I don't want to have a life that can be summed up as "nine-to-five until 65." But retiring at age 55 also seems like too long to wait. I recently was inspired by an article I read about a Florida man who hopes to retire before 40. Since I'm now 40, I won't be able to be that much of an extreme early retiree. However, I do plan to retire by 50. I don't want to retire early because I hate my job. I simply have other interests and hobbies that I'd like to pursue which may overlap with my nine-to-five work routine. According to a recent article by USA Today, extreme early retirement fans are making specific financial decisions to so they can become financially independent about the time others are having mid-life crises.
Buying our retirement home early
One way I'm preparing for early retirement is by being frugal. I purchased a home that I could afford to pay off in 15 years instead of 30 years. By the time I'm 50, I should be free of a mortgage. At that point, I'll only have to come up with the home owner's insurance and property taxes as well as home owner's association fees. We also purchased a home that we could live in during our retirement years.
Relying on the power of compounding
According to the article, early retirees have to use nest-egg mathematics. By saving for retirement at an early age, I should have more money than someone who didn't even start saving until he or she was 50 or older. I started saving money in my Roth IRA when I was in my 20s.
Buying an investment property
By buying an investment property now, I can take advantage of low interest rates. We plan to put 20 percent down on a property that can be rented out for income as we grow older. Having even just one investment property should provide us with at least $1,300 a month of extra income. We have the next 10 years to pay off the mortgage on the investment property, which won't be difficult since we can use some of our own money as well as the rent money that we collect.
Having strict spending priorities
In order to retire at 50, I can't get caught up in trying to outdo my neighbors or friends. We only buy practical items that we can afford. Before I make a purchase I ask myself if it's on my shopping list and budget and whether I have the money now to pay for it.
Being aggressive with some baskets
I've always heard that you shouldn't put all your eggs in one basket. I consider my different retirement accounts to be my different "baskets." I'm more conservative with my IRA account, but extremely aggressive with my Roth IRA. If I see substantial returns on my investments within my Roth IRA, I won't have to pay taxes on the money I take out when I'm old. I'm intend to tap my 401(k) when I turn 55 since there is no 10 percent penalty for early withdrawal if I wait until then.
Although I know I won't receive my full Social Security benefit if I retire at age 50, I'm not too concerned about that. I am skeptical about whether or not Social Security will be solvent by the time I reach full retirement age in another 27 years.
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