I read an article recently called early retirement secrets which gave the following short list of things to do if you wanted to make sure that you would be able to retire early. I looked at this list and thought that it was ok, but a little academic. Having gone through some of what they discussed and identified, I have my own thoughts about this subject and what you need to do to retire early. Every person will have a different experience so it is important to evaluate your own situation and make the decisions that are pertinent to your life style. First I would like to offer some comments about each of these points.
- Visualize What Retirement will be like
- Beat the Other Guy
- Use Reminders and Checklists
- Plan in Bite Size Chunks
- Consider Annuities
- Your Going to Have Some Losses
- Protect Yourself – Do Not be Too Trusting
Visualize What Retirement will be like – It is impossible to visualize what retirement will be like, unless you have some role models to follow and you are in the same circumstances as these role models. Still you are a different person, so do your best at figuring out what you really want to do in retirement and be realistic about it as well. For example, you will probably want to travel, but you cannot travel all of the time. You have health issues to consider and grandchildren as well to think about. List all of the things that you might do in retirement, prioritize and also consider from a budget perspective.
Beat the Other Guy – Simply do not worry about what the other guy is doing, do what is going to provide you with a happy good quality lifestyle. Competing with the Jones (sorry, this is a really old expression) is just a losing situation. Focus on yourself and your family.
Use Reminders and Checklists – it is a good idea to follow up on your investments on a regular basis. You probably would do this as part of your job so why not do the same thing for your personal life.
Plan in Bite Size Chunks – planning in stages is also a good thing, especially if you are the type that cannot focus on the big picture. Set milestones, achieve those milestones and then set new ones which will take you to your final objective.
Consider Annuities – I am not a big fan of annuities. They are just a way for the insurance companies and banks to make more money off you.
Your Going to Have Some Losses – This is very true. During the recession many people lost huge amounts and then recovered these same amounts provided they well invested in good quality stocks, bonds and mutual funds. Non of this speculative stuff and well diversified.
Protect Yourself – Do Not be Too Trusting – Always get several opinions and if it sounds too good to be true then it probably is. Most people should have at least 2 financial advisers and they should ask the same questions of both to see what kind of answers they give.
All of the above are excellent points, however as I mentioned earlier a bit academic for a lot of people. The reason I say this is many people do not even know how to get started planning for their retirement and end up retiring without a clue about what they are going to do with their time or if they even have enough money to live on! So what should someone do on a practical basis to prepare for retirement? Here are a few ideas which if followed, will get you ready for retirement. They worked for me.
- Save 10% of your salary every year
- Develop multiple hobbies that will carry into retirement
- Work at a job you enjoy
- Try semi Retirement first
- Always have a Rainy Day Fund
- Always take A Vacation
Save 10% of your salary every year – Save it and do not touch this money regardless of your needs. Get used to living on 90% and invest this money conservatively with some diversity so that you can manage the ups and downs of the markets.
Develop multiple hobbies that will carry into retirement – This is really to help you find a balance between work and personal life, as well as give you something to do when you finally do retire. A neighbor of mine told me the other day that he gets up in the morning and watches the grass grow. He has no hobbies and I feel sorry for him.
Work at a job you enjoy – This is a must, because if you like the job, you will do a good job at it and excel. Less chance of being laid off and you will be much happier as well which leads to a healthy lifestyle.
Try semi Retirement First – For some people this is really too risky, however for others working part time or on full time short term contracts is the best of all worlds. A short term contract gives you some extra money in addition to your retirement income, keeps your hand in the business, allows you to meet more people and challenges you as well which keeps the brain sharp. I like short term contracts since this allows us to travel and do some of the things a short vacation would not allow.
Always have a Rainy Day Fund – Let’s face it in today’s world, you’re going to lose your job someday when you least expect it. You may have a boss who does not like you, your company may get into financial trouble or you just fed up and quit. A rainy day fund, separate from your retirement fund, will tide you over until you find something else and take the pressure off as well.
Always take A Vacation – This appears to be a small thing, but it is important to always take that vacation. If nothing else you will learn what you need to do to keep yourself occupied when you retire. I know guys who cannot wait to get back to work after their vacation because they are bored. This is the wrong approach. Use this time to train for retirement!
Exercise – both the body and the brain to stay fit and healthy.
Hope fully these tidbits will help someone. If you have comments, please leave them as long as they will help our readers.