Did you ever really think that you’d work forever? None of us ever do, and almost all of us eventually retire. Sadly, however, too many of us wait too long to plan for retirement, and end up ill-prepared to enter that next stage of our lives when the working days are at an end. Wouldn’t it be better to retire on your own terms? What would you do with your life if you were prepared to retire early? Well, the good news is that you may be able to do just that – if you’re willing to plan for it. And when it comes to early retirement planning, it’s almost never too early to get a head start.
It’s Like Traditional Retirement Planning…
When it comes to retirement planning, there are only two basic options. The first involves being super-lucky and winning the largest lottery prize you can imagine. The other option requires something other than pure fantasy and wishful thinking: a strategy that can build wealth over time. You need to be able to save, invest, control your own spending, and adjust your lifestyle as needed to remain within your planning goals. That’s essentially true whether you plan to retire at age sixty-seven or at age fifty. In either case, you must create and adhere to a plan that grows your retirement reserves so that you have the money you need when you eventually stop working.
… Except When It’s Not Like Traditional Retirement Planning
There is one big difference when you want to retire early, however – and that difference is time. Most retirement planning is premised upon the basic principles of sound investment and compound interest. All of that is dependent upon one critical factor: time. When you’re young, you have decades to save and invest, and that provides you a much longer period of time in which to generate the wealth that you’ll need later in your retirement years.
When you shorten that period, you still have time but you have much less of it. So, if you’re thirty and planning for a retirement at age sixty-five, you’ve given yourself thirty-five years of saving and investing to achieve your retirement wealth objectives. If you’re thirty and want to retire at age fifty-five, you’ve just shorted that timeframe by ten years and left yourself with only a twenty-year period in which to accumulate the wealth you need.
There’s an added complication, too. If you’re retiring early, that means that you not only have less time to save for retirement, but you have more retirement that you need to save for. The last thing you want to do is end up with too much retirement and too little retirement income. That longer post-retirement period will require you to save even more money in that shortened saving and investment period.
The Loss of Compound Growth
The biggest challenge facing most would-be early-retirees is the loss of compound growth capacity. Your ability to compound earnings from your savings and investments is one of the key benefits of a lengthy period of retirement planning. It enables you to invest in more stable growth opportunities, because you have more time in which to accumulate the wealth you’ll need. Slow and steady is all it takes. With a shortened period for growth, however, compound growth becomes less of a positive. In fact, it can stunt your overall success as those more passive investments grow far too slowly to meet your retirement goals.
To counter that effect, you have to take a more aggressive approach to your planning. The following strategies can often help you to achieve the higher rate of retirement wealth growth you’ll need to meet your goals:
- Adopt a More Frugal Lifestyle. If you can’t make use of compound growth to its fullest potential due to time constraints, then you must make other things work in your favor. Frugality can help, if you’re prepared to do things like cutting down on major expenses like housing costs, putting off major expenses to focus on savings, and reducing unnecessary expenditures of all kinds to free up money for investments.
- Aggressive Investing. You need to be active investors. Money in static savings account will never advance your long-term goals, especially with interest rates as low as they have remained in recent decades. That means taking on some risk too. While it would be nice to focus on safe investment vehicles like bonds and mutual funds, you may need to dip your toe into the stock market in a more active way to get that higher rate of return you’ll need to accomplish your goals.
- Never Say Never. Be open to doors as they swing open for you. Learn to leverage your time and money to increase your rate of return. That may mean taking on special projects. It could mean starting your own business so that you’re leveraging other people’s time too. Possibilities are everywhere, and opportunities should be seized when they present themselves.
- Rely on Professional Assistance. Let’s be honest here: very few people ever manage to retire early on their own. You cannot simply increase your level of “hard work” and expect miracles to happen. At some point, true success stories only happen when you learn to leverage the power of other people’s knowledge too. In this case, that means getting sound retirement, financial planning, and estate planning advice from an experienced attorney.
Early retirement is an admirable goal. Who wouldn’t want to retire while he’s still young and get out and see the world? The bad news is that the opportunity to retire early probably isn’t something that’s just going to fall in your lap. The good news, however, is that you can grab that opportunity for yourself, if you have the courage to fight for it. At Robert J. Kulas, P.A., Medicaid & Estate Planning Attorneys, our team is here to join you in that fight, by providing the early retirement planning advice and assistance you need to make your dreams a reality. If you’d like to learn more about how we can help you with the strategies you need to use to achieve those ends, contact us online today, or call us at (772) 398-0720.
