Fewer than half of older workers feel they will have enough retirement income or are well-prepared for retirement, according to a survey from the Insured Retirement Institute.
But that doesn’t stop many from dreaming about early retirement: 30% of workers believe they will retire before age 65. Nor does it mean they can’t reach that goal.
Some lucky and hardworking few retire in their 30s and 40s, or even earlier. If you’re hoping to retire early, you should be doing every one of these things.
1. Define your dream retirement
For some people, retirement might mean the freedom to travel and eat at every single Michelin 3-star restaurant in the world.
For others, it might just mean no longer needing a job so they can spend all day writing novels in a remote mountain cabin.
Others just want to own their home, be debt-free and spend lots of time with their grandkids.
Different visions require different amounts of money, so it’s important to nail down in as much detail as possible what you actually want out of retirement. It will make your goal more real and let you start figuring out the financial milestones you need to hit.
You’ll also want to get on the same page as your partner if you’re planning retirement as a couple.
2. Cut costs where you’re willing
If you’ve ever read about a millennial millionaire, you’ve probably heard some extreme examples of frugality. Frugality is in the eye of the wallet holder, but for example’s sake, it might mean sharing a cramped studio with three roommates.
You don’t have to do that unless it makes you happy, though. Our day-to-day lives vary as much as our visions of retirement do. We all have different values and priorities.
What matters is taking a hard look at your costs, figuring out what is important to you and trimming what you can.
You’ll likely find more success cutting expenses that are easier to drop. Check out “15 Painless Ways You Can Cut Costs in 2021” before turning to bigger sacrifices.
That said, the biggest gains can come from cutting your biggest expenses. So, if you have the flexibility and willingness to, say, live somewhere cheaper — with roommates or family, or further from cities — your savings will add up faster.
3. Boost your earnings
There’s a limit to how much you can cut costs, but the sky’s the limit on what you earn.
Check out “10 Tips to Remember When Asking for a Raise.” Keep an eye out for higher-paying opportunities. Learn new skills, and consider reading about how to make money online, including with passive sources of income.
Then, manage lifestyle inflation. As you make more, don’t spend more. Direct most or all of that raise or side-hustle cash into your long-term savings.
4. Invest early and often
The difference between retiring early and not retiring at all can come down to smart investing.
Start young and small if possible. But even if it’s too late for you to start investing young, it’s likely not too late to start investing or even to retire early — see “5 Ways You Can Save $500,000 in 15 Years.”
If your employer offers a 401(k) match, take full advantage. A 401(k) match means the company will contribute to your retirement when you do, up to a certain amount. It’s free money.
Then, move on to low-cost exchange-traded funds. You can harness the earning power of the stock market without playing the guessing game of which stocks will do best or paying expensive middlemen to guess for you.
And here’s the key: Don’t get eager to touch your investments, especially when they start to drop in value. Do what celebrated investor Warren Buffett does and hang tight; time is on your side.
5. Prioritize paying off debt
Even if you’re earning a great return on your investments, you may still be paying 17% interest on a credit card balance. Then there are student loans, an auto loan, a mortgage and anything else you might owe.
It’s harder to become financially independent when you owe money. The sooner you become debt-free and stay that way, the sooner you can retire. So, make a game plan to wipe out your debt fast.
6. Start planning
Don’t be afraid to start estimating how much you’ll actually need for retirement with online retirement calculators.
You may find they ask you for figures you don’t know yet, but a ballpark estimate is OK as long as you take the results with a grain of salt, as Money Talks News founder Stacy Johnson details in “Ask Stacy: Are Online Retirement Calculators Reliable?”
Those numbers will get more real as you get closer to retirement, but in the meantime they’ll help you focus on what you need to do now. You’ll have a dollar figure you need to be setting aside instead of “as much as possible.”