5/8/2014 3:15 PM ET|
5 essential moves for an early retirement
These strategies will help you retire before age 65.
Most of us would love to quit our job and retire early. Who wouldn’t want the freedom to pursue their own goals and interests? However, it’s already difficult enough to save to retire at 65. How can anyone retire from their job earlier? Well, it often takes a lot of hard work to get there. Here are five things you need to do to retire early:
Track your expenses
The first thing to do is track your expenses to see where all your money is going. Many people have no idea where their paycheck goes. By the end of the month, all the money is gone and it’s a struggle to make it to the next paycheck. Whether you are spending on new car payments or a daily coffee fix, find out what your money is buying.
Once you see what you spend money on, you can determine what you can live without and start eliminating unnecessary expenses. Do you want to spend your whole life working to pay for luxury cars, cable TV and gasoline? To retire early, you need to prioritize financial freedom above some of your needless expenses and cut them. If you know your annual expense, you will also have a better idea of how much you need to save for retirement.
Save a bigger percentage of your income
Most financial advisers recommend saving 10 to 15 percent of your income for retirement. This is fine if you want to retire at 65, but you need to save more if you want to retire earlier. Some people save 50 percent or even 70 percent of their income in order to leave the workforce early.
- Also from U.S. News & World Report: 10 numbers everyone should know about Social Security
Saving a large percentage of your income has two very big benefits: You will be able to build up a significant retirement fund quickly, and you will acclimate to living way below your means and won’t need as much money in retirement.
Make money on the side
Of course, most people can’t save 50 percent of their income even if they cut every insignificant expense. So, you need to increase your income, too. One way to do this is to explore ways to make money on the side. People are busy these days and need a lot of help with everything from babysitting to putting IKEA furniture together. You can rent out a room in your house, provide consulting skills, participate in a focus group, tutor, write freelance articles or deliver pizza on weekends. There are endless ways to make a little cash on the side and everyone has talent for something.
If you are lucky, you will be able to make money doing something you enjoy and retire from your day job earlier. Another benefit of making side income is you might be able to put off withdrawing from your retirement fund until later.
Start saving and investing early
There is no way around it. If you want to retire early, you need to start saving early. The magic of compound interest will work in your favor and your retirement fund will accumulate faster. The stock market is a great wealth generating machine if you have a long investment horizon. When you’re in your 20s and 30s, a stock market crash can even be a good thing. You can keep buying and investing, and you will most likely do very well in the long run. The later you start saving, the harder it will be to retire.
Figure out how much health insurance costs
Finding affordable health insurance is a big issue for early retirees. You won’t be eligible for Medicare until 65, and you will need to buy your own health insurance. The cost will increase every year as you get older, and you need to make sure you budget adequately for it. However, you might qualify for federal subsidies to help pay for health insurance depending on your taxable income, so do your research before taking the leap.
- Also from U.S. News & World Report: The ideal retirement age
Early retirement requires a lot of planning and preparation. Those who have been saving a large percentage of their income since starting their first job are considerably ahead in this game. People who don’t start saving until late in their career will have to make considerable adjustments in order to exit the workforce, but early retirement can still be a possibility if they pay attention to these five essential steps.
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VIDEO ON MSN MONEY
I had to quit work because of a disability. Paid in about 12.5% into railroad retirement. The company put in about 22%. I have a 401k through work and have not touched it. Retired out of the military and at 60 draw a retirement now. In actual money it is more than working. Do not need a car every few years, no out of town expenses, no work clothes, tools, paid off credit card debt. Put money into savings almost every month. Planned on retiring 5 years latter then I did. Still put 3 children thru college
>3-Year Annualized return for FISHER INVESTMENTS PURIX MUTUAL FUND (PURIX) = 5.57%
Having been a former client (victim) of FISHER INVESTMENTS (KEN FISHER, founder and CEO) and losing approximately $125,000 of my life savings in just 4 years, a valued friend, and trusted colleague recently asked me about that investment experience. After much agonizing retrospection and heart rendering reflection, the BEST answer that I could give him was:
"Just as BERNIE MADOFF perpetrated the most notorious and despicable INVESTMENT FRAUD/SCAM in our lifetime on the rich and famous, KEN FISHER (FISHER INVESTMENTS) deserves that title for scamming the middle-income, working-class citizens -- he has been fleecing senior citizens and the elderly out of their pensions and life-savings for many years. Like a leech, KEN FISHER has become a multi-BILLIONAIRE sucking the life's blood from these unsuspecting investors!
>>>>>>>>>>>>>>BE AWARE AND BEWARE OF FISHER INVESTMENTS<<<<<<<<<<<<<<
So, keep complaining losers, cause absolutely NOBODY cares.
At a baby shower give a piggy bank with the words "Retirement Savings" on it.
Figure out how much health insurance cost! Answer: Astronomical!
Try telling those who lost big in their 50s and 60s and up that a stock market crash is a good thing!
Oh, and after working 10-hour days, drive to your local pizza place and ask them if you can deliver some pizzas for them well into the night! Please be careful!
The Solution: Buy a winning scratch-off lottery ticket! Which will be taxed, too!
Fisher Investments, Incorporated manages over $41 billion in assets for some 40,000 accounts for primarily individual investors and is run by the Forbes magazine columnist Kenneth Fisher. The firm was ordered to pay a retiree $376,075 in compensatory damages for breaching its fiduciary duties, according to a release by Bloomberg. The case was arbitrated through JAMS in Dallas, TX. JAMS is a private forum for arbitration and mediation, which is based out of Irvine, CA. Apparently, Fisher Investments had a clause in its agreement with the customer that required any disputes between the parties to be resolved through private arbitration, since it is a an adviser firm and not a brokerage firm registered with the Financial Industry Regulatory Authority (FINRA).
Interestingly, Sharyn Silverstein the Claimant, who was a 64 year old retiree, had called up Fisher’s firm simply to get a free copy of his book that was advertised in USA Today, with no intention whatsoever of doing business with the firm. After multiple calls and visits from a Fisher representative, she was pressured into turning over all of her fixed income investments to be invested into equities. This occurred despite vigorous objection from Ms. Silverstein and her husband, Seth. According to the recommendation of the arbitrator, the Claimant is entitled to her losses she incurred as a result of Fisher Investments liquidating her bond portfolio and putting her proceeds 100% into equities. According to testimony at the hearing by Fisher Vice Chairman Andrew Teufel, 80% of the Fisher investors are invested 100% in equities.
Ms. Silverstein placed $876,357 in bonds with Fisher in September 2007. After liquidating the bonds and investing her 100% in equities, her initial investment lost $376,075 by October 2008. According to the award recommendations, the retiree and her husband made it clear that they were going to be taking withdrawals out after he retired at the end of 2007. However, the investment adviser for Fisher used the “Suitability Wizard” to determine her recommended portfolio stating that she had no income needs from the portfolio and her only investment objective was growth until her death. The arbitrator said that the Silversteins had no children and “therefore have no need to leave an inheritance”; that Fisher failed to make reasonable inquiry into the financial situation, investment experience and investment objectives of the Claimant or ignored that information and rubber stamped her for the “one shoe fits all” recommendation of all other Fisher clients: 100% equities benchmarked to the MSCI World (MXWO) Index. Over the time frame she was invested, the MSCI World Index lost about 35% and the Merrill Lynch U.S. Broad Market Index of bonds, which mirrored her investments prior to liquidation, made 2.4%.
When the Silversteins saw they were 100% in equities, they expressed their concern and unhappiness only to be told they would have to pay a fee if they quit, so they stayed. In the summer of 2008, after registering their complaints and concerns of not owning any bonds they were assured that Fisher knew how to predict the market and would take appropriate steps to protect their investments. The arbitrator wrote a 25 page award going over the facts and concluding that Ms. Silverstein is entitled to all of her losses sustained because of the actions of Fisher Investments.
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