Finance

Start Planning Now If You Want to Retire Early

October 17th, 2020

As of a 1983 amendment, the United States government considers full retirement age to be 67 instead of 65. For people born during or after 1960, this means you’ll have to wait until 67 to receive the full benefit. But because our lifespans are now longer, many people choose to continue working into their 70s.

On top of this, many people continue working into their 70s. Some people use the time to build up their retirement savings, while others simply prefer to stay busy. However, this isn’t the case for everyone—some can’t retire soon enough!  

When you retire is ultimately up to you. If an early retirement is your goal, here are some ways to achieve that dream.

Start planning early

…and start thinking of your retirement age as 62. The earlier you do this, the better. Of course, you can always use the 65 or 67 as a backup retirement age. Just because you’ve retired doesn’t mean you have to withdraw Social Security. You can still plan to use your savings as your main income in the meantime.

Maximize your benefits.

At any company you work for, make sure you’re taking full advantage of the maximum employee match for your 401(k) and any other programs your employer offers. Remember that once you retire, you may need to support yourself for more than 30 years. Saving as much as you can throughout your career should be a top priority. If you’re approaching retirement age but haven’t saved as much as you want, many seniors are eligible for “catch up” options that allow you to contribute extra money to your 401(k) or other retirement accounts.

Plan to pay off your house. 

Try to time the last mortgage payment you make with your planned retirement age. Two ways to do this are by planning ahead and getting a 15-year mortgage or by making extra payments on your 30-year mortgage. If you need help planning out exactly what this will look like for you, try using an online mortgage calculator.

Understand your housing expenses.

If you’re not a homeowner and don’t intend to become one, it may be wise to invest the funds you would have used for a downpayment on a house. Then plan to use those funds for rent once you’ve retired.

Take advantage of your health savings account. 

If your employer offers it, take advantage of your health savings account (HSA), too. Unlike a flexible spending account, you can accumulate funds in an HSA indefinitely. Plus, neither your contributions nor your withdrawals are taxed so long as you use your withdrawals for medical expenses. Save the maximum allowed, because you can carry over what you don’t spend each year.

Did you retire early? Use a strategy we didn’t discuss? Let us know in the comments!

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