5 Strategies for Early Retirement

Summary: Is it your wish to retire early and enjoy the pleasures of retired life for longer? Do you have a plan to take care of your expenses and sustain your lifestyle? Consider these strategies while creating one.

One thing that you may not have on your side, while planning for an early retirement, is time. Within the shortest span of time you need to make money, save, and achieve your financial goals. But there is also a reward in this – you get to enjoy your retirement for a longer span of time.

Here are a few strategies you need to focus on, if you want to retire early:

Build assets faster

Following conventional strategies are not going to work for you, if you want to build wealth faster. Here are three ways to do that:

• Reduce your expenses: You need to be extremely frugal with your money if you want to retire within the next 7 to 10 years. You will have to make too many sacrifices, which may not be possible if you have needs. Thankfully, there are two more ways to explore.

• Try active investing: You can’t rely only on passive returns if you are looking at building wealth fast. You will have to add an extra skill component that helps you earn additional returns.

• Leverage more resources: If you don’t have enough time to build wealth, you will have to work on expanding your resources. Whether you are learning a new skill, starting a new career, opening a new business, or getting professional assistance, make sure it adds value to your goal.

You can either choose from any of the above options or combine all of them to achieve your goals faster.

Make sure you protect your assets

Building your assets is not going to help you retire early, if you are not doing anything about protecting them from inflation. Although invisible, inflation can be an insidious cancer that can destroy your financial security and eat away the purchasing power of the assets that you have built. You have to keep restructuring your portfolio as well as your income sources if you want to offset the erosive effects of inflation. It would be best to invest in income producing assets such as real estate, equities, and fixed income sources that have provisions to adjust cost of living.

Sort out your spending issues

Traditional retirement is generally associated with decreased spending because of the reduction in your activity level. However, early retirement is different. Your activity level here would be as high as it was before you retired. So you can’t expect any reduction in your spending. In fact it might even increase due to your active lifestyle. Here are four options you might want to consider if you want to sort out your spending issues in early retirement:

• Build more wealth: Build excess wealth than what is required to support your existing life style. This will give you the appropriate cushion for your early retirement spending.

• Make sure you earn higher returns on your investment: If you can find a way to earn higher returns than what you can expect from the market, you should be able to maintain your lifestyle costs during your early retirement.

• Supplement your retirement income with earned income: Taking up a part time job or starting a small business that can earn you some extra income should help you sail through your early retirement without any difficulties.

• Change your lifestyle: This is another way to sort out your early retirement spending issues. You can move to a smaller home or a home in a less-expensive locality, forego some of your lifestyle needs, and choose a lifestyle that matches your retirement income.

You can look for more strategies like this to lead a comfortable life after retirement. Or you can just combine a couple of these options and make your ends meet.

Be Self-Reliant Until You Qualify for Medicare or Social Security

One disadvantage of retiring early is that you won’t qualify for the benefits you can get from social security and Medicare. You can’t even think of calling up a reverse mortgage lender through reverse mortgage live transfer leads and taking out a reverse mortgage. You can’t rely on Uncle Sam at least for a couple more years. You will have to self-insure your health and budget for lower income until you qualify for Medicare and Social Security benefits.

Create a perpetual income stream which you can’t outlive

If you are retiring in your 50s, you might surely have a spouse or a dependent that will live for at least another 40 years. So you will have to plan an income stream that will last till then. Your principal will have to be intact till the end so that you don’t end up elderly and indigent.

Retiring early could be a blessing if you plan things the right way. You will have to build your assets faster, find out a way to beat the inflation, make sure your expenses don’t exceed your income, self-insure your health, and create a perpetual income stream that will help you sustain till the every end. Nevertheless, these strategies will only help you understand how to retire early; not when to retire.

There is only one thing that will help you decide when to begin your early retirement – your passive investment cash flow. The day your passive investment cash flow exceeds your expenses, you know you are ready to retire. That’s when you will be left with money to reinvest.

Money is the main thing that you need to focus on, if you want to retire early. Nevertheless, you need to also plan on what you are going to do after your retirement. There is a limit up to which you can watch daytime television, read novels, or play golf. These joys are only short-lived and you have a long way to go.