Most of us may have a dream of retiring early. The idea of traveling, spending more time with family and friends, and having the time to enjoy hobbies more often and on your own schedule are just some of the things we look forward to. Retirement is the ultimate reward for years – and more often decades – of hard work.
For many of us, there’s a need to maximize our retirement benefits, which means retiring at age 66 or 67.
If you aspire to retire at an earlier age, you’ll need to plan carefully to have the appropriate resources to support the lifestyle you wish to lead. It may not always feel this way, but it is possible. Here are 8 tips to help you get started and make your retirement dream a reality.
1. Start Saving Early
It’s never too early to start thinking about retirement. Start saving early so you can take advantage of compound interest. Investing even a small amount of money at an early age, and doing so every month consistently, will add up dramatically over time. That’s because the interest gained on your principal will continue to grow as your principal grows.
2. Contribute to a Retirement Plan at Work
Employer-sponsored retirement plans (typically 401(k) and 403(b) plans) are an exceptional opportunity for you to grow your retirement assets. These retirement plans allow you to save money, tax-deferred, in various types of investments. In addition, most employers will make contributions (up to a certain percentage or dollar limit), that add to your account holdings.
When you leave a job, you do not have to leave behind those accounts. You can choose to transfer assets without penalty to another employer-sponsored retirement account or leave them right where they are.
3. Pay Off and Avoid Debt
Paying off debt and trying not to accumulate it is also important in building a sound retirement plan. Interest that collects on the debt will hinder your ability to save for retirement. A careful plan for saving and not spending goes hand in hand with successful retirement management.
In the financial world, “debt” does not always mean the worst. For most people, certain major life purchases – buying a home, a car, or your education – will involve borrowing money.
There is good debt and bad debt, all of which is based on several factors, including the amount, interest rate, purpose, and your personal history with credit. In general, buying a house and student loans fall into the good debt category. Credit card debt is generally considered a bad debt, especially if you carry large balances at high-interest rates.
Establishing a solid credit history and paying your bills on time are foundational ways to show creditors that you are a responsible money manager. And managing debt is essential in retirement planning.
4. Keep Tabs on Your Spending
Planning for retirement means being thoughtful about your spending, especially as you get closer to retirement. Managing your spending often starts with developing a plan for what your budget is and what you will need. That includes setting aside emergency funds and setting savings goals. A handy tool for use in developing a budget is this calculator, which can help you recall and itemize expenses.
By developing a strategy for your spending, and reviewing and adjusting accordingly, you’ll be prepared for what you want and need when you retire.
5. Consider an HSA for Health Expenses
Health care is expensive and often increases in cost as we age. You can mitigate the risk of unexpected health care expenses by enrolling in a health savings account (HSA).
There are many guidelines covering who is eligible to contribute to an HAS, for example, you need to be covered by a High-Deductible Health Plan and there are limits to what’s covered. This article provides excellent details on HSAs, eligibility, coverage, and benefits.
6. Don't Overlook Insurance Needs
An important part of retirement planning is factoring in life insurance and long-term care insurance. Ensure you have multiple product options to choose from to make the right choices for you and your family.
7. Speak with a Financial Advisor
There are many factors, decisions, and options to consider when thinking about retirement. Speaking with an experienced professional can help you ensure that you have a strategy for covering your everyday living expenses, health care, and all the extras.
Remember, tapping into your retirement before age 59½ carries significant financial penalties. The earliest you can receive reduced Social Security benefits is at age 62.
8. Use Retirement Calculators to Help Stay on Track
A pre-retirement calculator can help you assess how prepared you are for retirement and the steps you can take to improve your retirement strategy. Use this calculator to determine how much more you could save by increasing your savings today.
What if you need to borrow from your retirement plan? Check out this helpful calculator that can help you make your best-informed decision. If you’re wondering about what your 401(k) might be worth, estimate how much it may grow before you retire.
For more retirement calculators and resources, visit this page.
The dream of early retirement is a common one and can be achieved with the right planning and research. It’s not something you’ll be able to jump into right away. Play it smart, plan wisely, consider all your expenses, and be committed to a plan that will help you reach your goals. Regular meetings with a financial advisor can also help to keep you on track.
Meet our team of financially brilliant advisors and schedule a complimentary, no-obligation, and confidential financial review.
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