Retirement is still possible even if you got a late start on saving.
There are a lot of folks who wish they could stop working sooner rather than later. However, it is common for workers to need to begin contributing to their savings at a relatively young age to make this a reality. If you’ve put in many years at your job without amassing significant assets, you may be questioning if you’ll ever be able to retire early. However, in a positive turn of events, they certainly are not.
If you want to retire early, the sooner you start saving, the better. And you shouldn’t give up on that objective just because you’re starting late. You may need to keep more, use your money better, and cut back on unnecessary expenses.
Invest as much as possible in a retirement plan.
You may have needed to contribute more actively to your 401(k) or IRA during the previous 15 years. That’s a bad situation. You still have 20 years to save up for retirement if you start in your late 30s and intend to retire in your late 50s. Maximizing your future contributions to your IRA or 401(k) is an excellent place to start.
Imagine you start saving for retirement at age 39 and contribute the maximum to an IRA every year until you reach age 59. Assume that you invest heavily in stocks inside your IRA to achieve a return on investment of 8% per year, below the stock market’s average return.
The total amount you’ll have is $287,000. It’s a little, but you can get by if you have access to other forms of funding. It’s possible to accumulate several hundred thousand dollars more in a brokerage account than you could save in an IRA, so it’s worth considering if you can save more than the maximum yearly amount for an IRA.
Meanwhile, the contribution limits for 401(k) plans are significantly larger than those for IRAs. If you contribute the maximum to your 401(k) between the ages of 39 and 59 and your investment portfolio has an average yearly return of 8%, you will have slightly over $1 million. In other words, you can retire early and comfortably with that money.
Establish a source of passive income.
Using savings for retirement can help you retire earlier than expected. But it’s also wise to plan for a source of income that will keep coming in after you leave your job.
In that perspective, real estate is a viable investment alternative. In the long run, you can profit from the sale of investment property you bought years ago. More importantly, though, rental income can assist in covering your expenses during your retirement years.
Investing in dividend stocks, bonds, and real estate investment trusts (REITs) can be pretty lucrative (real estate investment trusts). You might get payments from those assets on a scheduled timetable, giving you a reliable source of income.
Try to reframe your expectations.
In your retirement fantasies, you may spend three months each year exploring a new European city and enjoying the finer things in life. You may need to reevaluate your goals and strategies if you’ve gotten off to a slow start on the savings front.
You might be unable to afford to be a world traveler permanently residing in opulent new locations. Yet, you can continue your profession early to take advantage of spare time, travel close to home, and save money on entertainment.