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You Can Retire Early

If fears about your financial future have persuaded you that you'll be working until you die, take heart. With some preparation and a big dose of discipline, you may be able to escape the daily grind sooner than you think.

Don't become a statistic
It's true that many of the statistics about retirement look grim. As fellow Fool Selena Maranjian has pointed out, many people need to prepare for a gruesome retirement. With half of those over 55 having saved less than $50,000 to meet their financial needs for the rest of their lives, it's clear that many people have dug themselves into a deep hole.

But for many, there's plenty of time to do what it takes to retire early. The key is saving more.

Save, save, save
It's not glamorous, but the easiest way to give your retirement prospects a boost is by saving more. Every dollar you're able to cut from your monthly budget is worth double: Not only do you have an extra dollar at the end of the month, but you've also found a permanent reduction in your expenses.

Consider an example. If you're 40 with a $75,000 salary, saving $500 each month until you turn 65 will give you about $475,000 if you can earn an 8% return. If you use the simple rule of thumb that your retirement expenses will be about 75% of your pre-retirement costs, that translates to about $52,000 per year -- you saved $6,000 each year from $75,000, meaning your net costs were $69,000. So in simple terms, you'll have saved 9 times your annual expenses when you turn 65.

But if you can increase your savings to $1,000 per month, you'll accelerate your retirement savings goals. Not only will you have over $950,000 by the time you turn 65, but you'll be used to a less extravagant lifestyle, spending just $63,000 annually. That means you'll be able to spend less than $48,000 per year, and you'll have saved almost 20 times your annual expenses. Or, if you prefer, you could save the same $475,000 in about 18 years, putting you on track for retirement as much as seven years earlier.

Put time on your side
Procrastination is a killer when it comes to saving for retirement. The earlier you start saving, the more impact your savings can have. At an 8% return, money you put away when you're 25 will grow to over twice the value of money you save when you're 35 and over 10 times what you save when you're 55. Starting just a year or two earlier can add thousands to your nest egg when you retire.

If you're not sure where to start, take a look at the Fool's retirement newsletter, Rule Your Retirement. Each month, Foolish retirement expert Robert Brokamp gives you new insight into how you can create, implement, and monitor your financial plan to retire. With tips on the best investments for retirement accounts, figuring out how much your expenses will be, and first-hand success stories from people who've already retired early, you'll get the monthly dose of inspiration you need to stay on target.

It's up to you
Unfortunately, most people can't count on their employer to solve their retirement problems. With companies like IBM (NYSE: IBM  ) , Citigroup (NYSE: C  ) , and Verizon (NYSE: VZ  ) cutting back on traditional pension plans, most workers find themselves on their own to meet their retirement goals.

The choice is yours. Do nothing, and you may become the next statistic. Or take charge of your retirement, and live your golden years in prosperity and comfort. With the tools to succeed at your fingertips, it's an easy choice to make.

Related articles:

The Fool'sRule Your Retirement newsletter is available free for a 30-day trial. See how it can help you retire when you want.

Fool contributor Dan Caplinger believes that economic mobility and personal responsibility go hand in hand. The Fool's disclosure policy is always rewarding.


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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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