Are you looking for early retirement strategies to stay on track with your retirement goals?
One would think that, during this constant economic turmoil and the rather stagnate financial market performance of the last decade, anyone with aspirations to retire early would be rethinking those plans.
Yet, a recent survey showed that the number of Canadians who plan to flee the rat race early is on the rise.
It is likely that many of them are discovering what relatively few people know, that it is still possible to retire early and live comfortably even in today’s uncertain economic environment.
Achieving an early retirement is not easily done and few people have the discipline or the creative mind to cover the distance between a working income and a fulfilling retirement.
On the plus side, retirees today are realizing that they don’t need to have millions of dollars in the bank to live a comfortable life in retirement.
We’ve uncovered five simple early retirement strategies that anyone can follow:
Dial Back Your Income Need
Once you figure out what it will really take to live a moderately nice life style, you’ll begin to see your retirement clearly in your sights.
Forget what you’ve heard about needing 66% to 75% of your current income in retirement.
Your children are grown, your mortgage is paid, your taxes are lower, your RRSP savings are behind you, and you’ve bought all of the big toys and expensive dinners you need.
When all of that is lopped off you are down to your true disposable income.
If you shoot for 50% of your current income you may likely find yourself living very comfortably. Just be aware of inflation and its impact on prices over time.
Usually people wait until after retirement to downsize, trading in the big house and car for more modest accommodations and transportation. Why wait?
If you are set on an early retirement, you can reduce your expenses now and plow your excess cash flow into your retirement accounts.
You’ll want to do this anyway if you determine that you will still be paying your mortgage at the time of retirement.
Convert Equity into Income
If you trade your $400,000 house for a $200,000 town-home as suggested above, the equity can later be used to purchase an annuity which can provide the supplemental income you’ll need between the time of your early retirement and the time your government pension kicks in.
Ready Your Business Plans
Early retirement is the perfect time to turn your passion into profits. Most early retirees leave their salaried jobs to pursue their passion or hobby.
In most cases it can turn into a money making venture where it can bring in several hundred to several thousand dollars a month.
Take an Early Pension
Some planners will argue that it is better to wait until age 65 to begin receiving your government pension as the payout is higher.
Of course a lot depends on how you have managed to pull other sources of income together that could offset the difference.
Other planners say that it may be better to start taking the government pension early because you will be drawing from it for a longer period of time which will offset the difference in the payout amount.
You will need to do your own calculations based on your own assumptions to determine the best course.
From Early Retirement Strategies to Canadian Retirement Planning