The dogmatic perception of a retiree is often someone who is physically slow and uninspiring or someone who enjoys living by the beach. While this is somewhat true, in reality, most retirees struggle in between. Retirement can be a challenge if we are not financially prepared or don’t know what to do with the ample time that comes with the golden age.
By this time, we have probably stopped working full time. However, we still need the money to pay the bills, especially for medically related issues. Traveling and hobbies are only reserved for when we have some extra funds left. Planning for this phase can be a complex process and while there are no magic formulas to achieve a perfect retirement, there are definitely ways to make it better. Here are my personal 5 tips for early retirement.
Early Retirement Tips
# 1 – Track Your Spending
Knowing how your money is going out of your pocket is the first important aspect of the financial assessment. Be it paying your debts or daily expenses, you should identify your spending behavior and routinely cut back on excessive or unnecessary purchases.
With constant practice, you can live below your means and ideally, enjoy a debt-free retirement.
# 2 – Save and Invest
At any point in your working life, you should allocate 6 months to 1 years worth of income savings as an emergency reserve. Most retirees agree that by saving about 10% to 15% of gross income every year, you can create a fairly good pension fund.
Do consider investment option when you have an excessive saving. Investing in retirement plans and equity assets are recommended ways to leverage your future income.
Essentially, the higher your salary increment, the more you should contribute to your retirement plan.
# 3 – Add More Income Streams
As the saying goes, never put all the eggs in one basket. Therefore, you shouldn’t rely on one income alone. At any point in time in your career, you can always lose your job earlier than expected due to unforeseen circumstances.
Instead, learn to leverage your skills and turn them into business opportunities that can generate new income streams during the retirement phase.
# 4 – Keep Life Simple
A quick look at your current lifestyle can project how you would live during your retirement. If you are a spendthrift and desire to be surrounded by luxuries, you’ll have to earn a lot more than your current income to sustain that lavish lifestyle during the retirement age.
However, if you can settle for a simpler lifestyle, you’ll find that the cheaper options for basic living aren’t such a bad idea after all. In the long run, you are still able to save more and accumulate less debt.
# 5 – Find a Purpose in Life
Most people who retire at 55 to 60 years old, hope to live the remaining 20 years or so in a ‘comfortable phase’. If this phase means idling around, a retiree can suffer from disorders such as social decline and loneliness which can actually result in earlier death. Experts now believe that the key to longevity isn’t just about balanced diet and exercise; it’s also about family bonding, spiritual faith and having a purpose in life.
So instead of ‘shutting down’ during retirement, you should convert your retirement into a productivity phase, engaging in social activities and pursuing a passion to stimulate the mind and body in order to give your life more meaning.
Never Too Early to Get Started
Early retirement planning is a lifelong process and the outcome greatly depends on the choices we made today, which is during the peak of our careers. We must learn not only to survive it financially but also to enjoy the luxury of time that comes with the golden years.
Starting an online business is one of the many ways that you can plan for retirement and with the technologies these days, it’s not as difficult or as expensive as you think. Here’s an awesome entrepreneurship training that has helped many people achieve great retirements. You could be one of them too.
Do you have any thoughts or questions about planning for early retirement? Feel free to leave them in the comment area below and I will get back to you.
Hi there.
Sometimes I think that fate is about to bite me on the backside. I was just thinking that I ought to think about saving for later life, when your site came up. I find it hard to follow plans though as I pretty much live for the day. Interesting read though. I’m starting an online business to help me travel, as I’m quite a nomadic type. I’m also watching my spending and putting money aside. Let’s hope it sort of goes to plan. I have my doubts though. Thanks for the article.
Hi there Island Man,
I think you are off with a good start. Since you are already taking the first step in starting an online business, other plans will eventually fall into place. The reason I say this is because I never had the habit of saving, much less investing on myself.
But then things happened and I began to put some money aside. After a while, I thought about how to save more and gradually learned to make more. That’s how I ended up creating Time Rich Worry Free. I guess it’s all about survival. Since you are a nomad person, I am pretty sure you have develop a good skill for that. It’s just the matter of following through.
Hi Cathy,
I think you have given some very important tips in this post. Identifying and analyzing your spending behavior is essential if you want to have a debt-free retirement.
I like your point about adding multiple income streams. I really believe that the sooner people can start doing this the better. I know of so many people who are being retrenched or forced to retire earlier than they expected and are now suffering financial difficulties. Of course, you last point is my favorite – staying productive when you are retired. I am fast approaching retirement age so this is really relevant to me.
Thank you for sharing your thoughts with us, Erica.
Despite the economy situation, the awareness of making money from multiple streams is still lacking in the general population. Most college kids are steered towards employment and taught to climb the corporate ladder, which is not entirely wrong.
But it’s good to think of additional financial cushion to fall back on if employment goes wrong. If you can marry a passion with an online business, imagine how fun your retirement would be!
Hello,
Thank you for your insights concerning developing a healthy retirement. I like what you said about reducing expenses and adding income streams. Something that I’ve always thought to be a good idea is to allow residual income streams to dictate lifestyle budget. That way, you’ll have security beyond your savings. What do you think?
I certainly agree with you on that, Paul.
Personally, I don’t yearn for a lavish lifestyle; something comfortable and simple is good enough. As long as I can pay for all my necessities, including those in the future, I much rather spend my residual income to create memories with people that matters to me. Time freedom is ultimately, the lifestyle that I want to pursue.
It gets more and more difficult for people to get a healthy income during their retirement. Between the financial crash and 401K’s being hit hard, many people are finding themselves working long after they had hoped to retire.
And with student debt at ever-increasing levels, before even thinking about saving for retirement, graduates are paying back debt.
I believe this creates a vicious cycle with more and more people leaving it very late and ending up with very little money to retire on.
I think your advice of starting an online business to create supplemental income for your retirement is an excellent idea. Thank you for a very informative post.
Hi Clare,
Your comment is truly spot on. I am the one with the student loan and it’s frustrating to be in debt when you are just starting to work. We were not taught to be financially proficient, so long as we graduate with honors, everything will fall into place. How wrong is that mentality!
The lack of knowledge in managing our money is the very reason why so many people fail to plan for their retirement.
Fortunately, there’s still a way around this and that is to start your own online business. It has a low barrier entry and is pretty flexible in what you choose to monetize online. If you get the system right, you can see a good return of investment within couple of years and eventually earn a residual income from it.
Hi Cathy,
You provided some great information here. Providing other streams of income is of great value to retirees looking for some extra income.
As a retiree myself, I understand that it takes some getting use to getting only one check a month. I could have used this information before I retired so I could have been better prepared.
I find that there are several of your suggestions that I can still put in place even now after my retirement. I have actually already started to implement earning money online.
Thanks for the information and I do plan to put some of them to use.
Verna
Hi there Verna,
Good to know that you are still making plans even after your retirement. It goes to show how much you really care about your own future than depending on external support. I am fully employed and I get one check every month, but even so, I find that it’s not enough to cover my monthly expenses which I expect to grow over a couple more years.
Just like you, I discovered that entrepreneurship is the best way to gain more control over my future and finance. I too have started my own online business with Wealthy Affiliate and I really look forward to become very successful in it.
Hello Cathy and thanks for some great tips for those of us at that ‘early retirement’ stage. I’m 59 and always looking for ways, not only to bring in a little bit extra, but also for things to get excited and passionate about. I agree, it’s the passion and the purpose that keeps us going as we get older!
Hey Peter,
Great to hear that you are keeping yourself busy and living your life to the fullest. Age is just a number. Stay young at heart, Peter.
Hi Cathy,
Very good advice! I know this is something my family and I need to work on. Although I’ll be able to receive from my workplace, at this point in time I’d only be eligible to receive part of it, unless I continue to work there for another 13-14 years…ugh! No thanks!
Anyways, I’ll need to follow your advice here on saving money up for retirement. I didn’t realize how much a person needs to save before reading your post!
I certainly agree with your views on having a plan to do something once retired. I’ve seen so many that retire and end up not knowing what they want to do for the rest of their time on this earth.
Rather than enjoying it, they end up feeling depressed and lonely. Plus, being much older usually, health issues pop up that keep them from doing the things they’d enjoy.
I plan on retiring from my day job much sooner than that 13-14 years, and instead work for myself for as long as I want to keep doing so. And, of course enjoy time with my family and do more traveling!
Hey Sherry,
I have probably another 25 years or so before I hit retirement. Frankly, I don’t think I want to wait until then to enjoy life. There are so many more things that I wanted to do. Saving money takes discipline and I am positively sure that the time will come for me to enjoy it later. As I watch my online business grow, I could see myself entering retirement, earlier than expected 🙂
Due to some family situations in the past, I have very little retirement savings. So, a few years ago I started an online business in order to generate some extra income. And so far I am doing quite well. My goal is for my business to bring in just as much as my full time job does.
It is really important that people realize how fast the years will go by. You need to be prepared. Social Security will not be enough.
Thanks for reminding us on that, Wendy. For a brief moment after graduation, I didn’t know how much I actually need in order to survive.
When a good friend described me the concept of economy, time and health, it started to make sense that what we are currently earning (or getting from the government) will not be sufficient to sustain us into our old age. That’s when it struck me that I need to plan my retirement fund while I am still young.
Hey! I’m really looking forward to my eventual retirement!
The main problem I have right now is my student loan debt, which I know you wrote about in a previous post. Would you recommend that I pay that off before beginning to save for retirement? Or should I do both simultaneously?
Hi Dustin. I also carry the burden of a student loan debt. However, I was fortunate to have a friend who advised me on how to manage my finance when I started my first job. Although it is just a small amount, I started saving for my retirement when I was in my late 20’s because I want to take advantage of the compounding interest. Likewise, I updated all my health insurance policy because premiums are always lower when we are young and healthy.
As your situation may be different, I suggest you talk to some experienced people or friends who are financially wise to gather your options on ways to pay your loan and while saving for retirement at the same time.
Thanks for the response Cathy. Those are some very wise words indeed. Compound interest is a very powerful thing in the long term!
Retirement is not the end of life but rather being into another level of living it. Sharing and passing some of your knowledge and experiences in life to your grown up kids and also having time for the grandchildren.
I agree very much with the ways for a better retirement, for it will be a more fun and fruitful retirement rather than being a miserable and lonely one.
That’s true Bernie. I certainly don’t want to spend all my life at work and grow old without ever knowing how spend time with my family. For that, I look forward to an early retirement so that I can enjoy my time freedom to the fullest.