Most people dream of early retirement. But early retirement doesn’t have to be a dream. The internet is full of retirement tips to help you live out the rest of your days in relative financial safety. And just so it happens that we have a few tips on how to achieve that.
When planning your retirement steps, it’s all about seeing what your options are. Do you have a big enough investment portfolio to turn to in retirement, or are you just now building it? Your investment portfolio must support you for years. That’s precisely why there isn’t a better time to plan for retirement than now.
To do that, here are a few retirement tips to get you started.
One of the best retirement tips you’ll ever hear is to start retirement planning now. The present gives you plenty of time to amass a big enough savings account to support you later in life. If you’re thinking of retirement with 20+ years ahead of you, then there isn’t a better time to start than now.
However, think of retirement planning as saving. Instead of retirement tips, consider reading more about savings tips. Savings planning is different from retirement planning. The former comes in handy during emergencies, while the latter solely focuses on helping you live out the rest of your days in financial safety. Thus, you can read more about our expert saving tips for young adults.
On the other side of the aisle, some of you reading this article might have only a few years before retirement. So what happens when there’s so little time for retirement planning? Well, it’s simple. To plan for retirement with little time, you need to invest more. By putting more money in a savings account, you earn more compound interest.
Regardless of whether you have decades before retirement, or you’re just about to hang your coat, the important thing is to start today.
Know How Much You Need For Retirement
A tip that, no doubt, will broaden your horizon is to actually understand how much money you need for retirement. It’s logical to assume you’ll need less money to maintain a good standard of living once you retire. But just how much is enough? According to USA Today, you’ll need anywhere between $858,000 and $1.5 million to retire. The right amount varies between states and cities. Some states like New York or California aren’t the cheapest states to retire at.
But others offer much favorable living standards for seniors and people getting into retirement. So before you even put money into retirement, you need to know how much you’ll need.
Pay Off Your Debt
Not all retirement tips have to do with investing or putting money into a retirement fund. Some retirement tips help get you out of hot water by telling you what to do before retirement. One of those tips is this one. No doubt debt has ravaged US households. It is estimated that more people are in debt now than ever before.
According to the Federal Reserve Bank of New York, the total household and credit debt in the US has surpassed $15 trillion. These record-high numbers are concerning for both lower and medium-income families in the US. If you’re still carrying debt, you need to pay it off while you’re still working. The reasons for that are quite simple. While in the workforce, you have a higher income and a better chance to pay off debt. When in retirement, your income significantly drops. That makes it more challenging to pay off any debt.
If you’re thinking of retirement planning but aren’t taking into considering paying off debt, make sure to deal with it immediately. Living debt-free isn’t just an early retirement tip, but a life philosophy. You get tons of benefits from paying off debt. If you’re unfamiliar with what those benefits are, here is a guide for you.
Fill Up Your 401(k)
The ultimate retirement tip is to fill up your 401(k) to the absolute max. A 401(k) is, by definition, a retirement plan first and savings account second. The purpose of a 401(k) is for you to contribute a percentage of your salary to this account. While you can’t contribute an entire salary, the total amount does vary based on inflation. Regardless, filling up a 401(k) is a great way to retire happy.
Sadly, not every employer offers a 401(k). That’s precisely why you should think of other ways to contribute towards a retirement account. Any form of retirement planning should include some sort of retirement or savings account. If your company offers a 401(k), and you haven’t been maxing it out, then now is the time to do so. If you’re in your 50s, then you can contribute more than the maximum allowed amount. For workers after 50, you’re allowed to add a further $6,500 to the 401(k) each year up until retirement.
Diversity Your Options
A big mistake to make is to put all of your eggs in one basket. When planning for a happy retirement, the last thing you want is for your single investment to fail. It is precisely why you should diversify your investment options. If your investment portfolio consists mainly of stocks, then consider diversifying your portfolio. To do that, you can do two things.
The first is to diversify the types of stocks you own. By this, we mean spreading your investments across multiple sectors, industries, and markets. For example, if you own notoriously volatile penny stocks, then why not steady the ship by investing in tech stocks? The other option is to allocate your investments between multiple assets. So if you own stocks, consider putting a portion of your investments into bonds, REITs, real estate, forex, and even cryptocurrencies.
When it comes to the most effective early retirement tips, it doesn’t get more effective than this. What better way to retire happy than to let your money work for you. Generating passive income from your investment portfolio is the easiest thing to do on the road to a happy retirement.
Before We Go
While anyone can come up with a list of retirement tips that mainly consist of investment options, not every list tell you about the importance of paying off debt, diversification, or how much you actually need to retire happy. While it’s important to start your retirement planning now, you shouldn’t lose track of the more important things in life such as paying off debt or keeping in check with your goals and finances. That’s precisely why we’ve included a bit of everything to get you started.
Partner at Vega Capital Management - a private funds management company.
An experienced portfolio manager with 10+ years of proven and reputable track record in investment management and financial analysis. Currently, a partner at one of the fastest-growing private fund management companies in southeast Europe, Kiril has been tending to a loyal international base of client-investors and partners. When he is not crunching numbers and increasing his client’s wealth, he reminisces about his Michelin-star restaurant cheffing years and fondness of the culinary arts.