For some people, early retirement is a major goal. And a lot of people don't plan for an early retirement so much as get pushed into one.
But retiring early is something you may be striving to do, especially if you work in a high-pressure field that doesn't lend itself to the best work-life balance. If your goal is to retire at some point in your 50s, then you may want to make these essential moves while you're in your 30s.
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1. Keep your living costs low
Your 30s may be the time when you become a homeowner, upgrade your car, and take on other expenses that enhance your quality of life. But if your goal is to retire early, then you'll need to be really careful with the expenses you take on.
Buying a $750,000 home instead of a $600,000 home, for example, could mean not having enough spare cash to set aside for an early retirement. Similarly, taking on an $800 monthly car payment instead of a $550 payment could leave you struggling to carve out ample funds for your nest egg. So as much as it might pain you to limit your spending across major expense categories, remind yourself that you're working toward a different goal that's really important to you.
2. Steer clear of high-interest-rate debt
The more money you throw away on interest, the less you'll have available to save. This isn't to say that you shouldn't sign a mortgage to buy a home. Most people can't just throw hundreds of thousands of dollars in cash at a home purchase and avoid debt completely.
Rather, be careful with high-interest-rate debt -- credit card balances, in particular. And be judicious about signing high-interest fixed-rate loans.
Right now, for example, borrowing rates are generally high following the Fed's string of interest-rate hikes in 2022 and 2023. If you're hoping to tap your home equity to do a kitchen renovation, consider saving up for that work instead of borrowing to fund it. Or consider postponing the work until interest rates are more favorable.
3. Save outside of an IRA or 401(k)
It definitely pays to contribute to an IRA or 401(k) plan for your retirement savings. But if you know early retirement is on your radar, make a point to also save outside of these tax-advantaged accounts.
IRAs and 401(k)s generally impose a costly 10% early withdrawal penalty for removing funds prior to age 59 1/2. There are some exceptions, but for the most part, if you plan to retire in your 50s, you'll need access to money outside one of these accounts.
If you have a 401(k) plan at present, though, contribute enough to that account to claim your full employer match. Snagging all of the free money you can could help you meet the goal of being able to retire early.
Retiring in your 50s could allow you to end your career at a time when your health is conducive to meeting different life goals. But if you're serious about retiring in your 50s or retiring early, in general, make sure to limit what you spend on major expenses, avoid costly debt, and spread out your savings so that all of your funds aren't tied up in an IRA or 401(k).
