4 Roads to Early Retirement

The happiest workday is Friday, according to a recent study by the fitness tracker company Jawbone. And people are happier on weekends than they are during the week. In other words, people are happier when they’re not working. Many of us have, for one reason or another, dreamed of early retirement. A TIAA-CREF survey from 2014 suggests that the biggest regret of retirees is that they didn’t retire sooner. Maybe our career has plateaued, the workplace has developed a poisonous atmosphere or we are just sick and tired of the job. Some of us have early retirement thrust upon us when we are downsized out of a job for the benefit of someone else’s bottom line. Whether by choice or chance, retiring early is easier said than done. But don’t be scared. It may be the key to a happier life. If you hate your job, or if your company is in trouble, the smart move might be to take matters into your own hands, decide whether you can retire early and then map out a way to do it. Here are four clear routes to early retirement, and one road hazard to avoid.

1. You have enough money. 

© Corbis

This is the most obvious path to early retirement, but for many of us also the most unrealistic. Nevertheless, there are still a few people who enjoy a generous defined-benefit pension that kicks in after 20 or 25 years of service. This might be enough by itself to enable you to retire. Or maybe you had a good career, lived frugally and built up a substantial retirement nest egg. I know one accountant who retired at age 49. She made a good salary and saved a lot of money. And since she was a financial professional, she was confident she could manage her money. Due to her hard work and diligent saving, she is enjoying life these days.

2. You have another career in you. 

Technically, this is not retirement. But it solves the problem of hating your job and wondering how to extricate yourself from a bad work environment. One friend of mine who was a production manager at a struggling printing company held a secret desire to become a teacher. He saved up some money, did his research and at age 54 jumped ship to enter a fast-track program designed to train mid-career individuals to become math and science teachers. He left work in November, started the program in January and was teaching middle school science by August.

3. Your spouse has a good job.

You can retire early if your spouse is earning well.

© Steve Prezant/Blend Images/Corbis You can retire early if your spouse is earning well.

My brother-in-law took a retirement package from his computer company when he was in his mid-50s. He had a daughter in college and a son still in high school, and I asked him how he could afford to retire with those responsibilities. He smiled and replied, “The secret? A working wife.” His wife had worked when she was younger, took off a dozen years to raise their two children and was more than ready to go back to work – at what turned out to be a very convenient time. But he is not the only guy who’s enjoying early retirement while watching his wife go off to work every morning.

4. You’re prepared to seriously downsize your lifestyle. 

© Tim Hale Photography/Corbis

Some people scoff at professionals who advise us not to retire until we have $1 million in our retirement accounts, or until we can replace 80 percent of our pre-retirement income. If you’re prepared to sell your home, move to an area (even overseas) with a low cost of living and just enjoy life rather than try to keep up a middle class lifestyle, you can retire with much less money. It’s a serious adjustment, but for some people it’s the right thing to do.

Road hazard. If you retire before 65, the age you become eligible for Medicare, make sure you don’t go without medical insurance. My friend the teacher stayed on COBRA for the nine months he was out of work, then signed up with his school’s medical plan. My brother-in-law had his own retirement medical insurance, and his wife’s new job covered the kids. And now, of course, you have the option of buying insurance through your state’s health insurance exchange due to the Affordable Care Act. Finally, don’t retire just to get out of a job. Have a vision of what you’ll be doing once you leave the workplace – whether it’s launching a new business, starting a new hobby or embarking on a road trip. You will probably have to watch your expenses and live a more modest lifestyle. You might be poorer, but you’ll probably be happier.

Written by Tom Sightings of U.S. News & World Report

(Source: U.S. News & World Report)

15 Ways to Retire Earlier

© Provided by GoBankingRates
© Provided by GoBankingRates

The word “retirement” and number “65” are as linked in the American psyche as “bacon” and “eggs.” Then again, that all depends on how fast you want your eggs, right?

Retiring early — or leaving the work force for the golf course, if you like — might sound like an unattainable goal. But there are many ways to make it, so long as you take numerous approaches into account.

Yes, 65 is the standard — but what’s 21st century life all about if not exceeding standards? Here are 15 major financial and lifestyle moves you can make to achieve this goal.

Are you fantasizing about early retirement. Here’s how to make that dream a reality.

1. LIVE TWO TO THREE TIMES BELOW YOUR MEANS

Sorry, folks: Simply skipping that $4 latte in the morning ain’t gonna cut it. It takes a much more committed approach where “sacrifices” are viewed in a new light. “It’s amazing when I work through the numbers that some people think manicures, landscapers and maids are a need,” said Michael Chadwick, a certified financial planner and CEO of Chadwick Financial Advisors in Unionville, Conn.

2. REDEFINE ‘COMFORTABLE RETIREMENT’

Less spending later constitutes the flip side of less spending now. If you imagine comfy retirement as a vacation home and monthly cruise ship trips, revisit that vision so you don’t have to bleed cash — but can still retire in style. Instead of two homes, for example, why not live in your vacation destination and pocket the principal from selling your primary residence?

3. PAY OFF ALL YOUR DEBT

That’s right, all of it. First: Is it time to pay off your home? You might not have the resources now to plunk down one huge check, but consider savvy alternatives such as switching from a 30-year to 15-year mortgage. Monthly payments aren’t much higher, but the principal payoff is much greater. Second: Do the same with loans and credit cards, as high interest eats up income faster than termites chewing a log. A credit card balance of just $15,000 with an APR of 19.99 percent will take you five years to eradicate at $400 a month — and you’ll dish out a total of $23,764.48, the calculator on timevalue.com shows.

4. CONSIDER OVERLOOKED FINANCIAL RESOURCES

While it’s risky to count on unknowns such as an inheritance, you might have cash streams available outside the traditional retirement realm, said Jennifer E. Acuff, wealth advisor with TrueWealth Management in Atlanta. For example, “Understand your options with respect to any pensions you might be entitled to from current or previous employers.”

5. INVEST EARLY AND AGGRESSIVELY

If you’re in your 20s and start investing now, you’re in luck, said Joseph Jennings Jr., investment director for PNC Wealth Management in Baltimore. “Due to the power of compounding, the first dollar saved is the most important, as it has the most growth potential over time.” As an example, Jennings compares $10,000 saved at age 25 versus 60. “The 25-year-old has 40 years of growth potential at the average retirement age of 65, whereas $10,000 saved at age 60 only has five years of growth potential.”

6. MARRIED COUPLES: PLAY RETIREMENT ACCOUNT MATCHMAKER

The wisdom of taking advantage of a company match on the 401(k) is well established — but think about how that power is accelerated if a working couple does it with two such company matches. “If your employer has a matching contribution inside of your company’s plan, make sure you always contribute at least enough to receive it,” said Kevin J. Meehan, regional president-Chicago with Wealth Enhancement Group. “You are essentially leaving money on the table if you don’t.”

7. PRACTICE SOUND CASH FLOW MANAGEMENT

The methodology is simple, yet the results can be profound: Put money at least monthly into systematic investments during your working years. “There’s no other element of investment planning or portfolio management that’s more essential over the long term,” said Jesse Mackey, chief investment officer of 4Thought Financial Group in Syosset, N.Y.

8. JUMP ON EMPLOYER STOCK PURCHASE PLANS

How about some free money? The ESPP typically works by payroll deduction, with the company converting the money into shares every six months at a 15 percent discount. If you immediately liquidate those shares every time they’re delivered, it’s like get a guaranteed 15 percent rate of return,” said Dave Yeske, managing director at the wealth management firm Yeske Buie and director of the financial planning program at Golden Gate University. “Add the after-tax proceeds to your supplemental retirement savings.”

9. START THAT RETIREMENT ACCOUNT TODAY

That is, the earlier the better. Millennials who kick off retirement accounts early will reap big rewards later. A 25-year-old who socks away $4,000 a year for just 10 years (with a 10 percent annual return rate) will accrue more than $883,000 by the time she turns 60. Now then: Can’t you just taste those pina coladas on the beach?

10. PLAN SMART VACATIONS AND TRAVEL — AND INVEST THE DIFFERENCE

There’s no sense in depriving yourself of every single thing, especially well-deserved time off. But Yeske points out that you can save a ton in 150 countries through a service called HomeExchange.com. “My wife and I have stayed for free in London, Amsterdam, New York and Costa Rica,” he said. “And when you’re staying in someone’s home or apartment, you don’t have to eat out at a restaurant for every meal, so your food costs nothing more than if you were at home.”

11. DON’T LET YOUR MONEY SIT IDLE

To get to an early retirement, you have to periodically revisit your IRA, 401(k) or other retirement account to make sure your money doesn’t grow cobwebs. For example, the way your retirement account is diversified shouldn’t put too much emphasis on low-yield investments — such as money market funds and low-yielding bonds. “Dividends can pile up in the money market account, typically earning one one-hundredth of a percent,” Yeske said. “Make sure your cash is invested properly.”

12. HOP OFF THE HEDONIC TREADMILL

In this curse of consumerism, you buy something expensive, feel excited and then scout for something else to purchase when the “new car smell” wears off. And it’s a huge trap if you want early retirement, said Pete, a finance blogger who retired in his 30s. Another advantage: “Here in the rich world,” he wrote at MrMoneyMoustache.com, “the only widespread form of slavery is the economic type.”

13. LOOK FOR PASSIVE SOURCES OF INCOME

Early retirement doesn’t necessarily mean retiring all of your income, especially if you find ways to bring in money without hard work. Investing in rental properties is one way you can create a cash flow stream — and you can minimize the labor by hiring a property manager. Or: Set up an internet sales business and hire a part-timer to fulfill orders and track stock based on volume.

14. ENLIST IN THE ARMED FORCES

Here’s an alternative way to get to “At ease, men.” By serving in the military, you can also serve yourself. Members commonly retire after 20 years, living off generous pensions and health insurance. Even though President Obama in March proposed sweeping changes to military retirement and health benefits, earlier-than-normal retirement should still remain an option for many men and women in uniform.

15. HIT THE ROAD OR GO JUMP IN A LAKE, INDEFINITELY

Some middle agers are selling the bulk of their possessions — including the home — and moving into tricked-out mobile homes and houseboats. These options also open the door to a life of leisure travel and can eliminate major expenses, such as property taxes and mortgage payments.

If you think of retiring early as simply walking away from everyday life — and thus a pipe dream — it’s time to take a step back and look at how others have done it. You might enjoy your job immensely and have friends in the trenches with you. But if work is taking too much away from your family time, community bonds, overall health and peace of mind, you might do well to consider one of the smartest alternative investments of all: yourself.

Written by Lou Carlozo of GoBankingRates

(Source: GoBankingRates)