According to a recent survey from CNBC, 53% of Americans feel they’re lagging when it comes to retirement planning and savings. With the median balance of a retirement savings account at around $87,00, per data from the Federal Reserve, the idea of retiring early may seem like a fantasy. However, we spoke with someone who retired early, and we’ll be sharing tips on how you could do so as well.
What are general money tricks that can help you retire early as a millionaire?
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Advice on How You Can Retire Early
Since retiring early is a goal that many people have on their minds, we want to help you create a plan to make this a reality.
Run the Numbers
Paul Gabrail, the founder and host of Everything Money, left a traditional job to focus his energy on projects that he’s interested in. He considers himself retired because he has the cash flow to cover his expenses and can spend his time as he wishes without needing to find employment. He was able to leave his job and live life on his own terms at the age of 43 by focusing on the math involved with retirement planning.
“There are no silver bullets when it comes to early retirement,” noted Gabrail. “Spend less and save more is timeless, tried and true.”
You should do your best to determine how much money you’ll need to live comfortably in retirement. Your retirement number will vary depending on your lifestyle and housing costs. However, the goal is to run the numbers so that you can figure out how much money you’re going to need to save or have invested in assets so that you can leave your job 10-plus years earlier. In many cases, you’re going to have to focus on being a self-made millionaire so that you can be wealthy enough to leave your job so soon.
Once you determine the amount you need, you’ll want to find a wealth-building strategy to accelerate the process.
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Build a Real Estate Portfolio
“One tactical investment tip that can help contribute to increased revenue (and more opportunity to save) is through building a real estate rental portfolio,” shared Gabrial. While there are various options for building wealth, like starting a business or pursuing a well-paying career, Gabriel chose to focus on building a real estate portfolio.
He warned that investing in real estate isn’t free money and that it still requires a lot of work, but it can be worth it if you want to leave your job earlier. Investing in rental properties allowed Gabrial to build up a passive income stream that helped him cover his expenses so that he didn’t have to rely on his job. Now, he gets to spend his time working on projects that he cares about.
Gabrial added, “By building a rental portfolio and starting early (buying one rental a year starting in your mid-20s), you can get a lot closer to retirement sooner.”
Expert Advice for What You Can Do To Retire Earlier
If you want to start planning an early retirement, here’s some expert advice on what you can do to begin the process.
Set a Target Date
“First things first — you need to decide what your target retirement date is,” said Erika Kullberg, an attorney, personal finance expert and founder of Erika.com. “You have flexibility here if your financial goals or plans change over the years, but you need to know what year you’re going to try to work toward.”
If you want to retire 10 years early, you’ll have to choose a rough timeline and work backward to develop a plan for getting there.
Work With the Numbers You Calculated
The next step involves crunching the numbers and making sense of the finances to figure out what it would take to leave your job sooner. This will also require figuring out how much money you can pull out from your investment accounts.
“Instead of thinking of yourself as rich, focus on the amount of income your portfolio can safely generate over time,” said Katherine Fox, certified financial planner and founder of Sunnybranch Wealth. “If you’re in your 30s or 40s, you’re going to want to use an especially conservative estimate in the early years of your retirement. As time goes on and you get more comfortable living on a fixed income from your portfolio, you can adjust as necessary.”
The goal is to work with your numbers and timeline to figure out how you can become a millionaire and retire early. If you’re going to invest in real estate, this will include figuring out how many properties you have to invest in or what kind of cash flow you have to create to leave your job.
Once you know how much you need to save to retire, you can divide that number by the number of years left until the deadline to determine how much you need to save each year.
Take Advantage of Retirement Accounts
“Simply maxing out your company’s 401(k) likely isn’t enough to get the job done, although that is a great place to start,” remarked Kullberg. “Maxing out your 401(k) will help you enjoy the most tax benefits which can stretch your retirement savings further. “
Once you do this, you’ll want to consider contributing extra money to an IRA to save money on taxes today or in the future, depending on which account you go with.
Evaluate Your Lifestyle Choices
“For most people, saving enough money to retire early will take a lot of sacrifices in the here and now, so you may have to reconsider your current lifestyle choices,” said Kullberg.
It’s worth pointing out that these sacrifices may be worth it when you get to enjoy a longer retirement than most. However, you have to commit by making some serious lifestyle changes while you’re still working.
Kullberg concluded, “Life is expensive and when you retire early you not only end up on a fixed income sooner than most people, you have less time to earn the money you need to build out your retirement savings. To be able to retire early and live comfortably, you must have a savings plan in place and be ready to be very disciplined.”
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This article originally appeared on GOBankingRates.com: I Retired a Millionaire 10 Years Early: Try These 6 Money Tricks To Help You Get Rich, Too
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