Everyone hopes to reach a point in their life where they have achieved financial security and can retire comfortably – ideally at an early age. Retiring early can allow you to fully explore your hobbies while your mental and physical health are still strong.
It’s possible to retire earlier than the expected age of 60 to 65, but this usually depends on how soon you to start working towards this goal. Here are some useful ideas to consider:
- Start saving early
Post-secondary graduates typically enter the job market around the ages of 22 to 25. It’s recommended to save 55 percent of your net earnings for the next 15 to 20 years in order to have saved enough to last you for about the same amount of time (15 to 20 years), enjoying the same quality of life. Basically, you need to:
- Maximise your contributions to a tax-deferred retirement plan
- Adopt an automatic savings plan
At the age of 59, you can start withdrawing from your tax-deferred retirement savings without any penalties. If you wish, you can retire in your 40s and spend the savings until the age of 62-63 when you qualify for Social Security benefits.
This kind of retirement does not necessarily mean that you will be wealthy when you retire – unless you invest your savings. But earning a good income, saving a significant portion of it, and investing that amount well is the basic strategy for early retirement.
- Actively grow your assets
While saving is important, you should ensure that your money is hard to reach to discourage wasteful spending. A good way to do this is to grow your assets progressively, by:
- Owning a home
- Getting into rental real estate
- Joining an investment club
These are just a few ways to make growing your wealth an automatic habit.
- Make a commitment
When creating your early retirement plan, you must be prepared to provide the necessary resources to attain your goals. This means you must commit to your choice, whether it is living a frugal life to maximise your savings, or allocating some time to travel and manage your rental properties, for example.
The nature of employment has changed a lot in recent decades. As such, it is a good idea to start planning your retirement as early as possible. Generally, you need the right mindset, hard work, and sacrifice to retire early, but it is possible.