When you hear the word retirement, the first thought that comes into your head is the golden age of 60. Well, that was a decade ago when people used to wait to turn 60 before they retire. Today, we see people choosing to retire at the age of 40s or 50s to live their longer retirement life to the fullest. While the idea sounds intriguing, how will you manage your finances for the next 30-40 years without an income?
Well, this needs a methodical approach, which we are going to discuss below.
Planning Really Early Helps in Reaching Retirement Goals Quicker:
The earlier you start saving for retirement, the more you can prepone your retirement. Our predecessors did not really think of retirement-related issues until they were over 35 years of age. It was ingrained in their mind that they have time till the age of 60 to collect retirement funds. On the other hand, Millennials are clear about what they want because of their exposure to so much online content over the years. Hence, they have their priorities set and start saving for retirement from the first day of their job.
Calculate the corpus you will need to live a stress-free retirement life. Also, consider factors like responsibilities you will shoulder even after you take early retirement, such as higher education of children, etc. Hence your final calculated corpus should sum up all these factors.
Grow Your Money:
The money inflow should not stop once you retire. Putting all your money into a savings account is not a great plan as the inflation rate is higher than the interest rate of a savings account. This means your money value will depreciate, and your early retirement plan will not work. You should always divide your money between savings and investments. Investing in equities can help you grow your wealth. Equity means both stocks and mutual funds. They both have their own advantages and disadvantages. While stocks can be volatile and risky but offer higher profits, mutual funds are much safer but offer lower profits than stocks. This is a trading guide to get a deep knowledge of this subject. The thumb rule is the more risk you are willing to take, your chances of gaining profit increase. Invest in both to maintain a diversified portfolio.
Avail Minimum Loans:
It is inevitable to live through your job years without availing of loans such as home loans, car loans, etc. It is ok to take loans for such necessary assets. Avoid taking personal loans for your lifestyle habits. It is incredibly easy to get a personal loan which is why we strictly suggest you stay away from it. A personal loan should only be availed as a last resort in case of an emergency. These loans have a high-interest rate which can become a roadblock in your money-saving path. It will delay your retirement plans for several years.
Avoid Impulse Buy:
This is the major reason why your retirement savings is not up to the mark. At a young age, you would want to indulge in a lot of temptations. A few are absolute necessities, and others you can live without. Think twice about spending money on something small or large, as any money saved can go into the retirement fund.
Buy Health Insurance:
Buying health insurance with good coverage should also be on the top of your list if you are planning an early retirement. Most organizations offer medical insurance along. As you will be retiring early, make sure to start a policy early on. The early you can get good medical insurance; they will charge you less premium as you are healthy. If you buy a policy at the age of 40 or 50, they will charge you a higher premium as your chances of developing health issues gets higher.
Do Not Carry Debts:
Carrying debts in retirement life is absolutely wrong. You should think to save instead of spending the money as there is no in-flow of money now. If you use the retirement fund to pay off debt, then it may impact your retirement lifestyle. It is better to pay off debts before you retire. Even if you have to postpone the retirement for a year or two, never carry forward any debts during retirement age.
Do Not Stop Living:
Yes, you should get serious about collecting retirement funds, but that does not mean you stop living your current phase of life. Experiencing every stage of life is important. Just to make extra money, do not get over-occupied. The foundation you will build in your personal relationships in these early years is important. After all, your early retirement is a bonus not just for you but for your family as well.
Retiring early is not that simple. You need to meticulously plan each aspect of your life after retirement and make the right investments to be able to reach the goal. You may have to work harder in your job days to reach the retirement goal earlier, but once you are there, you will have all the time in the world to explore all your hidden passions.
Founder Dinis Guarda
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