What Would You Give Up To Retire Early?October 2, 2019
By Jeremy Reif, CRPS®, Financial Advisor and Owner of Point Wealth Management
Sure, the thought of retiring early is wonderful, but unless you win the lottery or receive a significant inheritance, most of us need all the time we can get to save for our golden years. That is, unless you are willing to make drastic sacrifices to clock out of your career early.
The Cost Of Early Retirement
The FIRE (financial independence, retire early) movement has garnered so much attention lately that even those who anticipate retiring in their 60s are considering making some changes so they can exit their career or business sooner rather than later. The basic premise of FIRE is that your time is worth more than your desire to acquire things. In other words, you want to enjoy more free time in the second half of your life so you are willing to give up every non-essential and save up to 70% of your income for the future.
That’s ideal, but is it realistic? What would you be willing to give up to achieve this dream? FinanceBuzz conducted a fascinating poll asking pre-retirees that exact question. The results? 36% said they would pare down their spending as much as possible and only purchase essentials for up to two years if they were guaranteed an earlier retirement. 12% said they would avoid starting a family in order to have more money to retire early, and 6% were willing to live without a vehicle. Some respondents said they’d gladly work two or even three jobs.
Those are some pretty big sacrifices. Is it worth it—or even necessary? Can you retire earlier without making these life-altering changes? Here are some ideas to consider.
1. Live Below Your Means
You can cut your budget without giving up everything in your life. By making small changes over time, like canceling your cable subscription, getting a cheaper car, and using the library instead of buying books and movies, you can save more than you thought possible. This includes getting rid of debt, because if your income is paying off bills, you won’t be able to save as much as you want.
While you don’t have to eliminate all guilty pleasures, be it massages or Starbucks coffee, try to reduce some of them and evaluate the worth of every purchase.
2. Save And Invest Consistently
Now that you have some extra cash to divert into savings, you need to be strategic to see the most growth. If you have a 401(k), contribute as much as you can, at least enough to receive the maximum employer match. And remember to increase your savings rate as the years go on, aiming to contribute an additional 1% each year. The more you save now, the more potential for compound interest will build up.
And on the topic of investing, your goal retirement date doesn’t have to dictate your investments’ time horizon. You may hope to retire in 10 years, but you don’t need to set a 10-year horizon for your investments because you’ll may only need a small portion of your nest egg in the early years. The rest of your money may stay invested for another 20 to 40 years depending on your life expectancy. Invest with an appropriate perspective so you don’t end up cheating yourself out of years (or even decades) of growth. Remember that no investment or investment strategy is guaranteed and can ensure a profit or protect against loss.
3. Turn Your Passion Into An Income
There are so many opportunities these days to start a side business, work as a freelancer, or earn income from a hobby or skill. If you put away $200 every month (including what you’re already investing), that’s an extra $24,000 in 10 years, interest not included.
Thinking About Leaving The Workforce Early?
That’s great! You can make some sacrifices today to enjoy your retirement longer. But keep in mind that just because you can’t retire early doesn’t mean you won’t have a fulfilling retirement. 81% of retirees responding to the University of Michigan’s most recent federally funded Health and Retirement Study said that their quality of life in retirement was either as good or better than in their working years. That compares to 65% in 1992. (1)
Whatever you decide to do, whether that’s reworking your budget or looking for a second job, you can still have the retirement you dream of; it just takes the right planning and strategies. No strings attached, Point Wealth is here to help and point you in the right direction. If you want to check on your retirement progress and see how different scenarios could play out, schedule a call and meet me virtually.
About Jeremy Reif, CRPS®
Jeremy Reif is an independent financial advisor with more than a decade of experience in the financial services industry. He is also the owner of Point Wealth, LLC, an independent financial planning and investment management firm. With advanced credentials and training in retirement planning and financial planning, Jeremy focuses on helping individuals and families pursue financial independence. Regardless of the services he’s providing, he focuses on talking openly about financial planning, the industry, common questions about retirement planning, and more to help everyday investors gain more confidence in their financial opportunities. Based in Wausau, Wisconsin, Jeremy serves clients throughout the state and can work virtually with clients throughout the country. To learn more, visit http://pointwealthmanagement.com and connect with Jeremy on LinkedIn.
Investment Advisory Services offered through Retirement Wealth Advisors, Inc. an SEC Registered Investment Advisor
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Point Wealth Management, Retirement Wealth Advisors, Inc. are separate entities and are not owned or controlled by World Equity Group, Inc.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.
The opinions expressed by Jeremy Reif are not necessarily those of Retirement Wealth Advisors, Inc. or World Equity Group, Inc. and are subject to change.
The information in the newsletter is not intended to be investment advice or to predict future performance. Past performance does not guarantee future results. Consult with your financial professional before making any investment decision.