Early Retirement Strategies

Networth is an accurate measurement of how much value a person’s assets have on paper, but this calculation alone isn’t sufficient when planning to retire early. Early retirement strategies instead focus primarily on income (especially passive income) and expenses. Here are a variety ways an early retirement program may boost income and reduce expenses.

Eliminate Debts to Improve Cash Flow

Paying off debt is a foundational element of many early retirement strategies, for every debt payment that’s eliminated directly increases monthly cash flow by that amount. Once all your debt is eliminated, the monthly income needed to cover your expenses is much less and you won’t have to generate as much passive income before retiring for good.

Maintain a Low Cost of Living

Another major cash flow consideration, an early retirement program means keeping your cost of living reasonable. The more you spend on living and discretionary expenses, the less you’ll have to save toward retirement. Additionally, you’ll have to save up more before retiring if you’re accustomed to an expensive lifestyle.

Take Advantage of Tax-Advantaged Savings Accounts

Taxes have a large impact on how much of your money you keep, and early retirement strategies seek to make the most of every dollar you earn. As a result, these strategies make the most of any tax-advantaged retirement savings account you have access to. Depending on your situation, you might be able to put money into a(n):

  • IRA
  • Roth IRA
  • HSA

Maximize Employer Contributions to Your 401(k)

If you have access to a 401(k) that includes an employer match, take full advantage of that by contributing the full portion of your salary that’s eligible for the match. This is essentially free money, and it’ll make a big difference in how quickly you can retire.

Develop Passive Income Streams

In addition to the more common retirement savings accounts already listed, most early retirement strategies also involve developing passive income streams. These streams may come from any number of sources, including rental properties, book royalties, monetized websites, silent partnerships in businesses or other endeavors. The money that they provide can be essential if you want to retire before the eligible withdrawal age of tax-advantaged retirement accounts.

Design Your Early Retirement Program

Most importantly, people who retire early are intentional about developing an early retirement program. To get started creating one that will help you reach your financial goals quickly, sign up for our workshop.