Early Retirement Planning
Is A Must

You need to do early retirement planning to start your retirement phase of life. Even if you work to normal retirement age, it is wise to do planning for early retirement.

I always wanted to retire early, but when I suddenly found myself retired due to business restructuring/down-sizing, I realized I had not been really planning for early retirement.

It may seem obvious, but early retirement means you will have more years to live without the income from your weekly, biweekly, or monthly paycheck than if you would retire at normal retirement age.

So you will need to replace that income from other sources, such as, savings,investments or a home business opportunity.

To put things in perspective, decide at which age you want to retire. Then decide your life expectancy. That will tell you how many years of income for which you will need to plan.

If you want to retire at 50, you can generally expect to have around another 35+ years to live in retirement.

Next, calculate your annual basic living expenses you expect to have in retirement. Let's say it's $50,000 for example.

Now for the eye opener!

Multiply the $50,000 (your annual basic living expenses) by the 35 years you are expecting to live in retirement. You will need $1,750,000 when you retire in order to give you $50,000 per year for basic living expenses, without adjusting for inflation. So, after adjusting for inflation you will need much more.

That's a pretty big number!

You can see how critical it is to save for retirement.

If you assume an annual interest rate of 5% on your savings, and an annual inflation rate of 3.5% on your living expenses, you'll be able to live on the accumulated interest for 10 to 11 years before beginning to dip into the principal.

Experiences of life can tend to sabotage your savings plan. I know from experience that it's easy to borrow from your 401K in emergencies, but you lose in the long run by missing out on compounded interest on that money. So, if at all possible, don't borrow from your 401K.

You'll also need to remember that withdrawals from a 401K or traditional IRA cannot be made without penalty until you are at least 59 1/2 years old. Click here for information on more sources of retirement income.

The earlier you retire the more aggressive your savings plan needs to be. However, early retirement planning could just mean planning to leave your current job/career and launching into your own home based business, or working part-time in something you thoroughly enjoy.

It is a very individualized decision.

In Summary

Early retirement requires planning. Know where you currently stand financially and where you need to be when you decide to retire.

Then you can do your early retirement planning on what needs to be done to accomplish your dream of early retirement and what options you have available.

Explore the other pages of this web-site for further insight on planning for retirement.

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