Retiring at any age with a significant nest egg can be a challenge, but planning to check out of the working world by age 50 brings additional hurdles. Yet, retiring at age 50 is a completely feasible option for many workers.
If you’d like to count yourself among them, you have to develop a goal-oriented, scarcity mindset that will require giving up a lot to reach your goal. But if you’re willing to make the sacrifices, an early retirement may be an achievable goal. Here are just a few of the steps you should take now if your goal is to retire by age 50.
Work in a High-Paying Industry
The best way to have more money for retirement is to start with as much as possible. While you can save for a decent retirement at age 65 or 67 on even an average salary, if you’re looking to stop working at age 50, you’ll need to maximize your earnings. This may be the first of many sacrifices you have to make to reach your goal, as many high-paying industries require lots of stress and overtime, and some may be in a field in which you have no interest. Only you can decide what you’re willing to trade off in order to earn the highest salary possible.
Save as Much as Possible
This tip is as basic as they come, but it’s also essential. Those who are able to retire as early as age 50 are typically super savers, socking away 50% or even more of their monthly income. This can be harder than it sounds, as about 40% of Americans would struggle to cover an unexpected $400 expense. However, if you want to reach your goal, it’s critical that you adopt this step.
While earning and saving are cornerstones of any early retirement plan, it’s extremely difficult to generate enough wealth for early retirement just from a salary. In addition to saving as much as possible of your income, you’ll have to invest aggressively and take advantage of the power of compound interest to amplify your savings. This doesn’t mean you should take all of your money and put it into cryptocurrency. However, it does likely mean that you should own a high percentage of stocks, especially if you have a number of years before you reach age 50. Talk with a financial advisor about how to construct a portfolio with appropriate risk/reward characteristics if you’re gunning for an early retirement.
Move To a Low-Cost Area
When you’ve taken care of the income and investment side of the equation, it’s time to devote some effort to your expenses. While articles about retirement commonly suggest things like cutting out your daily latte to help meet your retirement goals, that’s just not going to cut it if you’re looking to retire by age 50. One of the single biggest ways to maximize your savings is to move to a less expensive part of the country. Trying to retire at age 50 in San Francisco, for example, can be a lot harder than if you’re in Waco, Texas. Not only will you avoid high state income taxes, but your everyday cost of living can also be as much as 68% lower, with housing a whopping 88% cheaper.
But Waco is simply an example. There are plenty of low-cost cities in the U.S. that you can choose from if you’re looking to decrease your cost of living. If you can work remotely and earn big-city wages while living in a small town, your chances of being able to retire at age 50 increase exponentially.
Avoid Consumer Debt
Consumer debt is the albatross that has sunk many savings and investment plans. Not only do you have to divert your cash flow from saving and investing to pay off the debt, but that debt can grow exponentially when left unchecked. With the average credit card APY sitting at just over 14%, and many cards charging over 20%, you can say sayonara to your early retirement plan if you accumulate a lot of consumer debt.
Leverage Rental Properties
Passive income is another important factor in an early retirement plan, and rental properties can be a great way to help you achieve your goal. If you can buy in-demand rental units in desirable areas, you can get others to pay your mortgage for you while you watch your properties appreciate in value. If you start early enough, you can get renters to pay off your entire mortgage, meaning that rental income is pure free cash flow by the time you retire. Over time, that rental income will continue to increase, and your properties will likely build up a significant amount of equity. Nothing is guaranteed in real estate, but if you do your homework and remember the age-old mantra of “location, location, location,” you could set yourself up nicely for your early retirement.
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