No matter where you are in your career, your mind will always drift off towards dreaming of retirement. In some cases, those dreams quickly turn into nightmares and thoughts of “I’m never going to be able to retire at this rate!” However, for every person who has uttered that refrain, someone else has figured out how to retire early. Instead of being jealous of their hard work and smart money moves that have gotten them to that point, learn from their retirement strategy and begin making the right decisions now that allow you to retire early.
How Much Money Per Year Will I Need To Live On?
The question of how much money you will need per year in retirement is one of the most important questions to answer. You will need to calculate how much money you will need to generate through your retirement income streams to survive and thrive well into retirement. We recommend using 80% of your pre-retirement income as a starting point for calculating your needed retirement income. Depending on how you envision spending your retirement, you may need to adjust your projected needed income higher or lower.
How Does a Retirement Portfolio Help?
When you retire, your retirement portfolio will help generate much of your needed retirement income. Building a retirement investment portfolio that continues to grow and allows you to withdraw funds to cover your yearly expenses safely will be critical for your goal of retiring early. When you have your retirement income number set, you can begin to build your retirement portfolio with investments that will continue to grow in value over time. Making smart investments in the present will help you in the future.
What About Inflation?
While we cannot accurately predict what inflation will look like in the future, we can use history as a guidepost to tell us where inflation is likely to go. Doing your research into how inflation rates have fluctuated over time will help you add a projected inflation buffer into your portfolio to help cover future inflation changes.
Adjust Your Basic Cost of Living
Sometimes the reason why you think you cannot retire on time, let alone early, centers on how much money you think you will need in retirement. Sometimes, people have visions of an extravagant retirement lifestyle where they travel every chance they get or do other activities they promised themselves they would when they had the time. The problem with that line of thinking is that your projected retirement income will be at a level that feels unattainable. By adjusting your targeted retirement income, you can ensure that you meet your basic needs and still have enough money to cover some of the adventures you want to go on. You could move to a less expensive area to live with lower property taxes to get your retirement income number to a more achievable level.
Pay Off and Avoid Incurring Debt
One of the biggest threats to your early retirement plans is taking on additional and unnecessary debt. With various forms of debt (credit card, car loans, student loans, etc.) acting as an anchor to your monthly income projection, debt has a way of steadily building and eating away at your ability to save for retirement. Making smart investments, avoiding bad debt, and adjusting your projections can all help you reach your financial dream of early retirement.
Early retirement may not be an easy goal, but it can become more than a pipe dream with the right financial and tax planning services. With the help of Preservation Wealth Management, we can help you begin planning for your early retirement and get you in a position to enjoy that time without worry. Contact us today to start taking control of your financial future!
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