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Retirement - 7 min read
You can access your super as early as age 60. But what if you want to retire even earlier?
Maybe you’d like to only work six months of the year or help out with the grandkids.
Retiring from your job doesn’t mean you’re withdrawing from life. Early retirement could allow you to explore pursuits you’ve only dreamed of in the past.
What steps can you take now to give yourself the option of retiring early?
How much money do you need to cover your annual living costs? Without a thorough discernment of your cost of living, you won’t be able to walk away from your current job.
Do you need $25,000 per year? Or is it more like $75,000? If you want to generate $30,000 per year from your investments, you’ll need approximately $750,000. If you need $40,000, the number rises to around $1 million.
When you know how much you need, you can play around with the numbers. If you can reduce your expenses and live comfortably on less income, you’ll probably be able to retire earlier.
Once you know how much you need to generate enough to cover your living costs, you can set goals for saving more.
Check your current spending against your income. Is there a surplus every month? If not, what can you cut back to sock away more of your money for retirement? Use your surplus income to invest in your future. This is cash flow management, and it can put you on the path to early retirement.
Create a budget, and put these secrets to work for you. When saving is a line item in your budget, you’re proactively investing in your future.
Stashing your extra money in the bank probably won’t help much when it comes to retiring. You need to make your money work harder than that.
When it comes to investing, there are all kinds of considerations to keep in mind:
Your Altus wealth adviser can help you to work through these questions and choose the best investments for your goals. You’ll also need to consider your appetite for risk. Are you willing to try a riskier investment if it means you might have to retire a bit later if the market goes south?
One of the biggest roadblocks to early retirement is personal debt. It’s challenging to live on less money when you have credit card bills and car loans to repay.
It’s important to realise that not all debt is bad. Home and business loans, for example, help you to purchase items that generally increase in value while you’re paying them off. Most people would never be able to afford a home if they had to save up for it before they could move in.
But if you’ve been using debt to fund holidays or your wardrobe, it’s time to change.
Begin by paying off your highest-interest debts, such as credit cards. Once you’ve eliminated those debts, move on to your lower-interest debts like your car loans and mortgage. The sooner you can free yourself from liabilities, the sooner you’ll be able to retire.
Some people retire early by downsizing their home or moving to a less-expensive area. If you could eliminate your mortgage by moving to a smaller place, you would immediately experience a sense of financial freedom.
Mortgage repayments and rents usually make up the largest line item in people’s budgets. Without a mortgage or rent to pay, you could put your money to work, eliminating other debts or investing in your future.
Even if you can’t access your super straightaway, a healthy retirement fund provides a safety net for your future. Think of extra contributions to your super as payments to your future self. You could salary sacrifice a bit more each month, or you could contribute lump sums when you receive windfalls.
Another way to guarantee early retirement is to boost your income now. By taking another job, working overtime, or switching to a more lucrative career, you could have more money to invest and save for the future.
Just be careful that you don’t squander your extra money. It’s tempting to spend more when you earn more. By staying disciplined and keeping your spending reasonable, you may be able to speed up your retirement.
Your wealth advisor may have additional suggestions about how to plan for early retirement. To schedule a consultation, get in touch with us at Altus. We can work with you to create a plan for financial freedom. The sooner you start, the sooner you can start working on that log cabin.
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