The average age of retirement in the United States ranges from 62 to 65 years of age, depending on where you live. The exact year when you retire will be influenced by how much you have saved, how much debt you have, and whether you can still work. If you’re one of the growing number of people below 50 who wants to retire early, then the following tips can help you to reach your goal.
Live Modestly Now, Enjoy Life Later
Every cent that you spend today is money that you won’t have for retirement. Think about your long-term goals and understand that small sacrifices now will mean big gains in the future. Reducing your spending today could give you more for savings and investments. Buy practical reliable vehicles, avoid expensive vacations, and save your money to retire early.
Automate Your Savings
Maintaining discipline when you haven’t automated your savings can be nearly impossible. Set up a savings account today and start automating your deposits. A Certificate of Deposit (CD) account is the best idea, because this will prevent you from being able to access your money during the term of the deposit. You will grow your wealth through compounding interest, and you can reinvest the money at the end of the term.
Some CD accounts are currently paying above 4% interest on terms over three years, and you can start with a small deposit of $1000 in most cases. For short term automated savings, open a standard high interest savings account, before reinvesting larger lump sums.
Shop Smarter for Your Health Insurance
If you are paying too much for insurance, then that is money that you can’t save. If you are healthy today and rarely need medical care, then you could consider an affordable HMO plan. Lower premiums and deductibles mean that you can only get care in-network and with referrals, but the inconvenience is worth it for the money that you save.
Remember to assess your insurance policy every year, as your medical needs will generally increase as you age.
Invest in Growth Stocks and Minimize Risk to Retire Early
Short turnaround high risk/high reward trades on the stock market are exciting and sometimes very profitable. They’re also a terrible idea for investors who are eyeing retirement. As you age, start shifting your portfolio towards growth stocks and long term returns through dividends.
You can retire early if you plan it well. Even with simple changes to spending and savings patterns, you could reduce your retirement age by 3 – 5 years.
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