Retirement can seem like a long way away.
So far away, in fact, that it’s easy to ignore altogether.
This might explain why the average American has a paltry $96,000 saved for retirement.
That, of course, isn’t going to go far. Unfortunately, at the current rate, the possibility of ever retiring seems unrealistic! It’s a shocking realization. After all, nobody wants to work longer and harder than they have to.
Of course, it’s in everyone’s interest to retire as early as possible. Nicely, it’s absolutely possible.
It just takes the right know-how. With a few lifestyle changes and sensible decision-making, you can bring your retirement date forward by decades. Sound good? Want to learn how to do it?
Keep reading to discover exactly how to retire at 50!
1. Save More Earlier
Nobody retires at 50 by living paycheque to paycheque.
If you’re forever spending everything you earn, then you can never expect to retire at a reasonable time. The only way to do it is by being rigorous and regular with your saving.
The trick? Start as early as possible and invest what you save.
You have to make your money work for you. Sticking it straight into a typical saving account is good for nobody. Having cash is okay, but interest rates are at an all-time low at the moment.
Combine that with rising inflation and your money can end up depreciating in value over time.
Saving larger amounts earlier, and investing it all, helps you leverage the power of compounding. This is when money grows exponentially over time via interest. The earlier you start investing, the better. It gives you more time for compounding to take effect.
2. Live With Frugality
The more you save, the better.
Even relatively minor additions to monthly savings can make a dramatic difference in the long run.
For example, imagine investing an initial $1,000 and adding $100 per month for 30 years. An annual return of 8% interest will provide over $146,000 by the end. You’ve contributed $37,000 in total, but almost quadrupled your money thanks to compounding.
However, imagine the same setup, but this time you invested $200 every month. Now, you’d come away with almost $282,000. That’s an enormous jump for an extra hundred bucks a month.
As you can see, it’s in your interest to put more aside every month.
That takes sacrifice. Get into the habit of cutting back elsewhere so you can reach your monthly savings goals. For an extra hundred bucks, that might just mean cutting out your morning Starbucks coffee!
Oh, and want to know how much you’d get for saving $200 every month for 50 years (with an initial $1,000 investment)? A whopping $1.42 million. It’s a clear example of how starting earlier is in your interest.
3. Invest Aggressively, Earlier
The key to attaining these numbers is in investing.
We mentioned that earlier too. However, it’s worth digging into deeper. After all, investing is a total mystery to almost everyone out there. That’s one reason why not many people do it! Investing feels risky; in tricky times, it’s understandable to want to stockpile money instead.
However, investing should be for everyone. There are different ways to do it. Some are riskier than others. The trick is finding your risk tolerance and investing accordingly.
In truth, though, younger people can afford to invest more aggressively. What does that mean? It means investing larger sums in riskier assets (in other words, it means investing in stocks over bonds).
Market fluctuations are normal. They’re going to rise and fall. Over time, any falls will correct themselves and, like a pendulum, swing back into the positive. At a younger age, you’ve got more time to weather market downturns.
Want to retire by 50? Invest in riskier assets when you’re young. Then, as you get older, begin to reallocate your investments into ‘safer’ asset classes, such as bonds.
4. Reduce Your Taxes
Taxes are anathema to early retirement plans.
Of course, they serve a vital societal function. However, there’s no point paying more than is necessary. Many people do this unknowingly. All the while, their retirement date gets pushed ever further backward.
Imagine meeting your savings goals. Years go by and you start feeling great about your retirement account. You congratulate yourself on your achievement. You go to withdraw your money, only to be landed with an unexpected tax bill that slashes the total by 30%.
It’s more than possible; it’s in your absolute interest to take sensible tax-reducing savings decisions.
Two accounts of particular note are your 401(k) and a Roth IRA. Both accounts provide means of sheltering your finances from undue tax obligations. The tax-savings can extend to thousands of dollars.
Be sure to look into them in more detail and leverage them in your bid to retire at 50.
5. Plan Ahead
Is everything about financial planning a mystery to you?
We don’t blame you! Investments, savings, and budgeting can get confusing.
Speaking with a retirement planning advisor may be a good idea. Sure, you’ll pay for the service; it’s always worth having a clear understanding of how much they charge.
That said, finding a reputable and ethical, financial advisor to help you plan for retirement can make a big difference. They can support you in setting goals and reaching them. How? By making solid recommendations based on expertise and knowledge, suggesting sensible investment allocations, and preparing you for market downturns.
For total newbies fixed on retiring at 50, this can be a sensible approach.
Final Thoughts on How to Retire at 50
There you have it: 5 essential steps that help explain how to retire at 50 years old!
People are struggling to save for retirement. As it stands, the majority of Americans will struggle to retire at all! They won’t have enough saved up to cover themselves and provide any quality of life. However, that doesn’t have to be the case.
In reality, anyone can retire on time. Even better, taking early retirement is possible too! It just takes the right approach and know-how.
Hopefully, this post has highlighted the key steps in making it happen.
Want more articles like this one? Head to the Getting Finances Done section of our blog now!