Retirement is a highly personal milestone, and everyone envisions it differently. Some dream of relaxing on a beach with a cocktail, while others plan to dedicate their spare time to volunteering. Regardless of your plans, the key question is… when? Some people love their careers and plan to work as long as they can, while others are eagerly counting down the days. If you’re considering retiring before 67, you might be curious about the secrets to early retirement.
At First Financial, we specialise in helping clients to achieve their preferred retirement timeline. Whether your early retirement is a decade, two decades or even further in the future, we can guide you in making strategic decisions regarding your assets and income sources. Here are key steps to position yourself favourably for early retirement.
Start planning early
Setting a clear goal or target age is an important first step on the journey towards early retirement. This will provide a concrete timeframe for financial planning and implementing various strategies. Starting the planning process early significantly enhances the likelihood of achieving your early retirement goals.
Additionally, early retirement planning enables a proactive evaluation of lifestyle considerations. Examining factors such as desired activities, travel plans and potential healthcare needs from the outset ensures that your financial strategy aligns perfectly with the retirement lifestyle you envision.
Beginning your preparations early empowers you to adeptly assess and tackle potential challenges. From navigating market conditions to addressing economic uncertainties and unexpected life events, having time on your side makes these complexities more manageable and allows for better strategic responses
Budgeting is key
To establish a budget for early retirement, understand your financial priorities, as this clarity will effectively guide your financial decisions. Identify your essential expenses, assess your discretionary spending and then pinpoint potential areas for cost-cutting.
Cultivate a smart spending mindset to accelerate your early retirement savings. By critically assessing your spending habits, you can minimise expenses for unnecessary and frivolous purchases.
Maintaining a clear distinction between wants and needs is crucial. While you should absolutely enjoy life and allocate some funds to wants, prioritising your needs is key to successful budgeting.
Life is a dynamic journey, and all plans are subject to change. Your budget is the same – it will inevitably need periodic review and adjustment. Regularly assess your finances, accommodating changes in income, expenses and any unforeseen circumstances. This ensures your budget stays relevant, guiding you toward your early retirement.
Savings and debt
For early retirement, have an aggressive savings plan. Save a substantial portion of your income by utilising tax-advantaged accounts and strategic investments for optimal growth.
Consistent contributions significantly enhance your early retirement position.
In addition to savings, maintaining a separate, well-funded emergency savings account offers a financial buffer to navigate life’s unpredictabilities. This ensures you can address unexpected expenses without dipping into your regular savings or retirement funds and without incurring unwanted debt.
When it comes to debt, managing it is a key step toward achieving early retirement. Those high-interest credit cards can really throw a wrench in your plans, and who can afford to kick back and relax in retirement with a pile of debt hanging over them? Start paying off debts as soon as possible, prioritising those with the highest interest rates. Not only does this free up funds to bolster your savings, but it also adds an extra layer of financial stability.
Don’t ignore your super
Whether you’re contemplating retirement at 45, 50 or 55, one of the most pertinent pieces of advice we can give is to not ignore your superannuation, even if pension age seems in the distance. Incorporate it into your strategic planning, as the day will come when you reach pension age, and you’ll appreciate having all your assets within your super fund because then you don’t have to worry about paying tax.
Superannuation provides tax advantages for retirement savings. Contributions you make in preparation for early retirement attract tax at a lower rate than personal income, fostering tax savings and faster fund growth. Earnings on super also attract a lower tax rate than other investments, making it attractive for long-term saving.
The critical step is to evaluate the funds needed outside of your super to maintain your preferred lifestyle until the age of 60. This amount is contingent upon your lifestyle aspirations. Don’t overlook the potential impacts of both inflation and unexpected circumstances.
Talk to the retirement planning experts
Are you planning to retire before 60? It’s worth emphasising one more time: keep superannuation on your radar. Establish concrete goals for reaching the necessary amount to maintain your desired lifestyle during those initial retirement years. Through meticulous planning, you can work towards making this dream a reality.
At First Financial, we are retirement planning specialists. Our experienced advisers can guide you through this process, helping you set the appropriate targets and make well-informed financial decisions. Contact us to learn more today.
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