Early retirement means having the financial freedom to not have to work another day for the rest of your life. It means being able to live comfortably and even travelling when you want to. Since many of these goals aren’t realizable until after you retire, here are some tips to push forward your retirement age and to also make sure you have enough saved.
How Much Do You Need To Retire?
If you’re contemplating early retirement, ask yourself if you could retire right now if you quit your job today. If your savings and assets are not enough, then you should consider possibly cutting back on expenses.
- If you have children, should you pay for their college educations? Some people believe that people should pay for their own college educations instead of being funded by their parents. Some parents would rather their children work while going to school to build character. Many parents fear that a child going to college develops bad habits like partying and not taking their education seriously. Some think that students who work while going to college develop better habits. If you decide to fund your children’s education, set specific guidelines. These should govern how much you’re willing to contribute and the amount of financial aid you expect your children to apply for. If you decide not to fund your child’s college education, you can instead use that money to give them a trust fund to help cushion their transition into the workforce.
- Actively cutting your expenses can help speed up your early retirement goal. Being frugal is a skill that you can practice every single day. Instead of spending thousands of dollars on birthday celebrations, graduations and other parties, you can find other ways to celebrate special occasions without spending money on big, fancy parties.
You’ll want to pay off your house by a certain age. Part of your early retirement goal should be getting your expenses under control. A house is, for many people, their largest expense. After it’s finally paid off, that money that would otherwise have been earmarked for your mortgage payments can now be added to your nest egg.
Create An Emergency Fund
Begin setting aside a portion of your money for a contingency fund. You might have real estate that you are keeping as an investment, which is good for cashing in somewhere down the road. It’s not something that can be quickly converted to cash in the time of a crisis, however. Stay away from illiquid assets as part of your contingency fund. In the case of a real emergency, people should be relying on savings accounts and fixed-rate money market funds that can quickly be converted to cash. Some people even keep a small amount of cash or precious metals at home (5 – 10 thousand dollars worth would be good for possible emergencies). Even if you haven’t retired yet, you’ll want to have at least six months of reserve money available for emergencies and other inconvenient surprises as they come up.
Set Aside An Appropriate Amount For Health Care
Everybody knows that, sooner or later, they’re going to need the services of the health care system. Health care costs also tend to rise as we get older. A chance hospitalization (or even an extended stay at a hospital) can put a dent in your savings account if you haven’t properly planned for it. Some early retirees will want to take advantage of self-funded health savings accounts by making monthly scheduled deposits to fund it. Health insurance is essential at this stage. The best advice is to get enough health insurance such that you’re sure you’ll be fairly well taken care of in a wide variety of circumstances. How much insurance you buy (and how much health-related funds you set aside) will depend on upon your health history. Health-care funding is even more important for those with chronic conditions like diabetes.
Save for “Quality of Life” Purchases
Many elements of life get more challenging as you age. It can be expensive just ensuring you have the right products to guarantee you’re able to enjoy the same conveniences everyone else takes for granted. Purchases that help with mobility, comfort, etc. spring to mind. For example, as vision fades, it can be important to find a phone with larger buttons. A lift chair provides comfort while resting and also gently assists you as you stand up, and can also be a significant investment. These are things that should be taken into account.
Whatever your stage of life, Eastex would love to talk to you about your finances, and learn more about how we can help you!
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