How to Retire Young in 5 Easy Steps
Young people often balk when retirement is raised. They’re correct, at this stage of their lives, to insist on not being preoccupied with aging. But it’s misguided to park the question of retirement outright, particularly if planning can help them walk into the sunset while they’re young enough to enjoy it.
RETIREMENT—it comes to us all. So what plans have you made for the latter part of your life, when the big work has been done, the long-term goals achieved, and the children flown the nest? It’s not a question most of us enjoy facing—probably due to the intimations of mortality that retirement is freighted with. But the question of how to retire young is a big one, that you need to start planning for now.
Those in their early 20s who are just venturing into the workplace or their business careers for the first time can be forgiven for not obsessing over it.
However, they would be unwise to indefinitely defer preparing for retirement. It comes to us all, and, as with all things business-related, putting a structured long-term plan in place is probably the best way to tackle it efficiently and in a way that eliminates anxieties that you may have about it.
Here are 5 tips to help you towards walking into the sunset while you’re still young enough to enjoy retirement.
1. Consider Future, not Present Lifestyle
FINANCIAL consultants differ quite widely on how much you need to live comfortably in retirement. Calculations range from 60 percent up to 80 percent of your current earnings, often with a warning that this might not be sufficient.
A balanced and well-informed take on this question is offered by Which.co.uk, where it is pointed out that income requirements will vary widely.
The article also flags the possibility that during retirement you may not need anything like what you required in your working years. It seems rather obvious that the question of percentages of income is going to vary considerably depending on your current earnings.
Also, your retirement lifestyle will be very different to the full-time professional one. Have you ever noticed how, during holidays, you always seem to spend less? That is because your priorities change for that time.
Naturally, there will be outgoings that weren’t a factor during your working years. But these can often be offset by State benefits for seniors.
However, the takeaway from the Which article is that when considering how to retire young, you should focus on what your likely spending will be during your retirement years; not on your current situation.
2. Blitz the Big Debts
WORK out the interest rates of your various loans, creating a list with the highest-interest ones at the top, and works down in descending order to the low-interest ones.
It’s common sense to prioritise and target loans with the highest interest rates, such as credit card accounts. These are the loans with rates that can burden you for too many years. Lower interest loans, such as education funds, should receive a lower order of priority, but as with all debt, keep a vigilant eye on its impact on your budgets, both now and for the future.
Savvy entrepreneurs should avoid high-interest debts, such as those associated with purchasing cars. Indeed, many of them do not even take out a mortgage on a property, until they can afford the item in cash and purchase it upfront. Elimination of crippling debt is a significant short-term goal that will make more realistic the prospect of how to retire young.
SOMETIMES the holding of a property mortgage at retirement is inevitable. Perhaps it is something you signed into at a young age. But closing in on retirement, if you have a house that is larger than you need for your lifestyle, you could consider renting a room, or perhaps even join the increasingly lucrative Airbnb revolution.
Another option is to look at downsizing. If your property keeps abreast of inflation, and you are fortunate enough to be able to sell at a reasonably buoyant time, you might have sufficient equity to purchase a small home for cash.
This eliminates the single largest outgoing from your budget, and with the savings on taxes and upkeep that go hand-in-hand with a smaller property, it’s definitely an option to consider for many.
4. Go on the Road
AN INCREASINGLY favoured option for couples who enjoy travel is to plan for an ongoing life on the road during their retirement years. It’s a great goal to shoot for when planning how to retire young.
According to a report by the Global Coalition on Aging (GCOA) and Transamerica Center for Retirement (TCRS), around 18 percent of Americans have specifically factored travel into their retirement strategies [Source: Investopedia]
Obviously, this is the option that will require the most careful planning of all. It will require consideration of all of the above points, and more. But the payoffs are huge, usually in the form of living longer, healthier and happier lives.
5. Think Outside the Box
DESIGNER Stefan Sagmeister has a counterintuitive take on the question of retirement, which is among the most effective strategies for tackling the issue of how to retire young. Why not use part of your time as a resource now, while you really are in peak physical condition, to counter the stress that can insidiously take such a toll on your health over the long term.
Sagmeister takes a year-long sabbatical every seven years, by taking five of the 15 years traditionally spent in retirement, and dispersing them equally throughout the 40 years we spend working, to benefit his creative energy and personal commitments.
Here he is explaining his philosophy, and if you’ve just set up in business and retirement is not on your immediate horizon, it could be for you if you can make it work.