5 Tips to Early Retirement

Increasingly, more and more folks are asking: “how can I retire early?” So, what is early? For the purpose of this article, I am assuming early is before the traditional retirement age of 65.

While I could easily list more, I will keep this topic to the top 5 that I have seen in my years of experience.

1.Take an inventory of your current situation. Like any journey, you need to determine where you are starting from and then you can try to figure to how to arrive at the end of the journey –retirement! Or better yet, when you can make work optional.

2.Contribute (as much as you can afford) to a workplace retirement plan. I recommend contributing the minimum amount your company is willing to match–you don’t want to leave money on the table! Once you have reached that match figure, try to increase your contribution by 1% every 6 to12 months. If you are not eligible for a workplace retirement plan or it is not offered by your employer, there are other ways to save like IRAs, Roth IRAs, SEP (Simplified Employee Pension), etc.

3.Avoid withdrawing from retirement plan early. In addition to having to pay your ordinary federal income tax rate on any amount withdrawn, you may also incur a 10% penalty from the IRS for an early withdrawal before the age 59 1/2 years old.

4.Pay off current and avoid any future debts. This may seem too obvious, but it can truly derail your retirement plans. Every long-term debt you incur puts in jeopardy assets that could be used to build your retirement nest egg. Additionally, you increase your costs by having to pay interest –an unnecessary and avoidable added expense.

5.Invest early and often. After you are maxing out your work or alternative retirement plan, and if you still have discretionary income, consider automatically directing a portion of your income to a non-retirement investment account-use the power of compounding to your benefit!