People who retire early are healthier and more likely to live longer than those who retire on time, according to a study highlighted by CNBC. This is sure to please the 48.3% of Americans who are planning to retire early. But the biggest problem with early retirement is you need a larger nest egg.
So, how do you ensure you have enough cash to comfortably enjoy your later years?
Give yourself an annual income
A survey from Charles Schwab revealed that the majority of Americans think they need $1.7 million to retire. However, the average 60-something has just $642,000 put away. You might think you have a large sum of cash saved to safely retire at 60, but you need to consider that you could live another 30 years or more. The best thing you can do is review your savings and work out what your annual income will be.
For example, if you have $642,000 saved at 60 and live until 90, your annual income would be $21,400. Before you retire early, ask yourself whether this is really enough for you to live off annually, or do you need to save up some more before saying goodbye to work?
Invest in property
Property is a great way to give yourself more retirement funds. If you already own a large family home, it’s likely to have significantly increased in value over the past few years. One option is to sell up, buy a smaller property, and use the excess cash for your retirement. Another option is to invest in an additional property. This allows you to rent the property out and make some cash without having to work for it.
To do this, you’ll need a self-directed IRA for real estate. There are lots of self-directed IRAs available, but you’ll need one which focuses on all aspects of real estate, not just buying, renting, and selling. One of the biggest benefits of investing in property for your retirement is that you could sell it in the future for a lot of money.
In 2000, the median price of a home was $119,600, whereas in 2022 it was $346,900. If prices continue to grow like this, you’ll be set up for your early retirement.
Boost your cash
There are all sorts of ways you can increase your cash so you have more money for retirement. Obvious ones include looking for a higher-paying job, taking on a part-time job, or doing overtime.
In the 2022 tax year, you can add $1,000 more than you could in 2022 to a workplace retirement plan, so make sure you’re utilizing this benefit. It may also be worth putting more of your pre-tax earnings into your retirement account rather than waiting until after you’ve been taxed. Speak to your employer or a financial advisor about your options as the benefits of this will vary depending on which tax bracket you’re in.
Many people dream of retiring early, but it’s not always financially possible. These tips will show you what you need to do to achieve your retirement dream. Also check out some of the reputable personal finance sites like MyStages or Investopedia to understand more about planning based on your stage of life, salary-expense ratio, debt circumstances, and more.