone opening an IRA is that they must be earning an income. However, if you are unemployed but married to someone earning an income, you are eligible for this plan. Self-employed workers commonly choose to open an IRA.
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