Early Retirement Planning

After decades of hard work, you are hoping to be rewarded with a financially secure retirement income. However, many people are not maximizing all the opportunities available to prepare adequately for their retirement years. With health care costs skyrocketing as well as the general cost of living, it's going to cost more than ever to provide a comfortable retirement for today's working generation.

Many people dream of an early retirement so they can take advantage of other opportunities, such as travel or a second career, while they are still relatively young and in good health. Most Americans consider the early retirement age to be between 53 and 58 years old, while the retirement age is 60 to 65 years old. There are some things you can to do ensure an early retirement and focus on investing for retirement so that those golden years will be worry-free.

In early retirement planning, you must decide what level of retirement income will support the lifestyle you desire. If you plan on taking a word tour and buying a second home in Costa Rica, that will cost a bit more than purchasing a beach cottage and living the quiet life. Figure out what your monthly and annual financial needs will be upon retirement, and then work to accumulate that amount. Don't forget to factor in inflation and cost of living increases in that number. There are several retirement expense calculators online, as well as retirement income calculators, to help you get accurate numbers.

To get on the path to an early retirement, start saving what you can, as early as you can. While workers who are in their early twenties may feel that retirement is too far away to start worrying, statistics show that in order to have a retirement income that most people would feel gives them a comfortable living, setting aside some money as early as possible is necessary. Even if the first few years barely show up on the retirement account, it's a good habit to start and know that every little bit helps toward the goal of early retirement.

Another tip for working toward an early retirement is to follow a budget. Without a strict savings plan, you may be tempted to spend some of your excess income on more frivolous things that don't matter in the long run. Instead, create a budget, stick to it and put any extra income into your 401k or other retirement plan. That way, the money will work for you when you need it most, not when you're just throwing it away on unnecessary expenditures. Living within your means translates into putting money away towards an early retirement.

The next step in achieving an early retirement is to make your money work for you. While stashing it all in your savings account may seem like a good idea, it's not the best way to make your money grow. Most workers are familiar with the 401(k) retirement plan, which is an employer-sponsored retirement plan. Other options are a traditional IRA (Individual Retirement Account) and a Roth IRA. Whatever vehicle you choose to safeguard your retirement savings, make sure it is secure and somewhat conservative so that the money will continue to grow over time and provide you with the retirement income you need.

If you have a 401(k) through work, always take advantage of any company matching contributions, where your company will match whatever you put into your retirement account up to a certain percentage. It's actually earning free money, and, with significant contributions on your part, you can get the most allowed from your employer.

A major obstacle to early retirement planning is the accumulation of debt. If you are paying too much of your income to debt, including interest, penalties, late fees and membership fees, you won't have enough for savings or contributing to your retirement funds. Get rid of debt as quickly as you can, especially that high-interest debt, such as credit cards.

Once you have an aggressive savings plan in place and you've got plenty of time until you retire, consider investing some of your retirement money into different investment vehicles. From money market funds to the stock market, you have many choices to help your money grow even more. They are not without risk, but with an experienced financial advisor, you can gain big returns with your money over time. Giving your money enough time to grow can help you toward your goal.

After mapping out your long-term strategy for early retirement planning, it's important to stick with it. By living within your means, investing your money early and over time and taking advantage of all the income-building investment options out there, you can realize the dream of early retirement and be secure knowing you've got income to last you for the rest of your life.