Early retirement – the thought of it can bring a smile to many faces, but how realistic is this goal? Well, that depends on a host of factors – some of which you have a lot of control over; others, not so much. Let’s investigate what hurdles we need to jump over to make early retirement a possibility for you!
Probably the most important factor that you have on your side (provided you’re young enough to benefit from it) is time….yes, time. With the powerful (almost magical) combination of time and compounding, you can grow your wealth exponentially. However, you need to start saving a lot of money very early and invest a good portion of your retirement in assets that can appreciate significantly over time (ex: the stock market, real estate, commodities, etc.). Otherwise early retirement is nothing but a pipe dream.
Now I’m sure some of you would love to hit it big at the casino or the lottery, or get a windfall from a rich relative when you’re still young. Of course, the odds say that you’re more likely to get struck by lightning twice in your lifetime than becoming a big lottery winner! Therefore, putting together a plan of action for early retirement is essential if you’re serious about making it happen. Don’t take Han Solo’s advice when it comes to retiring early – you need to know the odds.
You would need to consider using tax-deferred or tax-advantaged accounts (ex: 401(k)s, 403(b)s, IRA – both traditional and Roth – annuities, etc.) to house some portion of your retirement investments, or else the tax man might take a big bite out of your early retirement funds. If you’re young and self-employed, you have a number of extra options – with some higher yearly investing limits – at your disposal when it comes to saving early and often for retirement (ex: solo 401(k), SEP-IRA, etc.).
If you have a second job or a part-time business where you make extra money separate from your primary occupation, consider using those funds to begin saving for an early retirement. Eliminating or not racking up any high-interest debts (ex: store credit cards) and living at or below your means gives you a much better chance of retiring early than if you are saddled with debts from “keeping up with the Joneses”. Nothing like being house-poor and having to work – because you have to – until you drop dead, right?
If you are still in your 20’s or even your 30’s, you can retire early but you must make a concerted effort to get there. Planning is essential; it won’t happen by accident (unless you’re extremely lucky). You must have a saver’s mentality, not a spender’s. Enjoying the good life by hanging it up from having to work when you’re in your 40’s or 50’s and living off of what you’ve accumulated up to that point is a difficult but an attainable goal. If you can’t plan to do it on your own, make sure you have the right financial advisor (aka a fiduciary) to help guide you on your early retirement path. Here’s to you sipping a tall, colorful drink while sitting on the beach of a tropical island while you’re still young enough to enjoy it!
Find an experienced financial advisor who helps clients plan to retire on a regular basis, works for an RIA firm, earns his/her money from fees (NOT commissions), believes in having an abundance of investment choices for clients, and has the heart & demeanor of a teacher, NOT a salesman, and chances are you’ve found the right financial advisor to help you prepare and plan for retirement.
To learn more about Martin Federici, view his Paladin Registry profile.
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