Being able to take an early retirement may be a life-long dream, and achieving the option is a significant financial accomplishment. Building the nest egg involves a lot of good planning and wise use of money, both of which are habits that will keep you prosperous in the future.
These tips might pave your road to early financial freedom so that you can make choices about your life, not based on economic necessity, but preference.
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Financial planning for early retirement should start early and be more aggressive than if you were to wait for your pension social security income to kick in. If you can live on 50 percent less, financial planner Charles Farrell suggests saving 12 times your income by the time you’re 60. Up the savings to 17 times your income if you want a more generous lifestyle. Start early with frugal living habits to simplify both saving for retirement, and achieving it.
Aside from your retirement savings, your biggest asset is likely to be your home, especially if you own it outright. Selling it and buying something smaller and less expensive could net you a windfall. Moving from an expensive neighborhood or city to an affordable location saves substantial amounts of money, which might be your fastest path to early retirement.
When moving down, choose a home based on your current needs, and watch out for hidden costs. A low-maintenance town home or condo might appeal to you for lifestyle reasons, but most require monthly homeowner association (HOA) fees to pay for upkeep and amenities.
Investing some of the profits from your exiting home sale in another property as a rental unit could provide a secure, relatively passive income stream. Besides paying for itself through monthly rent payments, the property’s value will likely increase over time and give you tax benefits, too.
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You may plan to quit your job and retire early, but unless you’re 100 percent sure you’ll never need an auxiliary income stream, be open to working as a consultant or on special projects. Instead of pulling the plug on all your contacts and professional memberships, stay involved and informed about the industry.
Talk to one of our investment specialists to learn how JWB can help you earn passive income through long term real estate investing.