Early Retirement

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The Secret to a Planned Early Retirement

For most Americans, the indicator of true success is early retirement. About 90% of the working population would love to go into early retirement while they still feel they have some energy left in them to do the things they do not have time to do now.

One way to do this is to start early and invest into an IRA or a 401k. But with today’s economy you need to save every penny that you earn, and you can never guarantee that the place you work for is going to stay in business for your entire working life.

Since there are no guarantees, you need to start saving for early retirement now if that’s what you truly want - but it will come with a price. If most of your traditional retirement plans are designed to give you the maximum amount in your account when you reach retirement age, and will penalize you heavily for early withdrawal, then they are not for people who will want early retirement.

What you want is a savings account. With a savings account you have the option to withdraw the money whenever you want, put in as much or as little as you want and since you are already taxed on that money you won’t pay any further taxes except for the interest.

The downfall to this type of account is that, the interest rates aren’t that great and you have to have self control, in other words, when you deposit the money into the account you must not touch it. You need to keep reminding yourself that this money is for early retirement and you can not retire early if you can not keep your hands off the money until the right time.

You can, however, use the money if you plan on investing in bonds or stocks, because the money you are spending may yield a higher interest rate, giving you a better return for your money than a regular savings account.

The Secret

The big secret to early retirement is to evaluate your life right now and figure out how much you really need for your present lifestyle. Let’s assume you net $3,000 a month. Take that amount and subtract all of your bills, including, utilities, rent or mortgage, car, insurance, water, cable and trash. Now take your miscellaneous expenses like clothing dining out and movies - anything that can be classified as a luxury. Now take that total and subtract it from the new net income. What you may have remaining is very little.

This is the hard part where self control comes into play as you will have to decide what you can do without and take that money and invest it into your account and not touch it, ever, until early retirement time.

It would be ideal if you can invest 50% of your net pay, but a lot of times that is not feasible, so try to invest as close to 50% as possible. You can do this by eliminating your credit cards and pay cash or write a check for what you need and save yourself from paying that ridiculous interest.

A simple secret to paying off all credit card debt is to pay off the smallest balance first and then take the money you would have spent on that payment and apply it the payment on the next to the smallest credit card balance. In this way you will end up paying the largest credit card balance with the most amount of cash.

How much you want early retirement and what you are willing to do for it now is the real secret.

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