How to Retire Early

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You’ve got a sense of your ideal retirement age and you’ve probably made certain plans based on that timeline. But what if you decide to retire sooner than you expect? Take some time to pull together your assets and expenses and be sure that no matter what the future holds for you, you know what you need to live the life you want.

If you’re a woman who’s been diligently working towards early retirement, you know that with disciplined planning and strategic financial management, retiring early is an ambitious but achievable goal. Some people enjoy the stimulation of work later in life, and others like to put in their focus and relax. As with anything, there are pros and cons of early retirement, but it’s always good to get organized. 

It’s never too late to get it together! There are so many online tools that can help, or just keep scrolling for the basics. 

Here’s a comprehensive guide to help you navigate this journey:

1. Assess Your Financial Situation

Begin by taking stock of your current financial status. Calculate your net worth by listing all assets (savings, investments, real estate) and subtracting liabilities (debts, mortgages). Understanding where you stand financially is crucial for mapping out your retirement plan.

2. Set Clear Goals

Determine how much money you will need to retire comfortably. Consider factors such as desired lifestyle, expected life expectancy, healthcare costs, inflation, and potential travel or hobbies. Tools like retirement calculators can provide personalized estimates based on your input.

3. Develop a Savings Plan

Maximize Retirement Accounts

●     401(k) or 403(b): Contribute the maximum allowed to employer-sponsored retirement accounts, taking full advantage of employer matching contributions. In 2024, the contribution limit is $22,500, with an additional $7,500 catch-up contribution if over 50​.

●     IRA: Utilize Individual Retirement Accounts (IRAs), which allow for tax-advantaged growth. The limit is $6,500 annually, with a $1,000 catch-up if over 50.

Taxable Investment Accounts

●     Invest Wisely: Diversify investments across stocks, bonds, and mutual funds. Consider low-cost index funds or exchange-traded funds (ETFs) for steady growth and lower fees. Historical data shows that stock market investments tend to yield higher returns over the long term.

4. Assess the Situation 

If necessary, minimize your expenses or focus on your career and or side projects to increase income. As always, investing in skills development can lead to higher-paying job opportunities. 

5. Plan for Everything… Especially Healthcare

Healthcare is a significant expense in retirement. Consider Health Savings Accounts (HSAs) if you have a high-deductible health plan. HSAs offer triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

6. Create a Withdrawal Strategy

Develop a strategy for withdrawing funds to minimize taxes and ensure the longevity of your retirement savings. Consider the “4% rule” as a guideline, which suggests withdrawing 4% of your retirement portfolio annually to maintain a steady income stream​​.

7. Seek Professional Advice

Consult a financial advisor to tailor a retirement plan to your specific needs and goals. A professional can help you navigate complex financial products and tax strategies, ensuring your plan is robust and flexible.

By combining disciplined saving, strategic investments, and prudent spending, retiring early is a realistic goal. Stay committed to your plan, regularly review your progress, and adjust as needed to stay on track.