How To Financially Plan For An Early Retirement
Early retirement can seem like a pipe dream until you really start to break it down and plan for it. Although modern generations face unique financial challenges, there are also unique financial tools and strategies that anyone can take advantage of to better position themselves to retire how and when they want to.
For example, if you have a more sophisticated financial situation, universal life insurance can help you achieve multiple goals like providing a death benefit from your family, while also helping you accumulate funds that you could use to supplement your retirement income. Here are some other ways to consider planning for early retirement in 2021.
1. Make the most of your savings
It’s no secret that saving is an essential component of retirement, but putting everything into a savings account isn’t going to cut it for most people. When you’re getting ready for your eventual retirement, be sure to consider what sorts of retirement savings programmes are available to you through your employer or other means. Examples may include an individual retirement account (IRA) or a 401K, which are designed to help you grow a nest egg in a tax-advantaged way. Be sure to consult a professional financial advisor about the best investment products and strategies that are available to you.
2. Put in the hard work now
While you’re young and have the energy, make the most of it by working hard. In addition to your primary income, there are a plethora of other things you can do to earn extra income on the side and reach your financial goals faster. For example, if you do gig work on the side as a freelancer or independent contractor, that can be a great way to earn extra income, but keep in mind you’ll owe taxes on the additional income and you may have to pay quarterly estimated taxes. Be sure to keep track of any expenses you incur while freelancing or operating your side business so that you can accurately report your profits and losses, and offset your tax obligation with any eligible itemised deductions.
3. Protect your progress with life insurance
Planning for retirement isn’t just about not working anymore–it’s also about building your legacy for the people you care about the most. While you’re in the process of building your retirement nest egg, you want to make sure the people who depend on you financially don’t face financial hardship if something happens to you. Some types of life insurance offer more than a death benefit to create that safety net for your beneficiary(ies). Some life insurance policies offer cash value, which accumulates over time. This can make some types of permanent life insurance a very useful tool for financial planning for retirement and beyond. Be sure to consult a financial advisor to go over your best options.
The bottom line
Early retirement is best made possible with proper planning. The more you can earn and save now, the sooner you’ll be able to retire early and/or reach other financial goals. Just be sure you have the right assurances in place so that all your hard work is never in vain.