Is It Possible To Retire Early And Still Have Enough Funds?

young woman smilingAre you trying to get ready for retirement? Well you can expect an overload of information from the Internet. It seems that of all the goals that we have in life, one of the most prominent is how we can retire early. We want to work hard every day, not just to provide our families with what they need at the moment, but also to prepare for life after work.

It is the dream of everyone, regardless of who they are, to retire comfortably. It is an added and ambitious goal, to do that earlier than the average. So what does it take to be able to hang your work clothes much earlier than expected? And more importantly, given our current economic conditions, is this even possible at all?

Survey reveals retirement age statistics

A recent survey done by Gallup.com revealed some interesting statistics about retirement today.

Average age of retirement

First of all, it is reported that the average age of retirement is 62 years. This is considered to be the highest ever since the website started asking the question since 1991. The age used to be 61 in 2013, 60, in 2012 and 2011 and 59 in 2010. It was consistent at 60 years from 2005 to 2009.

This increase in age is said to be caused by the hesitation in the Baby Boomers to stop working. This is probably because they knew they needed the steady income to pay for their existing debts. Another possible reason for the delay is lack of funds. With everything that we went through after the last recession, some pre-retirees had no choice but to use their retirement fund to stay afloat – against the advice of several financial experts. This lowered their retirement funds and forced a lot of them to continue working to add more money into that fund.

Average expected age of retirement

Another data revealed in the Gallup survey is the average age that non-retirees are expected to retire. Like the other data, it also went up to 66, from 63 back in 2002. It The age of 66 was the same in 2013 where it went down from 67 in 2012. It has to be noted, though that 30% of Americans mentioned that they expect to retire before the age of 65. 11% of those who are between 18 and 29 are revealed to be much more confident by saying that they expected to retire by the age of 55. It is assumed by the survey that this is because young adults do not fully comprehend what it takes to retire early.

It is evident, looking at the two data that although the retirement age is increasing, it also continues to be lower than the expectation average. We can assume that those who set retirement age goals have something to target and have a higher chance of, not only succeeding, but exceeding their expectations.

5 requirements to have an early retirement

The important data that you need to get out of this survey is that you can retire early but it will not be something that will happen to you by chance. You have to realize that from now on, your choices will have an effect on how early you will retirement. That means you need to be careful so your life decisions will help you get an early retirement.

So to answer the question, is it possible to retire early and still have enough funds? Yes it is. It all boils down to how you will prepare for it, of course.

Here are 5 important things that you need to know if you want to be one of those who retired earlier than the average.

  1. Understand your options. The first thing that you need to do is to educate yourself about how you will succeed to have an early retirement. You have to research on the different retirement plans that you can use. Identify which of them will help you reach your target a lot faster. You have the 401(k), IRA, Roth IRA, and other plans that will help you money grow while it waits for you to retire early.

  2. Save early. It is not only important that you know your options, you also have to start early. Ideally, starting when you are in your 20s will increase your chances of retiring early. But if that age have long passed, do not fret. Just start now and make up for the lost time. The earlier you start, the faster you can reach your retirement goals.

  3. Keep your debt low. One of the factors that kept Baby Boomers from early retirement is debt. If you have to buy a home or a car, make sure that it is paid for before you reach your intended retirement age. Avoid growing your credit unnecessarily. Take note that using your credit cards without budgeting it and carrying a balance over to the next month will waste your money as you pay interest for your purchases.

  4. Build up your assets. Please note that we did not say that you need to stop taking on debt. You just have to keep it low by being smart about it. In most cases, building up assets like a home or something similar will require you to be in debt. But before you commit, ensure that your payment plan also has a back up plan. That can be done by setting up more than one secure source of finances.

  5. Think about investing. The best way to increase your funds so you can retire early is to invest your money. If you are brave enough to take on risks, then the growth of your finances will be slower than it should be. Learn how to invest so you can put in more money in your retirement. You can invest in stocks, bonds or mutual funds. The more diverse your portfolio is, the more you will feel confident about your retirement plan.

Preparing for retirement is not easy and it is definitely not an overnight thing. If you really want to retire early, you have to start early too. There is no shortcut to it and no quick fixes if you make a mistake.

Frugality is key for you to retire earlier than the average

In the end, you will realize how frugality will plan an important role in your attempt to an early retirement. You want to live frugally now and you also want to pursue a frugal retirement. That is the only way that you can conserve your limited income and save up most of it so you can enjoy a long and comfortable retirement.

If you want proof that retiring early is possible, you have to meet Mr. Money Mustache. Believe it or not, he and his wife retired at the age of 30 and they have a young child to fend for. If you want to look at how they do it, he blogs about his life through MrMoneyMustache.com.

The thing is, frugality was just a deep rooted habit that they implemented in their lives. Both he and his wife are unconscious savers. In an interview done by MarketWatch.com, Mr. Money Muscle revealed the following helpful tips.

  • Frugality played a key role in helping them reach their saving goals.

  • If you take your annual spending and multiply it by 25 or 30 and you put it all away in investments, you can actually live off the 4% profit of what you invested.

  • If you think that being frugal will make you miserable, then that is what it will be for you.

  • You are in more control of your finances than you think. Your ability to retire early is dictated by how much of your savings you will take from you income.

  • Do not equate your income with your spending. Your spending should be based on your needs, not how much you can afford to spend. If that is your perception, you will spend the same amount of money regardless if you are earning 10x more than what you used to. That bodes well for your savings.

  • The key to successfully increase your savings and cut back on spending is to eliminate the desire to spend on treats.