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How to Retire Early

Updated on September 6, 2017
My dream of the perfect retirement is spending my days on the beach.
My dream of the perfect retirement is spending my days on the beach. | Source

A lot of people that work a 9 to 5 job are looking for a way to enjoy an early retirement. It may seem impossible to find the funds in the current economy. Included in this article are some ideas to obtain your goals so you can retire early. My husband and I were able to do this and if we can, you can too.

The best way is to start preparing early, but many of us are too close to retirement to save enough in time. Baby Boomers that thought they'd be fine, now find their retirement funds didn't grow the way they had planned. Either the accounts were drained because of the stock market losses or they aren't getting the interest rates that they planned on. Only 12% of this age group will be able to retire at age 62.

If you are looking for advice on how to make easy money, you won't find it here. All of these steps are hard work, but anything worth getting is worth working hard towards. The ugly truth is that some people won't be able to retire early or at all. Follow these steps and it will be much more likely for you to be able to do so.

Steps You Can Take to Retire Early

1. The first plan of attack should be paying off any debts that you may have. Start with the smallest debt first and pay as much as you can each month. Paying off the first debt will make your feel like it is possible. Get rid of all charge card debt and any money you may owe to banks for car loans or anything else. Keep at it and you'll be surprised how fast you can pay them off.

Once you have accomplished this, pay off your home if you aren't renting. Often mortgage payments take a large chunk of the monthly income.

Whatever you do, don't accumulate any more debt. If you absolutely have to, first ask yourself if this is a need or a want. If it isn't a need, forget it.

2. Start saving as much as possible. Start a savings account and as it grows, put some of the money in CD's or bonds. Have 3 months savings or more that you are able to access for emergencies.

If you are starting out with a small sum of money, be sure to check what the minimum balance is required at your bank. The bank we are dealing with charges a service charge whenever the balance goes below $1000. Don't let service charges eat up your savings. Don't start an account until you have the minimum saved.

If you are still several years away from retirement, once you have managed to build up your savings account, a wise choice may be investing in stocks. Don't put all of your eggs in one basket though. Get good advice before investing your money from an expert.

If you are older, keeping your money in a CD or bonds may be a better choice, because you don't have time to make up for losses in the stock market. Stocks can still be good for oldsters only if they have enough money in savings to retire.

3. Take advantage of pension plans. Be sure to check the amount that you are allowed. This can change as tax laws change. Use the money you save on your income taxes to put even more in your savings plan or to pay off debts. Remember that you can't touch the money in an IRA until you are 59 1/2 without paying high penalties and income taxes. There are exclusions to this rule such as if you become handicapped and some other reasons. If the need arises, you will need to check into the exact rules.

4. Find ways to earn residual income. Writing on sites like Hubpages is one way to do this. You need to be patient. At first, you may not make a lot of money, but as the number of articles you write increases you'll will see your income go up.

Another way to earn residual income is by investing in rental houses. This works well for some and not so good for others. If you need to take out another loan to purchase the houses, you may be better off staying away from this. It isn't always easy to rent the house and you'll need to make the payments yourself when you don't have renters. Houses can also need repairs after the renter's lease is up. Always check out the renter's credit report and get some references from past landlords.

Before purchasing rentals, think first about whether you are you going to have the money and health to do this when you retire. Even when the renter is living in the home, furnace, plumbing and other repairs are up to the landlord. Yards also need to be mowed, raked, and shrubs trimmed when the house is sitting empty.

5. Live in a less expensive area after you retire. You may be able to sell your present home and purchase one at a much lower price. You may be able to get some extra money that can be stashed in your retirement fund.

If you consider selling your home, don't forget to subtract the realtor fees, moving costs, deposits for heat and lights etc and make sure you come out ahead. Our county required a water and septic test with a $500 fee. You may be surprised at some of the fees. Sometimes staying in the same place makes more sense.

Even if you rent, you may be able to find rentals at a cheaper price. Think small, because this will save you money on property taxes, electricity and heat expenses. There are senior living homes that are subsidized by the Federal Government. They base rent on your personal income.

6. Think about other sources of income. 2/3 of baby boomers plan on continuing to work during retirement according to an AARP poll. This statistic may even rise for younger workers. Could you sell on eBay, work as a consultant at your present job, be a Walmart greeter, work as a freelancer?

My husband plans on getting a realty license, because he has always been passionate about looking at houses. Find something you always wanted to try and it may be a fun way to make some extra cash.

Maybe starting your own business will work for you. Just remember that businesses don't turn a profit right away. If possible start early to see if the new business will work.

Other Considerations

Your Social Security benefits are based on your best 35 years of earning, so it may pay to wait a few extra years to get your earnings up. That is assuming that in your last years, you are making more money than at the beginning. Something else to remember is that if you've worked less than 35 years, the years that you didn't work will count as zeros.

If you retire before your full retirement age, you will receive less at 62 than you would if you waited. For each extra month that you work, the amount goes up until you reach your full retirement age.

Write a plan and set goals to accomplish what you want to achieve. You need to be realistic. Make your goals achievable. Read every article about how to save money now to help meet your objectives. Be sure to bank the extra money you save.

Figure every expense that may arise once you retire. Don't forget to add in car repairs, house repairs, medical bills, everything that could arise. Inflation needs to be considered. Do you have enough money to cover all expenses? It would be best to have some extra money for travel and to be sure your lifestyle will be comfortable.

You also need to remember that people are living much longer. Many people are living well into their 90's. Will you have enough money to last that long?

Don't forget the cost of heath care insurance. Very few companies now pay for this after you retire. If yours does, count yourself fortunate. If you retire before 65, Medicare will not be available until you are 65. For a couple, healthcare cost can be as high as $1500 per month and higher depending on the policy you choose. Obamacare might be what will save the day for you.

You'll need to discuss this with you insurance agent when figuring what it will cost you. Many people save money by purchasing a plan with a higher deductible. You'll need to have extra money in savings to cover these deductables in case the need arises.

Once You Reach Your Goal

Once the time arrives, there will be new things to think about. If you have a pension plan you'll need to decide whether to take it in one lump sum or should you take a monthly payment. For some people it would be wise to talk to a financial counselor.

If you are 62, it does take a few months to receive your first Social Security check. You should apply at least 3 months before your birthday.

You may not be as happy in retirement as you expected. Everyone has dreams of what they would do if they retired. Maybe you want to play golf, catch bluegills, or pursue another hobby. The truth is, that retirement isn't always what it is cracked-up to be. Many people become bored and depressed. Man is happiest when they feel they are accomplishing something.

Unless you aren't physically able, it may be better to find a line of work that you would be happier doing or work part-time instead of full-time. If you do retire, you need to create a plan for your life. You may no longer see people everyday and a social life is important. Being on a schedule helps you stay motivated.

Retirement involves more than just no longer working. A plan needs to be created for your new life. I hope you obtain your goals.

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    • Barbara Kay profile image

      Barbara Badder 6 years ago from USA

      marcoujor, Thanks for commenting and thanks for voting it up. I wish you all the luck in your goals and hope you do attain your retirement when you are ready.

    • marcoujor profile image

      Maria Jordan 6 years ago from Jeffersonville PA

      Barbara Kay~~

      I found this to be realistic and inspiring... I always remind myself that we "work to live / not live to work..." and it is so seamless to have a job(s) that you truly love (that you may even do PT or volunteer when you retire)...thank you for a great read!

      Voted UP & USEFUL & AWESOME...!

    • Barbara Kay profile image

      Barbara Badder 6 years ago from USA

      mainprak, Nobody can retire too early! You just use the time to do a job that you love.

    • maniprak profile image

      maniprak 6 years ago from New Delhi, India

      Great work Barbara! Your article tempts me to retire too early.

      Fabulous job!

    • Barbara Kay profile image

      Barbara Badder 6 years ago from USA

      V Kumar, Thanks for reading the hub and I hope you are able to put the steps into practice and be successful.

    • V Kumar profile image

      V Kumar 6 years ago

      This is a very useful Hub. Great work. Thanks.

    • Barbara Kay profile image

      Barbara Badder 6 years ago from USA

      heart4theword, I think it would be easier for everyone if we did a lot of things like back then. Think of the Waltons. Grandma and Grandpa lived right with the family. It benefited everyone.

    • heart4theword profile image

      heart4theword 6 years ago from hub

      Be nice to retire early:) Think it is nicer when people are able to retire...and stay in their current homes. Like the old days, when the family home was passed on from one generation to the next generation!

    • Barbara Kay profile image

      Barbara Badder 6 years ago from USA

      revybaby, You are fortunate that your husband was able to do it. Thanks for all of the advice and it should help someone. Thanks for commenting.

    • Barbara Kay profile image

      Barbara Badder 6 years ago from USA

      swedal, It sounds like you are on the right track. Best of luck meeting your goal.

    • revybaby profile image

      revybaby 6 years ago from On the Road

      My husband always wanted to retire by the time he was 55 and he made it! Now five years into retirement we still love it. I think one of the major things that helped is that we were always "frugal" or "value conscious". Not that we didn't do things, we always kept the cost down when it didn't interfere. And, he got a solid piece of advice years ago -- and that was to get into the 401K as soon and as much as possible. Although it took a hit it has come back.

      A piece of advice that I would like to give others is to try and bring a bit of retirement into your lives now. What is it you want to do in retirement? I have heard people say "I want to read more". Something that simple can be brought into your current working years to make them more enjoyable. That sounds lame, but I have heard so many people give such simple goals.

    • swedal profile image

      swedal 6 years ago from Colorado

      Excellent information. I am working on this now. Paying off debt and getting in a position to have a home that is paid for.

    • Barbara Kay profile image

      Barbara Badder 6 years ago from USA

      b.Malin, Thanks for your comments. I wrote this hub because my husband and I are still working on an early retirement for him and doing just what I am advising. I am already retired myself.

      You and your husband are fortunate, especially that you are both healthy also.

    • b. Malin profile image

      b. Malin 6 years ago

      Wonderful Hub on Retirement Barbara Kay. We have done so, and are really enjoying the Freedom that it gives us. My husband planned it all so well and we are HEALTHY!