Retirement, it's something most of us think about. Often times however, it's largely kept out
of our minds and thought of as something that happens when we are older. 65 years old
or later seems to be the consensus standard. Why is that? For one, that's been an age at which we are able to start receiving social security benefits (the benefit age now is 67; with the range falling between 62 and 70 depending on the amount of benefits you want to be paid out). Now, just because the government tells you that you'll start receiving SS benefits in your 60s, does not mean you have to wait until then to retire. It just means that you need to have another plan in place of social security benefits in order to retire. In fact, my wife and I personally, aren't factoring in SSI benefits into our retirement plan. For one, there might not be Social Security Benefits for us when we are in our 60s. Secondly, the retirement age seems to be increasing, so it will likely be in the 70s if we were to wait until then to retire. Third, we want to retire earlier than that, much earlier.
Another thing I've noticed is that people seem to assume that retirement happens when you're 65 or older. Now, just because that is the consensus age, doesn't mean that you can do nothing and still retire at that age. You need to make a plan and put it in place to make it happen. Because of that, there's no reason that you can't retire when you're 55, 40, or even earlier. Heck, if I had started maxing out my 401K every year when I was 18 until now, I could easily be retired now.
Unfortunately though, many Americans live pay check to pay check, living simply for today with little to no thought going towards their retirement plans. Far too many people simply put in an employer match (if that) into their retirement accounts and hope when they hit 65, they'll have enough to retire. That is better than nothing, but is not an adequate plan. It's important to have a plan and to implement it if you have a goal of retiring at a certain age.
Also, retirement may mean different things to different people. Generally speaking, traditionally, retirement has meant no longer working and perhaps increased travel, relaxation, etc. In the world we live in today, there are now many more variations of "retirement". There are many folks that are semi-retired and working as much as they'd like to stay busy, because they want to or because it fits their lifestyle better. This is especially true for those that are retiring early. For my wife and I, we have dreams and plans to "retire early". For us, that means quitting our day jobs, as that is the part of our lives that give us the least joy. We still intend to manage our rental properties and side businesses. From that perspective, we will still be working, but 40 more hours are open and available to us to spend time doing things we love and are more passionate about.
So, now, say you want to retire at 55, or 40, or earlier; how do you go about it? The first step is to analyze your current financial situation. You'll want to ensure first of all that you have a solid understanding of your finances, including your monthly budget. Secondly, you'll want to make a determination as to how much money you'll need for the rest of your life if you were to quit your job at a certain age. Some things that may need to be considered and implemented to speed up your retirement are the following: increased yearly earnings (potentially a new job title), increased retirement contributions (2021 401K contribution limit is $19,500 and an additional $6,500 for those over the age of 50), paying off your debts (including paying off any car loans, mortgages, etc.), preparing appropriately for medical expenses (having a well funded HSA, access to health care plans that you can afford without a consistent income) and having access to liquid funds (passive income, brokerage funds, Roth ladder, etc.).
Early retirement is doable. I've heard many people say that they wouldn't want to retire early because they wouldn't know what to do with their time or that they would be bored. I have to assume that's an excuse to not put the effort or time into retirement planning. However, I could be wrong. But, personally, I'd rather spend my time doing what I love, traveling, spending time with friends and family and thoroughly enjoying the time I have left on this earth. For that reason, retiring early is the one and only plan in the cards for me. If it's in the cards for you too, reach out to Take the Leap and we can help you craft a plan.