Tips For an Early Retirement

In Canada, the average retirement age is between 64 and 65 years old. In recent years though, the topic of retiring early has been very focused on. While the idea of early retirement is pleasant, having the financial means to do so is entirely different. Retiring early, no matter how tight, can be possible with some planning and organization. Thousands of Canadians have successfully been able to retire early with all sorts of financial situations. Considering some of the best tips to do so can help you to start saving towards early retirement.

Why Do You Want to Retire Early?

Before you can analyze ways to retire early, you should consider why you want to retire early. For some, work stress can be a real motivator to retire. On the other hand, you may have life goals, such as traveling, mastering a skill, or learning new hobbies. This question is personal, so only you can answer it.

Creating a Life Scheme

Whether you are a young or middle-aged adult, knowing what your life will be like in a few decades is hard to wrap your mind around. There will always be unexpected occurrences, so it is unrealistic to have an exact plan for your future. Yet when wanting to have an early retirement, it is crucial to understand how much you believe you will need financially for your retired years. You must consider housing, taxes, medical, food, and everyday living costs. A saving amount will be far different if you plan on traveling during your past years compared compared to spending your retired years at your cottage. When you take the time to examine what lifestyle you will have, you can begin to create a practical life scheme.

Determine Your Income

Whether or not your career offers you an RRSP contribution, you should recognize how much of a stable income you are making. Your income will be the main asset that helps you reach early retirement. If you have a fluctuating work schedule, this may be more challenging. Once you have an estimated income amount, you can begin to create an action plan for working towards your retirement. This would include choosing a reasonable amount for your RRSP and other savings accounts.

Increase Your Income

This is a reasonably standard tip to consider when wanting to retire early. The average 64-year-old will require between 1.2-1.5 million dollars to have a comfortable retirement. If you are a young adult planning on retiring, you need to have three times as much saved. This can be very tight, especially if you are not making enough of your income. The best action, in this case, would be to gain more significant revenue. There are various methods to increase your income, yet finding a way that works best for you is vital. A more common practice is to request more hours at work if possible. If you have been in your current position for some time now, it may be possible for you to earn a raise. Of course, you would need to speak with your employer for this to be a possibility. Another possibility that is often overlooked is finding a second job. This option can increase your regular income significantly, yet it is not as popular since it could lead to stress and job burnout.

Establishing Your Expenses

Touched on previously, your income is one of the critical factors in having an early retirement. When you have more significant expenses that take away from your income, this will make it much more challenging to save. When determining your expenses, you must look at both fixed and variable expenses. Fixed expenses will be the payments that are typically the same each month. This includes your mortgage payment, utility bills, and any monthly subscriptions. On the other hand, variable expenses are payments that are not the same every month. For example, some variable expenses could include groceries, entertainment, and clothing. When you analyze your past payments, you can find an accurate number for both categories.

Investing

Getting into investments can be a challenge for many, especially from lack of knowledge and hearing false information. One popular myth is that you cannot invest if you have debt. This is undoubtedly untrue since numerous accounts of those who have begun investing with a substantial amount of debt. Funding is essential when trying to retire early since you accumulate money over time. When you have different investments, all these accounts will gain you money slowly as time progresses. These investments are vital in continuously growing money, allowing you to retire years earlier than average.

If you want to retire early, know that it is an attainable objective. With great effort and motivation, you can have a work-free life earlier than the average Canadian.

Sources

-Coxwell, Kathleen (2021). 29 Early Retirement Tips, Strategies, Tricks, and Hacks. New Retirement. Retrieved from https://www.newretirement.com/retirement/early-retirement-tips/
-Schroeder-Gardner, Michelle (2022). 21 Best Early Retirement Tips to Help You Retire Early. Making Sense of Cents. Retrieved from https://www.makingsenseofcents.com/2021/04/early-retirement-tips.html