Life after retirement can be fun and fulfilling, but only if you have your health and energy supporting you through it.
For many of us, we’ve watched our parents and grandparents retire in their 60s. By the time they finally have the time and financial freedom to enjoy life, they’re often too tired or dealing with age-related health issues to make the most of it.
Early life is spent working hard, middle age is spent developing a career and starting a family, and retirement is when all those ideal vacations and purchases are scheduled. But when retirement finally arrives, it can feel like it’s too late to enjoy it.
This is why more people are choosing to retire early, taking control of their time and energy while they’re still able to make the most of it. But the big question remains: How can you retire early in today’s economy?
We have a guide for you to help you retire earlier than your peers and follow your passions that you’ve been putting on hold your whole life. This might include making smart financial decisions, like consolidating your debt or borrowing from trusted sources like Salad and working towards saving for the future. Let’s dive in!
1. Decide How You Want To Retire
Have you envisioned what your life would look like after retirement? You must have a realistic plan in place and consider your life after retirement. If you’re married, you need to have a discussion with your partner regarding your decision and consider their input as well.
Here are some points you must go over:
- Do you want to travel extensively and become a globetrotter or nomad?
- Will you be working part-time, freelancing or providing consulting services?
- Do you wish to maintain the same standard of living or do you want to upgrade or downgrade?
- Do you have future responsibilities like funding your children’s education or marriage?
- Will you and your partner retire together, or will your spouse continue to work?
These questions will help you determine whether you’re financially and emotionally ready to retire early. If retiring at, say, 40 isn’t feasible, you can always adjust your timeline—whether that’s 45, 50, or even 57. The right age for retirement ultimately depends on your personal circumstances, goals, and preferences.
2. Pay Off-Debts and Mortgages
When you retire, you essentially lose out on your income source. Even if you continue to earn money from investments and pensions, it may not be enough to cover or exceed your monthly salary. That’s why it’s crucial to minimise financial outgoings as much as possible. Before retiring, aim to pay off all major debts—whether they’re student loans, personal loans, car finance, or your mortgage.
If you’re planning for early retirement, prioritising debt repayment over savings is the smartest approach. Once you’re debt-free, you can focus on building your savings and investing for a secure future.
3. Calculate Your Total Retirement Income
Before retiring, you should calculate and estimate the income you will generate during your retirement year. This will include calculating your pension, income from investments and any rental income. Once you have the approximate figure, you need to determine your expenditures.
Consider your necessities, such as groceries, utilities and energy bills. You can ignore work-related costs, such as commuting or buying lunch at work, as well as expenses like children’s education, if they no longer apply.
After calculating your basic monthly or annual expenses, don’t forget to set aside funds for emergencies—like home repairs or supporting dependents. Additionally, factor in money for leisure activities, holidays, and hobbies you plan to enjoy during retirement.
These calculations will help you determine your FIRE number (Financial Independence, Retire Early). With this figure in mind, you can create a tailored plan for savings, debt repayment, and investments to ensure a comfortable and fulfilling retirement.
4. Supplement Your Income
Since you’ve chosen to retire early, you’ll likely need to work harder in the years leading up to it. If your primary income isn’t enough to retire by 40, look for ways to supplement it.
Consider taking on a side hustle, such as freelancing as a digital marketer, videographer, or content creator, or offering mentoring services. Any extra income you earn can be directed straight into your retirement fund.
If you own an investment property or have a spare room in your home, renting it out could provide a significant boost to your finances. Rental income not only adds to your savings but also offers long-term financial security for your later years.
Final Words
While early retirement is ideal, it should not define your current life. This can lead to undue stress and anxiety, which can cause you to miss out on the small joys of life and also develop chronic health conditions.
Working actively towards early retirement is encouraged, but if you don’t reach that goal by 40, its fine. You can try to reach it a few years later.
Working with a professional accountant or financial advisor can help you better prepare for early retirement. They can often suggest high-yield savings accounts and investment schemes.
It’s important to get out of your comfort zone to reach your goals, but its advisable to not risk your present for the future that’s yet to come.
What’s your ideal retirement age?
