How to Truly Retire Ahead of Schedule

How many times have you read a headline that boasts about yet another person retiring early? More times than you’d care to admit, particularly since you’re the one still working, nearing retirement or even if you’re years away but haven’t exactly engaged in a proactive plan of attack.

These stories are tantalizing and terrible in the same breath, and the latter emotion only is underscored by jealously and wanting to be that person, that couple or that family that is so close to retirement you can taste it, and you’re still much younger than the average retirement age.

That average age of retirement in the United States has reached 63.^[1]

That 63 number is just above that 62 plateau that most strive for as considered “early,” and ahead of the 65 that some see as more realistic based on their current financial situation.

The age you retirement, some argue, is more about cost of living that you’re currently enjoying and also predicated on how much it costs to live in the state you’re residing in at the moment, or where you’re ultimately considering moving to in order to get the most out of those “Golden Years.”

No matter how you choose to “spin” your current cost of living or post-work, retirement plans, you’re bottom line figure in order to retire has to be met with proactive approach to retirement, rather than doing the bare minimum.

Those sensationalistic stories you read about on MSN, Yahoo or USA Today, among others in the financial section, tout those who are able to retire young and earlier than expected mostly due to being concerned with their budget while they’re working, paying attention to their 401K and retirement accounts, meeting with a financial planner and trying to find ways to save everywhere they can, including deescalation of cost of living as years pass.

Are you doing any of these to reach that retirement plateau of your choosing?

The statistics and numbers aren’t promising and would suggest otherwise.

More than 29 percent of the population above the age of 55 doesn’t have a retirement account started or a pension to speak of, and the age group of 55 to 64 have a net worth retirement account of about $45,000.^[2]

That speaks to not so much the propensity of individuals and couples alike who want to retire and look forward to that financial flexibility and comfortability but instead is more of a commentary on how little money is saved while you’re working and more of a penchant to put off retirement as being an afterthought until it’s too late in the game to take notice, when playing catchup is no longer an option.

So what is the answer to this retirement dilemma? Chances are, it sits mostly in the younger demographic, that age group in their mid to late 30s, most of who aren’t really making retirement a high priority or the kind of item that supersedes day to day spending, trying to figure out how to pay for groceries, bills and braces, and aren’t so much concerned at this very moment about how you’re going to take care of yourself when you reach retirement age.

If you’re still not believing it, look at the mean and media retirement account savings averages for ages 32 to 37. The mean retirement is around $31,644 and median is about $500 ($480, to be exact); the truth is by the time you’re 40 you should have about three times your salary saved, so these numbers aren’t quite up to par, most likely.^[3]

Consider that you’ll need, relatively to what you make now, about 70 to 90 percent of that to live comfortably well into retirement.^[4]

So if you’re making $100,000 per year, you’ll need to take home between $70,000 and $90,000 in retirement to maintain the cost of living you’re current partaking in or be relegated to taking a “pay cut” into retirement, which isn’t as easy as it sounds.

Rather than follow a path of uncertainty, change your retirement outlook.

Standard bearable: Change how you spend, save now, not later

One of the drawbacks of retirement, quite frankly, is learning how to live on less money or on a “fixed income.” That last phrase often comes with it a connotatively negative meaning since it sounds more like depravation than enjoying retirement.

But those who transition the best into retirement not only start early (more on that later) but also start getting serious about their current financial situation in an expedited fashion.

That start climbing out of debt with bigger chunks and a better game plan, along with budgeting a little stricter so they can increase their retirement contributions, among other things.

Downsizing your monthly budget isn’t about starving yourself from fun, vacations or other wants, but more about a better understanding of contributing to retirement accounts early.

The average contribution goes up with age, mostly due to, one would think, because you make more money as you get older.

But consider the age group of 25 or younger, and they’re only setting aside 4.5 percent into retirement with the greatest age contributor, not surprisingly, 10 percent to those 65 and older.^[5]

What if a 20 or even 30 something year old flipped the script, paired down their current budget and starting saving and maxing out retirement.

Sound as though someone has their eye on retiring by 50.

Getting more fixated on debt is another way you can save more for retirement.

Consider that the student loan (yes, student loan) of a person who is 60 or older and still carries student loan debt is four times higher than it was in the last 10 years.^[6]These are parents who borrowed to put kids through school, and are still paying off tuition.

A younger generation might reconsider paying for their kids to go to school, but this is a perfect example of letting debt linger well into retirement age.

Budgetary restraints: Budget now, but also have a retirement budget prepared, too

First and foremost, you should have a working budget right now, as in on your desk or saved to a spreadsheet on your computer, only a few clicks away.

Remember, only 1 in 3 people have any money saved for retirement so if that doesn’t scream “no one is budgeting right now,” then nothing will.^[7]

Less than half of families in the United States have a budget that they go on from one month to the next, so the idea of coming up with and devising a retirement budget seems almost laughable.

But a retirement budget is something you should think through when you’re getting into your 50s, because it ultimately will determine how much longer you work. You can take into consideration things like utilities and other fixed costs, and then work backwards on cell phone carrier payments, cable television and memberships that you might be contemplating.

As far as working longer, one example shows a 55 year old with $468,000 saved, can be 1.3 million saved by 65 without doing anything other than working on the job and saving at a rate of $625 saved her month at their current rate.^[8]

Working to 65 might not be ideal, but often times working longer is one way you can combat retiring comfortably.

Ultimately, a budget now means you can stretch dollars and save more for retirement as years progress, but retiring without knowing what your wants and needs will be is a recipe for financial disaster.

Job hunter: Part-time jobs mean extra income and full-time retirement benefits

A study done last summer showed that nearly 8 million Americans held a second job (7.6 million exactly), which was up 2 percent from the previous year and a 20-year high overall.^[9]

The story suggests that a second job, in this preface, is more about making extra money because you can’t pay your bills or want to be able to be comfortable in just your daily or monthly expenses.

But a true second job, one that is discretionary income and driven by truly saving money, can be the best thing that happened to your retirement since the 401K match.

Those who are adept at saving and financial planning are going to want to do one thing with a part-time job and extra income: max out their 401K.

So consider that you should be saving 15 percent of your income toward retirement.^[10]

If you’re not doing that, a part-time job and supplemental income could allow you to save on your terms by putting money aside or contributing more and thus maxing out that 401K.

If you’re above the age of 50, you’re allowed to play catchup, although that isn’t ideal it still is an option, not to mention change across the board in 2018 with 401K’s in general.

The IRS made a change that you can now contribute $18,500 to your 401K, a $500 jump from last year. Keep in mind, too, that if you’re over the age of 50, you can put in $6,000 in addition to the $18,500.^[11]

Again, being able to max out or go above and beyond with your primary job happens for some because of that additional income.

Moving forward, and into retirement, you’re going to want to start thinking more about retiring “young” than struggling when you’re older, perhaps being a statistic that has to get a part-time job after your funds run dry.

If you don’t want to run out of money, use the 4 percent rule when all else fails.

This states you should be pulling out 4 percent of your retirement funds in your first year of retirement and then adjusting that based on inflation.^[12]

Being able to do that successful starts with pre-planning heading into retirement and being as proactive as possible when it comes to saving now, rather than procrastination being your leading indicator.

Those who wait to start saving, have a lot of work left to do, so if you decide to delve into all things retirement before or at 40, you’ll have time to retirement on schedule. But the trick is really to start in your 20s or 30s, a task that is a virtual unknown to that demographic.

If you’re someone who is just starting your career and getting into the working “world,” find someone you know, a grandparent, relative, etc., who is in their 60s and ask them what they would have changed financially if they could.

The overwhelming reply, you’d believe based on current retirement standards, is “started to save younger.”

Of those who are retired who were pulled, 40 percent said that would be there biggest takeaway about what they would change.^[13]That sentiment can’t be ignored, and neither can the superbly fascinating stories about retiring much younger than the average.

If the average person is totally fixated on retiring, there shouldn’t be much issue, but only 57 percent of the population make retirement their number one financial goal.^[14]

Getting to the 90 percentile is about structure, smart investing and perpetuating a happy medium between spending and saving so you can be one of those headlines worth reading, rather than a startling statistic.