Retirement isn’t always synonymous with old age. U.S. Census Bureau data places the average age for retirement around 63, yet a strategic financial plan, clear vision and determination may lead to retirement well before.
While the path to retirement is as unique as each individual’s goals and lifestyle, there are fundamental steps and milestones that impact when you do hit this magic mark. If you’re eyeing an early retirement, consider the following:
- Save early, often and consistently – Of course, planning for early retirement starts with healthy saving habits. Over time, compound rates of return can yield big benefits — maximizing your savings and asset growth. Starting to save early, participating in your employer’s retirement savings plan, and using tax-advantaged investment vehicles for your retirement funds can all have an immense impact.
- Plan your business transition – If you have big ideas, an entrepreneurial drive, and the plans to make it happen, you might consider starting a business earlier in your career. If you play your cards right, you may be able to structure your retirement around achieving profit goals. If you’re currently a business owner nearing retirement, it is important to consider what will happen to your business when you’re no longer at its helm. Selling your business to a qualified buyer presents the perfect opportunity to kick off retirement. Well ahead of this transitional goal, it can be helpful to reach out to a financial planner to guide you through the process and myriad scenarios.
- Take an honest assessment of the lifestyle you envision – If you are planning on an early retirement, you probably have a vision for what it’s going to look like. One of the biggest preparations for a comfortable retirement is realistically budgeting according to your desired lifestyle. Do you plan to adapt your lifestyle post-career? If so, in what ways? What do you want, and what do you need? Setting attainable savings goals and sticking to a plan early-on will have make a difference later on.
- Evaluate your risk tolerance – Those wanting to retire early should revisit their investment strategy and adjust their portfolio based on short- and long-term goals. As an individual or couple nears retirement, they may want to reduce exposure to stocks and invest in more conservative options. Others seeking an early retirement may find that taking a more aggressive approach suits their end-goals.
- Install safeguards – It’s important to plan for future health concerns. If you pass away or become incapacitated, will your partner have enough money and resources to support him or herself? Disability or life insurance can provide extra cushion and peace of mind during turbulent times.
- Get your estate in order – Organizing your estate is an important aspect of planning for the future. An estate goes far beyond a will. It encompasses all of your personal possessions, savings, and assets. An estate provides direction on what to do if you pass away or become incapacitated. This process also includes leaving a legacy, whether this means providing for your spouse and heirs, or donating to a charitable organization.
Retiring early is an accomplishment that requires careful saving, time, and planning. A financial planner can offer a valuable and experienced perspective on what needs to be accomplished before retirement. Additionally, they can provide advice on how to set up a comfortable nest-egg — helping to ensure you and your loved ones are taken care of well into the future.