4 Steps That Matter Most To Early Retirement as a Millionaire
What are general money tricks that can help you retire early as a millionaire? Since retiring early is a goal that many people have on their minds, we wanted to help create a plan to make this a reality.
If you want to start planning an early retirement, here's some expert advice on what you can do to begin the process.
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1. Set a Target Date
"First things first -- you need to decide what your target retirement date is," said Erika Kullberg, an attorney, personal finance expert and founder of Erika.com. "You have flexibility here if your financial goals or plans change over the years, but you need to know what year you're going to try to work toward."
If you want to retire ten years early, you'll have to choose a rough timeline and work backward to develop a plan for getting there.
2. Work With the Numbers You Calculated
The next step involves crunching the numbers and making sense of the finances to figure out what it would take to leave your job sooner. This will also require figuring out how much money you can pull out from your investment accounts.
"Instead of thinking of yourself as rich, focus on the amount of income your portfolio can safely generate over time," said Katherine Fox, certified financial planner and founder of Sunnybranch Wealth. "If you're in your 30s or 40s, you're going to want to use an especially conservative estimate in the early years of your retirement. As time goes on and you get more comfortable living on a fixed income from your portfolio, you can adjust as necessary."
The goal is to work with your numbers and timeline to figure out how you can become a millionaire and retire early. If you're going to invest in real estate, this will include figuring out how many properties you have to invest in or what kind of cash flow you have to create to leave your job.
Once you know how much you need to save to retire, you can divide that number by the number of years left until the deadline to determine how much you need to save each year.
3. Take Advantage of Retirement Accounts
"Simply maxing out your company's 401(k) likely isn't enough to get the job done, although that is a great place to start," remarked Kullberg. "Maxing out your 401(k) will help you enjoy the most tax benefits which can stretch your retirement savings further. "
Once you do this, you'll want to consider contributing extra money to an IRA to save money on taxes today or in the future, depending on which account you go with.
4. Evaluate Your Lifestyle Choices
"For most people, saving enough money to retire early will take a lot of sacrifices in the here and now, so you may have to reconsider your current lifestyle choices," said Kullberg.
It's worth pointing out that these sacrifices may be worth it when you get to enjoy a longer retirement than most. However, you have to commit by making some serious lifestyle changes while you're still working.
Kullberg concluded, "Life is expensive and when you retire early you not only end up on a fixed income sooner than most people, you have less time to earn the money you need to build out your retirement savings. To be able to retire early and live comfortably, you must have a savings plan in place and be ready to be very disciplined."
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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