8 Tips To Retire By The Age Of 45
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Early retirement is a dream for many people. For some, it means getting well-deserved rest after years of hard work; for others, it means freedom to travel and do whatever they want; and for others still, it means settling down to enjoy more time with the family.
There’s even a whole ‘financial independence, retire early’ movement, known as FIRE. It emphasises savings, investments, and additional income streams as ways of achieving financial independence by a certain age, usually around 45 years old.
Given that the average retirement age in Australia is about a decade older than that, it’s little wonder why there’s such a big push towards getting out of the world of work ahead of time.
Tips for retiring early
Whatever early retirement might mean to you, here are eight tips that will help you get there.
1. Set your goals
There’s no one-size-fits-all when it comes to early retirement. Every individual has different expenses and overheads to contend with, as well as different wages. So, decide how much you want to have in the bank by retirement age. This will help you figure out what to put away each month and how.
Additionally, you should figure out what your retirement itself might look like. Will you want to continue working in some capacity? Or, will you take the drop in income and live a slightly slower life?
2. Minimise your expenses
Irrespective of your approach, you will more than likely have to learn to live on less if you’re serious about retiring early. As such, you need to work out a way to minimise your expenses by figuring out the attitude you need to forge and the habits you need to break to have a good life both pre and post-retirement.
3. Save money for now
Putting money into retirement savings accounts can be tempting. But, if you do that, you won’t be able to do anything savvy with what you save. So, channel as much of your income as you can into your savings (ideally around 50% or more). Then, once you have an impressive pot, invest that into real assets that are sure to pay dividends.
4. Make good investments
Speaking of investments, it’s crucial that you make good ones. Don’t just dive into the first opportunity that promises a big payoff. Do plenty of research into the investment markets that interest you the most and find the most suitable, safest options.
5. Make the most of retirement accounts
With the government’s 401(k) retirement plan for Australian citizens, 9.5% of a person’s salary is saved every year. However, this alone won’t guarantee a retirement income that will last well into your twilight years. So, take a look into other, more lucrative retirement and superannuation pension plans, including the transition to retirement pensions and annuities.
6. Use your employee benefits
If you work for a big company or corporation, chances are you get access to employee benefits that could help you save for early retirement. You might, for example, be able to purchase discounted company stock. This can reap particularly impressive gains if your company is a strong performer on the stock market.
7. Plan for inflation
Ensure that your early retirement projections always adjust for inflation. The price of things won’t stay as they are now, and you’ll likely need more money in the future to live as you do today. So, imagine that you’re planning to live until you’re 100 or older and accrue enough money to do so comfortably.
8. Set up a side hustle
Whether you want to invest in stock or start up a small part-time business, having a side hustle is a great way to increase your income and boost your retirement pot early. You could even keep it going past retirement age. That way, you can feel secure in the fact that you’ll always have an income to fall back on.
Making early retirement happen
Reach the post-retirement life you want for yourself by building its foundations today. It is very much possible to get there sooner rather than later if you’re a frugal shopper, a savvy saver, or an intuitive investor. Put these simple but effective tips into action and take your first big steps towards retiring before you’re 50.