Author: Dan Caplinger | June 08, 2018
It's not an impossible goal
Just about anyone who's ever had a less-than-perfect job has dreamed about the possibility of retiring early. When you're just starting out in your career, 50 seems really old, but retiring at 50 gives you a realistic chance at 30 to 50 years of retirement living. It takes a lot of effort to put yourself in position financially to retire that early.
As hard as it is, retiring early isn't impossible, and the sooner you get started planning for it, the more likely you are to achieve it. Follow these strategies, and you'll give yourself the best shot possible at quitting by 50.
1. Be a supersaver
If you want to retire by 50, the most important factor is to save as much as possible as early as you can. Many people who work into their 60s don't seriously get started with their retirement saving until they hit 40, but you don't have that luxury if you want retire 10 to 15 or more years earlier than that.
Conventional wisdom says saving 10% to 15% of your salary is enough to get you to retire on time, but the most successful early retirees do a lot better. Saving half or more of earnings isn't unheard of, and it's especially possible for those who choose to get into higher-paying professions without adopting higher-cost lifestyles.
2. Get value when you buy
To save as much as you need to in order to retire by 50, you can't waste money on unnecessary expenses. Those in cities can replace car purchases with public transit, and even if that's not a viable option in your area, buying older model vehicles used can save you thousands versus purchasing shiny new models. Even on smaller items, savings can add up. Getting rid of triple-digit cable bills by replacing them with single-digit streaming video subscriptions, for example, can give you the same entertainment experience while letting you set aside $100 or more extra each month. Your peers might not understand your spending decisions, but your true friends will appreciate your end goal and what you're willing to do to achieve it.
3. Boost your earnings
The more you can earn, the easier it is to produce the savings you need to retire at 50 or earlier. For some, that means identifying a lucrative career early on and making the most of it. For others, finding overtime or working side jobs can produce extra cash. There's no one secret to boosting your income, and there are countless options to choose from either to boost the size of your main paycheck or to supplement it with additional earnings on the side.
4. Make investments that will give you reliable income
Many early retirees count on investments that produce streams of income that they can use after they retire to cover basic living expenses. Rental real estate is a popular option, because it has historically allowed landlords to borrow from banks, use rental payments to cover interest and principal payments on loans and other expenses, and still have money left over as profit. Entrepreneurs who start their own businesses can sometimes leave them to trusted partners while collecting ongoing streams of income. Putting together a dividend stock portfolio can also be a good strategy. Whatever you pick, having income without having to sell off assets has huge advantages for early retirees.
5. Look at cheaper retirement destinations
Many people look forward to the ability to travel when they retire, and for those willing to consider long-term living in lower-cost destinations around the world, early retirement can be a lot easier to manage financially. Many areas are popular with U.S. expatriates who are looking to stretch their retirement dollars further, such as Mexico, Costa Rica, and Portugal, and having a community of like-minded people can be extremely rewarding.
6. Be tax smart
Retiring early gives you the ability to use tax laws to your advantage. During your high-earning years, do everything you possibly can to defer income, such as maxing out contributions to 401(k) plan and traditional IRAs. After you retire, your taxable income will go down dramatically, and that'll give you a chance to convert those retirement accounts to Roth IRAs with minimal tax expense if you plan accordingly. Every dollar you pay to Uncle Sam is one less you'll have to spend, so it pays to consider all the tax angles you can.
7. Call your own work shots
For many people, retirement doesn't mean just sitting around on a beach doing nothing all day. Instead, it means having control over what you do and when you do it. Even if you're retired, there's nothing stopping you from taking on paying work on your own terms, and some employers will be willing to let you stay on in a consulting role with greatly reduced commitments. Some won't consider that to be true retirement, but there's no better feeling than having control over your time.
You can do it!
Retiring at age 50 isn't easy. It takes commitment and dedication to stop following the crowd and instead to follow your dreams. But if you manage to leave the rat race by 50 while leaving the skeptics behind to work another 10 or 15 years, that should be more than enough of a reward for you.
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