Oh to be 35 and retired.
It’s not impossible, but you need to have the right strategy in place to make it happen. Sure, you can be a millionaire before you even reach 20, amass enough cash to carry you through the rest of your life.
But even the Jordans and Zuckerbergs of this world made sure their assets continue generating revenue.
That’s the key. Make your money work for you. Putting away cash thinking that will be enough won’t cut it. There’s inflation. The ever-present possibility of an economic crash or, as Covid19 demonstrated, a global pandemic.
You’ll need to implement a series of strategies to retire early. But it is possible, and below are eight simple strategies to help you do just that.
Step 1. Consult a professional financial advisor.
Whatever I say here is just for informational purposes only. It is meant to be a part of bigger research you need to do for yourself.
Step 2- Be clear on your timeline.
That’s important because your planning will change dramatically if you plan to retire in 15 years, rather than 20. The more luxuries your pre-retirement life requires, the longer the planning phase will need to be. Make that decision now.
Step 3- Know Your Early Retirement Target “Numbers”
This is where things start to get technical. You need to calculate the income you’ll need in early retirement. Determine your actual living expenses. You’ll need to assemble records from all spending accounts for at least the past 12 months. Go through those expenses, separating the ones you expect to continue in retirement, but eliminating those that will no longer apply.
For example, you know you’re going to have a housing payment, but if your plan includes getting out of debt, you won’t have a car payment. You should include the house payment but exclude the car payment.
Step 4- Take inflation into consideration and plan to have emergency funds
Due to inflation, your retirement portfolio target number is likely to rise before you reach your desired retirement age.
There is no accurate way to predict what the cost of living will be in the future, but we can get some guidance by looking back at the recent past.
Let’s say your planned early retirement date is in 20 years. Using the Bureau of Labor Statistics CPI Inflation calculator, we see that it takes $1,495 in November 2020 to buy what $1,000 would have bought in November 2000. That translates into an inflation rate of about 2% per year.
If you’ve determined that $1.25 million is your retirement portfolio target number based on today’s price levels, you’ll need to increase it by about 50% to anticipate higher price levels in 20 years, consistent with the past 20 years.
Step 5- Determine the retirement portfolio needed to generate your target income
Never make the mistake of concentrating on only a few assets. You need to spread your investments and determine what role each asset plays.
Step 6- Insurance is a big thing
Whether it’s health insurance, travel insurance, life insurance, and others, you need to figure this into your target.
Step 7 – Protect all your investments
Dividend-paying assets can be risky, but you need them. The only thing you can do is protect them.
The best way to do this is through precious metals. Gold is the one asset that thrives during economic turmoil and remains consistent the rest of the time. It’s the best store of value. It is the one asset that will keep you safe even as you venture to riskier ones.
The truth is that early retirement is a major, long-term investment commitment, and you’ll need to be ready to make these kinds of sacrifices.
Remember, it’s not impossible but the sooner you start preparing for it, the better it will be for you.