More and more people are thinking about early retirement and a financially comfortable life after years of work. Recent reports show that 1 in 4 UK adults want to retire by 60, 6 years earlier than the current pension age. Early retirement is possible, but it needs a lot of financial discipline, planning, and investment to make it a reality. Making the right investment moves can ensure that you have more than enough saved up to shelter you financially. If you dread working deep into old age, you can use these tips to fund your early retirement dreams.Â
What you can expect in this article:
1. Start saving small amounts as early as possible
Start by figuring out a good savings rate based on your financial goals and current expenses. Doing this will help you determine how much you need your savings or investments to grow. The rule here is simple: save as much as possible as early as you can, regardless of how little it is, and let compounding take over. Don’t wait until you have enough money to save because the small amounts you save early (and often) are more effective than the larger amounts saved later in life. Once you start saving, let your money work for you. Keeping all your money stashed away in cash will not help. Instead, consider investing in stocks and bonds to earn extra money on your savings.
2. Know the 4% rule
Speaking of stocks and bonds, it’s important to know the 4% rule, which posits that with a portfolio invested 40% in bonds and 60% in stocks, you can only spend 4% of your nest egg during the first retirement year. You can then gradually increase your annual withdrawals by the rate of inflation, assured that your money will last at least 30 years. If it sounds too complicated, you can think of it this way. The 4% rule suggests that you save about 25 times your annual expenses before you retire. You can then withdraw only 4% of your money during the first retirement year, with subsequent withdrawals only based on inflation. This way, you’ll have enough financial cover for at least 30 years during retirement.Â
3. Invest in appreciating assets
Another great way to fund your retirement is to invest in assets that appreciate in value with time. Real estate, rare art, fine wine, cryptocurrency, silver coins, and some rare collectables are known to attract greater value with time. The more such assets you have, the easier it will become to retire early, as you can sell them for several times more than you bought them. Collecting rare silver coins, for example, can be a lucrative strategy to contribute to your retirement fund as they build value over time, but you need to know which ones are worth the most with time. The rarest silver coins, for example, command higher prices but may be more expensive to acquire.Â
4. Create an emergency fund
While an emergency fund will not directly fund your early retirement dreams, it can cushion you in case of unexpected financial downturns. An unexpected debt or expenses can easily derail your early retirement goals if you don’t have a backup plan for it. Your emergency fund will make it easier to save without making large, unplanned withdrawals and delaying your retirement as a result.Â
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