14 Ways to Retire Early

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It seems like the economy is making it more difficult for people to retire at 65. That's true in
some ways, but what if you had more control over your own retirement than you realized?
What if there were some practical things that you could do that would enable you to retire
closer to 60 instead of 70? While we can't control the economy around us, there are some
practical financial things we can do to round down our retirement age. (See
also: Retirement Planning if You're Under 30)

1. Know What You'll Need to Live On
Simply knowing what your monthly expenses will be during your retirement years can be
helpful when it comes to planning when exactly you'll be able to quit working.
Thisworksheet from Vanguard covers most expenses and will give you a rough estimate of
what you'll need to live on a monthly basis.
Let's assume that currently you're 27 years old and earning around $35,000 per year. We'll
also assume (generously) that between a 401(k), savings, and other assets, you already
have $30,000 saved.
According to CNN's retirement calculator, if you can save 15% of your income, you can
retire at 65. That's $5250 a year or $438 a month at your starting income. (The calculator
assumes that your income will grow at an annual rate of 3.8%, so your savings in actual
dollar amounts should also increase each year.)
Now, if you knock your hopeful retirement age down to 60, 15% of your income suddenly
isn't enough, as it falls quite short of what you'll need. It's not until you're saving 21% of
your income that you make the cut to retire at 60. That's $7350 a year or $613 a month.
So your challenge is to increase your savings by 6%, or $175 a month.

2. Start Early
Starting to plan and save for retirement in any capacity is far easier in your mid-20s than
your 40s or 50s. The earlier you start, the more time your money will have to accumulate
and grow.
In the retirement calculator above, the starting age was set to 27. Knock that number down
to 24, and you can get away with saving 19% instead of 21%.

3. Contribute a Weekly Amount to a Long-Term, Low-Risk
Investment
If you start early, contributing as little as $20 a week to a money market mutual fund can
grow to five figures (six if you start with a five-figure initial balance) by the time you're
ready to retire.
Depending on your income and what you're saving already, $20 a week is $80 a month
(plus two bonus weeks every year!), which gets us almost halfway to $175.

4. Save Your Salary Increases After a Certain Point

Our habit is to increase our income and upgrade, always hovering at the ceiling of what we
can afford. If you get to a certain point where you're content with your lifestyle and living
situation, stop upgrading when your salary increases, and instead, save that increased
amount every year as a lump sum for your retirement accounts.
If you've been saving 21% of $35,000 (or even 15%), it's okay to loosen up a little. But
keep your eyes on the prize. (See also: Lifestyle Inflation: The Ultimate Money Trap)

5. Keep Your Living Expenses Low

Keeping your living expenses capped will allow you to put more money aside for retirement
and contribute more to investment accounts or a 401(k).
Stay practical for this one.
Start with a simple budget plan and then carve out unnecessary expenses. You also can
work to lower your utility bill, which can save anywhere from $30 to $100 per month. (See
also: Save $1,500 a Year in 15 Minutes)

6. Pay Off the Principal on Your House
If you can get your house paid off, you'll free up all the money that would normally go to a
mortgage payment every month, which can go to retirement savings. Also, the more
principal you've paid, the more you get to keep when and if you sell your house.

7. Take a State- or Federal-Level Government Job
Those who were born after 1970 and work for the state or federal government have a
minimum retirement age (MRA) of 57, and often retire before 60 with a pension. These
employees are entitled to public employee pension plans, though they vary by state.

8. Max Your 401(k) Contribution

If you have a 401(k) and can afford to contribute more, try to contribute as much as your
employer will match.
If you're able to contribute an extra $1,500 a year total (starting when you're 25) that will
give you roughly an extra $15,000 a year to live on if you want to retire at age 60.

9. Downsize Your Home When the Market Is Good
This can be a particularly good move if your house is paid off and the kids are all grown and
moved out. Assuming the market is good, sell your home at a profit and move into a place
that's smaller, cheaper, and better suited for just a couple people. Odds are that you'll have
a sizeable amount to put away; perhaps even enough to get you through a year or two.
(See also: How to Downsize and Live a Better Life)

10. Move to a State With Lower Taxes
Some states are easier to retire in than others. Property, income, and sales tax should all be
taken into consideration if you plan to move. Reduced taxes mean reduced living expenses
which means your retirement dollars go farther.

11. Exercise and Manage Your Health
One way that you can help to prevent increased expenses in your later years is to exercise
and take care of your body. If you do, you might be able to qualify for cheaper health
insurance plans and be less susceptible to increases in your monthly premiums. (See
also: Live Longer With These Small Healthy Habits)

12. Start a Roth IRA

A Roth IRA is a retirement account that allows you to contribute after-tax money. The
appeal over a traditional IRA is that withdrawals won't be taxed in retirement, and that your
contributions can be withdrawn anytime without penalty (with some caveats), for
emergencies.

13. Work the Tough Hours While You're Young
Working overtime and weekends, and doing what you can to bring in more cash flow is
much easier in your 20s and 30s than when you're older. Work those hours now and put
money away so that you can wind down as you get closer to retirement age.

14. Cultivate a Skill That You Can Do Part-Time in
Retirement
Many people work part time in their retirement, if for nothing else as a means to kill time.
Try to plan for a way to continue to bring home a paycheck even after you've retired. This
can mean continuing in your line of work part time or perhaps going from a business owner
to a consultant for another company. It also means your retirement funds won't be your
sole means of support.

Planning Ahead
The most important thing you can do when it comes to securing your retirement is to do as
much advanced planning as you can. While certain things can't be predicted, like exact
living expenses or the cost of insurance, you don't have to wait until your 50s to start
putting money away.
Be prudent (Judicious – Farsighted – Practical) when you're still young, and you'll make an
early retirement far easier.
Do you have other ideas on how to retire early? Let me know in the comments below.

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