One-third of baby boomers say they don't expect to retire before 70 or older – or perhaps never retire at all – according to a study from the Insured Retirement Institute. Furthermore, almost half of the boomers asked said that they do not have a penny saved for retirement.
It can be a disappointing thought for those who cannot wait for retirement. Unless you are passionate about your career and really enjoy working, most are eager to retire as soon as they can realistically.
Saving enough for retirement in traditional retirement is challenging enough, but if you want to retire early, give some serious victims. Not only do you have less time to save by retiring early, but you also spend more time in retirement ̵
That said, it is possible to retire early, even if you are not among the super rich 1%. However, you must be willing to make some great lifestyle changes.
What it takes to live the dream of early retirement
If you want to retire early, you have to do more than just cut a few expenses here and there. Not everyone will be willing or able to provide this type of victim, but it will be up to you to decide how important early retirement is.
Asking what they would be willing to do in retirement for decades early, more than a third of workers say they would cut their budget to just bone and spend only on costs that were absolutely necessary, according to a survey from FinanceBuzz. Another third said they would get a second or third job to save more, about 12% said they would be willing to forgo children, and 11% would give up their pets. Only 6% of the respondents said they would be willing to give up the car.
But even among those who are willing to sacrifice, many of them do not believe that their goals are actually achievable. Although the most common retirement age is 50, according to the FinanceBuzz survey, most respondents said they would not realistically retire before age 65. When asked what obstacles prevented them from achieving their retirement goals, the most common response was that they did not make enough money.
If you do not earn a high salary, it may be tougher to save enough to get out of your 50's, but that doesn't mean it can't be done. If you start saving early and you are willing to sacrifice to maximize your savings, you can potentially achieve your dream of early retirement.
To find out how much you need to save to retire early, your best bet is to use a retirement calculator. Think about how much money you expect to need each year in retirement, as well as how long you expect your pension to last. These two numbers will have a significant impact on how much you need to save, so the more accurate estimates are, the more accurate the calculator will be.
When you first see your results, try not to get caught up in the sticker shock. You will probably need to save over $ 1 million to get out of your 50s, which could save hundreds or thousands of dollars every month to reach that goal. But again, if you are willing to sacrifice and start saving early, you may be able to save enough.
Other considerations when you retire early
Just saving enough money is not the only thing you need to consider when I retire early. There are other factors, such as health care and social security, that can have a significant impact on retirement.
You will not be eligible for Medicare before age 65, so if you retire before then, you need to find another source of health cover – because going without health insurance puts the pension fund at risk, as it will quickly be emptied if you is in an accident or is diagnosed with an expensive disease. Buying health insurance through the Affordable Care Act market is usually much more expensive than receiving coverage through your employer (especially if you buy coverage for the whole family), so you may need to budget much more money each month to go against retirement insurance.
Social security benefits are another factor you must consider before you retire early. The earliest you can claim for social security is 62 years, so until then you have to survive on your personal savings alone. If you start claiming benefits at age 62, you will receive less each month than you would expect until you have full retirement age (which is 66, 67, or somewhere in between depending on your birthday).
Furthermore, your social security benefits can be reduced if you do not work for 35 full years. Your benefit amount is based on an average of the 35 highest earned working years, so if you do not end up working at least 35 years of age, you will have zeroed in for each year you did not earn any income. These zeros weigh your average, thus reducing the amount you receive in benefits.
Finally, you need to consider where to take out your savings when you get off. Because you cannot rely on benefits from the insurer before the age of 62, your retirement income will probably need to come from your personal savings. However, if your money is deposited in a 401 (k) or traditional IRA, you must pay 10% penalty for all withdrawals you make before reaching 59 1/2. With a Roth IRA, you can withdraw any of your original contribution without penalty, but you will still have a fee to withdraw some of the proceeds from the original investment if you withdraw before maturing 59 1/2.
Early retirement is a dream for many, but achieving it is not easy. It requires decades of careful planning, and you will probably need to make significant sacrifices to reach your goal. But if you are willing to give these victims, you can spend decades living the retirement lifestyle you've always wanted.