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Want To Retire Early? How To Plan For Retirement - Here Are The Steps To Take If You Want To Retire Early (Essential Tips and Tricks)

 

Early retirement dream is what actually make most people go through the daily grind. Sundowners on a seaside terrace, a round-the-world cruise fantasies, or writing a best-selling novel is what always make work endurable.

Then we get to 50 years of age, take a look at our pension pot, and start to wonder if we will ever be able to afford to retire at all – let alone get in any sort of luxury.  

 

 

 

With good strategy you can easily make your dreams come true when you are still young enough to enjoy them to the full.

"Now to retire at 55 and then enjoy a pension for life of £20,000, you will have to accumulate a £700,000 pot on top of a full state pension"

And it is worth the effort. The opportunities which retirement brings are always limitless, with spending long periods abroad or traveling very high on most people’s wishlists. In a recent research from the Share Centre, the broker, found that 71percent place travel at the very top of their retirement “to-do” list, with 23percent planning to live abroad for at least some months.  

 

 

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Round-the-world cruises is a very famous option and for other lovers of water, sailing craft, humble fishing dinghy or even a canal boat would simply bring its own piece of heaven.

Hobbies normally come into their own, why some people usually look forward to taking up a new sport or using more time for their ponies or golf. Some others are always free to fulfill their ambitions like doing postgraduate research.  

 

 

 

 

Listed below are some tips to retire early and enjoy your life

 

Start early if possible

It is not too quick to start saving when we talk about retirement planning. The earlier you start and the more you invest, the more time your retirement savings will have the potential to grow.

The key engines which actually drive the best opportunity for savings growth in a retirement strategy are tax-deferral (assuming you are thinking about enrolling in a deductible IRA, tax-deferred, or an employer-sponsored retirement plan) and compound interest.

The money you’ll use to invest is called tax-deferred, which actually means that taxes are not payable until you decide to withdraw the money from your account.  

 

 

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Now thanks to compound interest, the money which you would otherwise pay toward income tax normally remains in your account to earn more money. For instance, if you just contribute even a little amount over time, you will be very amazed at how much it could grow.

Do you know that only $50 a month could easily generate as high as $75,000 over the next 30 years. So waiting to begin your long-term savings program can simply have a big impact on the saving outcome of your retirement. The potential for compound earnings and time matter. For instance, let’s take a look at a very realistic scenario which could make a big difference in your outcome.  

 

 

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Let’s assumes you earn just $30,000 a year, you then get 4% annual raises and you are planning to retire in 30 years. You only save 4% of your income a year and then earn an 8% annual return. If you decide to start investing now, you can easily have more than $220,000 by the time you fully retire.

Now if you decide to wait another five years before you start, you’d only have $164,878 (assuming the same retirement salary, date, raises, savings rate and return). Now waiting five years just cost you $56,066.

The fact remains that the quicker you start your retirement saving, the easier it will be for you, given the number of financial obligations that is normally faced at that later time in your life. Just take a very close look at the interesting aspects of compounding and you will see that the early bird normally get the best in the retirement game.  

 

 

 

 

Diversify your investments to lower risks

When you are investing it is very good and common practice to diversify your portfolio in order to lessen risk. It is very hard to predict how financial markets will perform and all asset class such as property, cash, bonds and shares has their own business cycle. So by diversifying your investments you can simply take advantage of the 'ups' while restricting the 'downs'.

Diversifying a portfolio actually means that you are investing in different asset classes as well as investing in a number of securities in each of the asset classes. In the share aspect your plan would be to hold a number of various organizations as well as adding overseas shares. Those organizations would also represent various sectors as they will also have their own business cycle.  

 

 

 

The main basis for diversification is that even if one or two of your investments go bad, you will have a lot of others which will be providing you peace of mind and avoid losing it all.

Not only will diversification assist you to protect your funds it will also assist to smooth returns. A portfolio that has only one share is likely to have returns that fluctuate largely, while a portfolio which holds a range of some other shares and asset classes will bring more reliable and less volatile returns.

 

Plan a retirement strategy

Retirement can be the best part of your lifetime. You will have the time to engage in hobbies which you never had the time for while you were on the job and you will also have the time to travel. When you design your retirement strategy very well, you will find out that retirement gives you the freedom to explore everything which life can offer. But in order to prepare for a very good retirement, you will need to set goals to make certain you remain on course and not all retirement goals actually involve money.  

 

 

 

Your health is one very good aspect of planning for your retirement. You can start preparing today in order to have a very healthy body. You can easily enroll in a Yoga class, or start walking around your neighborhood on a daily basis. If you will like to drop a few pounds, you will have to make a program for that also. The truth is you need to be very healthy as possible once you retire, so that you won't be restricted in whatsoever you are planning to do immediately you have the time to start enjoying your life. So one of your first goals is just to preserve or improve your general fitness and health.

Have you ever been failing to get a proper health check -up, or visit your dentist? You will have to simply start right away and always keep regular scheduled visits with your dentist and doctor. This will easily help you to stay in top condition and could also help you in getting good health insurance rates as you grow older.  

 

 

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Another very good area you will have to think about is your social relationships and friendships, because immediately you retire, you won't be opportune to have the daily talk  around the water cooler which you normally enjoy with your co-workers. So you will have to start creating time for family and friends, even if it's just a quick call or maybe once in a week luncheon meeting. This will actually keep you in constant communication with the people that you really care about, and it will also help in making certain that they're around for you once you have all the time to spend with them.

Planning your retirement strategy will also means that you need to get control of your finances, and keeping track of where your money is going. You will have to keep a very good list of each of your assets, social security, your benefit plans, and any other additional sources of money which you might have once you retire. You will also have to know where exactly your money goes, so you will need a very detailed list of all your financial obligations, such as loans, debts, etc. Financial goals are the most popular when it comes to planning a retirement strategy.  

 

 

 

Now just take the time to sit down and picture your ideal retirement. Simply think about the things that you will like to do, and the person you will prefer to do them with. Planning a retirement strategy is actually about looking into the future in order to see how much wealth, health and companionship that you will need to live the exact way that you wish.

 

You need a wealth plan

The truth is that it is only by having a wealth creation strategy in place is it possible to become wealthy. A lot of people work at becoming rich with no clear objective in mind other than they want to be rich. And almost all of them fail. It’s just same thing like you can't erect a house without a blueprint, you can't just become rich without having a very good outline of wealth strategies which will get you there.

Of the so many wealth creation plans that are out there, I believe to first buy a home is the basics in all. Real estate is actually the cornerstone of the wealth strategies that is most successful. So the very first step in becoming wealthy is to actually become a homeowner.  

 

 

 

Next thing is that you will have to think about any disposable income and then look for investments which you can easily use it for. Having money in a savings account will actually make you feel very rich and secure, but the truth is it isn't doing any real work in order to make you wealthy. The actual fact is that even investing small amounts is a very good wealth strategy.

Perhaps discipline is the most necessary of all wealth creation strategies. It takes lots of discipline to achieve wealth. It's difficult not to take that disposable income you have at the end of every month and use it on small luxuries. It's also very difficult not to take the nest egg which you have built up and splurge on the sports car or vacation of your dreams.  

 

 

 

But if you really want to become very wealthy, then you will have to become very disciplined in order to be able to invest your money rather than use it.

It will also be fine if you decide to take courses in financial and investment planning. There are a lot of excellent courses that are available online and through your local universities and colleges that can easily teach you some invaluable wealth creation strategies.

The more wealth strategies which you are aware of, the better off you will actually be in deciding what the best ones are for getting your financial goal of becoming wealthy.  

 

 

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Determine your retirement health care needs

Many people actually think that being eligible for Medicare which is a federal health insurance program that is only for people who are 65 or over means that they don’t have to worry so much about healthcare costs in retirement. That program actually doesn't cover a lot of expenses, including deductibles, premiums and co-payments.

Beyond what Medicare covers or excludes, retirees will have to take into account other healthcare considerations.

Whether you just began to save for your retirement or you are just about to get into the age which you can get Medicare, it's very important to know the potential healthcare costs which you may incur. To start, Medicare actually doesn't cover so many ranges of expenses, such as hearing aids, dental services, prescription eyewear, and related exams. Medicare will not also pay for long-term care expenses for disabilities or chronic conditions.  

 

 

 

Medicare is actually divided into various types of coverage such as Medicare Part A which covers hospital coverage and short-term rehab care at home. Part B normally covers doctors' services and Part D also covers prescription drugs.

A lot of people do not pay any premium for Part A. But you will have to pay a deductible for any hospital stay.

For Medicare Part B, seniors will have to pay a monthly premium and a one-time annual deductible. Also Medicare recipients actually pay 20 percent of the rest costs for any Part B service, with no limits.  

 

 

 

 

Determine your retirement income

What sort of retirement income will I need? You can start by asking yourself this question and it is also one of the difficult questions to answer. Nobody answer is actually right for some other person. Based on personal lifestyle and retirement goals, there is always a different answer to this. A popular rule of thumb is that you will actually need at least 80% of your current income when you decide to retire.

In determining retirement income, you will also have to determine how many years you will spend on earth after retirement. A very good estimate which you will have to make should be like 100 years. Your income can be pass on to heirs if you live less than that.

Another good question to ask is what your expenses will be after retirement. This is actually where you project what exactly your lifestyle will be and your need and wants when you retire. Also determine if your retirement income will be enough. You can figure out your actual net worth and then make a comparison between income and expenses. It is very recommended that you estimate a 3% higher expenditure. This normally takes very good care of inflation.

Don’t ever rely primarily on social security. But, it normally provides a retirement income other than savings, pension and income from retirement plans. Every year you will always receive copies of projected social security benefits. Just look at it and make sure there are no mistakes and then add this amount to your retirement income.

Determine how much money you have in your organization retirement account and what it will actually be worth when you finally retire. You can also talk to your benefits administrator on how much retirement income you will get from your company. Most organizations have gone from pension plans to contribution plans. So you have to determine your plans worth when you retire.  

 

 

 

If saving for retirement you will be needed to start saving from a very early age possible. The more you start saving early, the better your retirement income will become later on. There are so many people who are in their 40s and 50s and have not start to save for retirement. But there is still hope for some of these people because when there is a will there is a way. The first thing these set of people have to decide is when they will actually retire.

This is a big question, which normally appear in the mind on the way to work mostly when you just got a job and start to work, retirement and retirement income will be the last things on your mind. The mind will be occupied with the date of the next paycheck and what you intend to use it on. Your focus will be so much on personal goals that any other talk of retirement gets thrown out the window. Now after 20 years of hard work, retirement will then seems like a very good option more and more.

In order to achieve your dream retirement, you have to start spending money wisely. You can shop at the supermarket instead of the convenience store. You can purchase generic products rather than labels which are more expensive. You have to invest your money wisely to earn a good retirement income.  

 

 

 

 

Know your investments

When you think about investing as a method to increase your overall wealth it is very necessary that you are always honest with yourself and know the kind of investor that you really are. Broadly speaking there are four various approaches to investing which are saving, investing, trading, and speculating and all of them have their advantages and disadvantages but if you actually understand yourself and what exactly your investment goals are the more equipped you will be to easily choose the perfect investment approach and style.

Firstly be very honest with yourself. Write down on a piece of paper what stage of your life you are currently at. Are you at the peak of your earning power, or are you in your pre-retirement years? Have you made some investment before and won big or even lost a little fortune? Knowing your approach to risk is very important here insomuch as did you cry into your pillow at night because of a big loss or you were just emotionless or just as traders normally say being "in the zone"? Now do you think that you are an aggressive investor or a conservative one?  

 

 

 

Next you will have to think about your current financial situation. A good recommendation is to make sure that you have saved up to six months gross salary. This is actually common sense and will assist in freeing you from feeling that you are risking all members of the family wealth in any one investment option. Having that financial safety net will definitely ensure that come what may happen at anytime you can simply pay the bills in the periods of illness or unemployment.

 

Invest early and aggressively

Some young people are way too conservative financially. According to a report of Wall Street Journal report in 2016, people who are in their twenties most common money mistake is always investing too conservatively, they put so much money into bonds and cash and not enough money into equities. This might be understandable because between coming of age in the Great Recession, then graduating into anemic job markets, and also carrying some record amounts of student loan debt, this might be the reason why millennials are conservative about investing.

But while a low-risk portfolio produces better outcomes during a downturn, it’s a severe handicap in the long term. We’ll make comparism between aggressive and conservative portfolios, and then also discuss why your 20’s is actually the time to be very bold.  

 

 

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To start with, what exactly does a “conservative” investing plan look like, and what exactly make it different from a very “aggressive” one? An investment portfolio usually has of a lot of financial vehicles, which includes bonds, money market funds, certificates of deposit (CD’s), and stocks.

A conservative investment portfolio is usually weighted towards bonds and also money market funds, it gives very low returns but it also has just small risk. This is actually the kind of portfolio that you will want if you’re more afraid of losing money than not making money - for instance, if you are retired and these funds are your only source of income. Aggressive portfolios are normally weighted towards stocks, and are always better for those people who can simply handle just a few bear markets in exchange for overall higher returns.

An aggressive portfolio actually get you so many better returns on average but on the other hand, you’re more likely to lose money, and even likely to lose big.  

 

 

 

 

Spend less than you earn

Spending less than you earn is actually one of the most important financial concepts to know and live by. If you refuse to live on less than what you earn, you will never be able to go ahead. Spending less than you earn will take some initial life changes, but the more you do it, the easier it will become to continue doing it. You need to do the following in order to use less than you earn

 

Analyze your financial habits. It is surprising how simple it is to use money without even knowing where exactly it is going. You can take the time to actually track how and where you are spending your money. You can use something that is as easy as a paper and notebook, or Quicken which is an automated program. There are so many free online money management tools that you can easily use to assist you manage your money. The truth is knowing where your money goes makes it very simple to understand where you can easily cut back just to free up some extra cash to save more money or pay down bills.  

Make a budget. Immediately you understand exactly where your money is going, you can easily make a budget. You need to have a good idea of your recurring expenses and a very decent idea of how much money you use on variable costs such as entertainment, gas, groceries, travel, etc. You can always use your budget as a guide to easily control your spending. As you go through your budget, you will be able to free up some cash flow each month. If not, then you will have to make some extra money.

Find places to cut back on expenses. There are people who like to save money and one of their hobbies has always been bargain hunting. But saving money is actually more than just looking for bargains; sometimes it’s normally about preventing spending altogether. You can easily save money by taking along with you your lunch to work instead of eating out every day; you can also save money by opening your windows instead of putting on your air conditioner, or renting or reusing things instead of buying new ones. A very good example of that is to rent movies from Netflix or Blockbuster Total Access instead of using $20 on a new DVD. You can also try things such as working from home or carpooling to save some money on gas. You can also shop around in order to make certain that your cell phone plan is actually the best price for your needs and then simply find some carriers which can pay for the quick termination fees. There are a lot of ways to save money; all you have to do is to use your creativity always.  

 

 

 

Build an emergency fund. An emergency fund may not actually seem like it belongs in a list on how to use less money than you earn, but it actually does. An emergency fund normally gives you a buffer to take very good care of some expenses which are unexpected so that you won’t spend more than you actually earn by using credit cards or blowing your savings.

Use your surplus wisely – pay down debt. The truth is that it doesn’t do you a lot of good to save money at an interest which is less than 1% when you are actually paying 21% interest on your credit cards. So if you are in debt, you can set up an emergency fund, and then pay it down before you send all your money to investments. Your emergency fund can assist in keeping you out of debt and reducing your debt will also bring your monthly payments very low and maybe increase your monthly cash flow making it very easy to spend less than you earn.

When you are able to spend less than the money you earn, you will no longer be playing catch up and living an existence of a paycheck to paycheck because the stress which normally comes from worrying about bouncing checks and living paycheck to paycheck or making late payments can be very paralyzing. You need to know that you owe it to yourself to live a very stress free life as possible so you can simply enjoy life. Spending less than you earn is actually a very good method to reduce your money problems. It will also allow you to easily save and invest for your future.  

 

 

Do not rely on government social security

Never depend on Social Security for any part of your retirement, when you’re considering retirement, just assume that you’re actually going to be paying your own very way.

This is not a statement which so many people like to think about, but the data actually points to this as an inevitability.

With the population getting older and with just fewer babies being giving birth to, there are more people who are reaching the age of retirement and with less people coming into the workforce. This actually means that so many people are moving to the point of taking money out of Social Security and just few people are joining the workforce to start paying into Social Security.

Now what actually happens to any pool of money if you decide to suddenly start paying out more than you’re actually paying in? It easily dries up.

There is actually not so many ways which this problem can be easily solved. The most likely solution might be to easily raise the benefits age that is for Social Security, and raise it again, and then raise it again. What this would mean is that by the time we decide to retire, we might be very, very old before we are able to see Social Security money.  

 

 

What this means is that unless we want to retire when we are in our eighties, we’d better begin strategizing for our own retirement now.

Saving for your own retirement is very beneficial; because it let you have financial means in retirement that go far beyond the small Social Security benefits.

Now you may ask what you can do. It’s very simple. Just start saving for your retirement now, whether you’re just 22 or 35. The earlier you start, the better off you will be.

You can easily think of it as a small thing which you can do right now to assist your future self a lot when he or she is in their sixties. Giving up on a magazine subscription or any other thing else that is small now can easily give you the needed freedom to control your own destiny when you get older. That’s a good trade if you ask me.

 

Don’t spoil your children

Obviously, some children are more stubborn than others and no child behaves perfectly. But there is actually a line which a child can cross and fortunately, you are the person to prevent them from crossing that very line. It’s very okay to learn about good parenting very early on, even before your child is born, but it’s always late than never to take back control.  

 

 

 

Children that are spoiled usually come from homes where the parents are very lenient. Now what exactly does lenient mean? If you give into your children temper tantrum, rather than punish them for it, or if you decide not to limit your child to some rules, then you are actually being too permissive. Immediately you do this, you’ve given your children power over you and that will strengthen their ego and influence them to be selfish in different situations. Do you know that before a child is even a year old, they can tune into their parents techniques of parenting and then learn how to manipulate a lenient parent.

Most parents usually spoil their children because they are simply uneducated about parenting. Most parents mix up needs and wants and easily perceive a crying child as a child which is being poorly parented. But this is actually not the case – all children are expected to feel frustration and unhappiness; if they are not allowed time alone during these periods they will get too use to attention and affection.

 

Find the best pension provider

When you decide to set up any type of personal pension one of the very first tasks you will have to complete is to just identify the pension provider which you would like to invest with. But if you do not immediately know which are the best pension providers available then making this decision will be very challenging but some few clear questions can easily make the process much easier.

How?

How you have decided to invest your pension is actually going to depend on the number of years which is left before your retirement.

Where?

Think about the location of your investment spread. Are you actually happy to put all of your funds in just one country or would you prefer to spread your risk all across the globe?

What?

Now, think about the kinds of industries that you want to support with your funds.

Why?

Once you have decided what kind of funds you would like to invest in, choose the best pension providers by simply making use of a site for comparison that can show you the rates on offer along with the fees and charges that you are likely to pay.

Use historical data to find providers with a proven track record so that you can always be confident that the management team is worth their money.

 

Pay off all your debt

Many plans to pay off debt normally fail because there’s no actual motivation behind them. You can start out fully motivated to pay off your debt, but you can easily become discouraged at the effort and time it will take you to see your plan all the way through.

If you will like to keep some momentum in your debt payoff, you will have to always remind yourself of the very reasons you have decided to get out of debt. Debt is actually a very serious threat to your financial security because it normally keeps you from making the best of your money. The money you spend on payments of debt could be easily stashed away for a rainy day, for your kids or for your retirement days, immediately you become free from debt, you’ll be able to work toward becoming secure financially.

 

Compound return

The return rate, which is usually seen as a percentage, that normally represents the cumulative effect which a series of losses or gains have on an original amount of capital over a time period is called compound return. Compound returns are normally expressed in just annual terms, which mean that the percentage number which is normally reported actually represents the annualized rate at which capital has compounded over time.

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