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  • Writer's pictureBruderman & Company

How to Retire Early

It’s not uncommon for people who are constantly chained to their work desks to daydream about early retirement. However, the road to retiring early isn’t as easy as most people imagine it to be. If nothing excites you more than the idea of working, relaxing, and traveling on your own schedule, you may want to speak with private financial advisors in Saddle Brook, NJ.

Tips for Retiring Early

Figure Out What Early Retirement Means to You

Before anything else, you’ll have to outline your version of early retirement. You can start by picturing out and establishing your ideal day-to-day. However, be open to the idea that what you may have in mind can change over time.

Do you want to leave your 9-to-5 job for something else that allows you to make your own hours? Are you more interested in traveling in between work spurts? Would you like to concentrate on non-income-producing hobbies?

Establish How Much Money You’ll Need

The next step is to establish your target number when it comes to the amount of money you’ll need. Ideally, you should have about 25 to 30 times your expected yearly expenses invested or saved. You should also have a year’s worth of expenses in cash.

Establishing your target number will make it easier for you to determine your monthly, weekly, and daily savings goals. Since multiple scenarios have to be considered, you may need the help of an experienced financial planner to crunch the numbers for you.

Take Inventory of Your Finances

Taking inventory of your finances will require you to calculate your net worth and annual spending. Use your checking account habits and credit card statements as the basis of your guesstimate. If you want to verify the amount of money that you spend each year, try setting up semi-automated tracking with an app.

Avoid Spending More Than You Earn

Building substantial and long-term wealth would be impossible if you’re used to spending more money than you earn. If you really want to work toward early retirement, you’ll have to decide to live below means.

Otherwise, you won’t be able to increase your savings rate and invest as aggressively as you should. You can start by identifying your biggest expenses and focusing on reducing them. This can be anything from food to transportation to housing.

Optimize Your Savings

You’ll want to take advantage of the tax advantages and investment growth offered by employer-sponsored retirement plans and IRAs. However, it’s important to note that certain restrictions may be placed on withdrawals if you stuff your retirement accounts to the brim when you’re retiring early.

Invest the Money That’s Left Over

Are you maxing out your retirement accounts? Try moving on to a brokerage account. You can invest this money directly in the stock market and cash out when you need to.

You may want to consider low-cost index funds. These all-in-one investments are specifically designed to minimize risk while it diversifies your money. They also track a special financial market.

Work Regularly with a Financial Advisor

To help you reach your early retirement goals, it’s always a good idea to enlist the help of a financial advisor you’re compatible with. They’re the experts at developing investment strategies. Additionally, they can help you manage your income streams that may include income from dividends, Social Security, required minimum distributions, real estate investments, and defined-benefit plans.

At 1879 Advisors, we’re here to help you get there by providing effective, long-term wealth management solutions and retirement planning to help you reach your financial goals. Contact us today to schedule an appointment.

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