How Much to Save to Retire by 50
For many people, the idea of retiring at age 65 is overwhelming enough, let alone the prospect of retiring at age 50. That doesn’t mean that retirement when you are only a half-century old isn’t possible, particularly if you start planning early. Just how much money will you need in order to retire a full 15 years early? Here is a guideline.
Shoot for $1 Million in Savings
The financial website Nerd Wallet estimates that the average person will need approximately $1 million in savings if he or she is to retire at age 50. They also provide some calculations designed to help you determine how much to save. Of course, the earlier you begin saving money the better. Ideally, you should begin in your early 20s, and invest your funds in such a way that you earn at least a six percent return.
Follow those guidelines, and you will need to put back 34.6% of your income if you earn $40,000 per year. You’ll need to save slightly less than ¼ of your paycheck if you make $60,000 annually. If you are able to draw six figures, the amount you must save decreases to under 14%.
Ideas for Saving Money
The idea of saving one million dollars in a 28-year timespan may seem overwhelming, yet doing so is entirely possible. In fact, some people have been able to save enough money that they were able to retire before age 40. A few of the ways early retirees are saving money are to:
- Make savings automatic. When you have a certain amount automatically set aside every month, you are more likely to develop a pattern of saving. Not only that, but you will likely not miss what you do not see.
- Create more “made from scratch” meals at home and eat out less often. Not only is this healthier for your wallet, but it is also better for your waistline.
- Stay in your starter home longer, and double up on payments so you can become mortgage free sooner.
- Cut back on transportation costs whenever possible. If your vehicle is paid for, hold onto it as long as you can. Walk, bike, or take public transportation to work at least one or two days each week. Look for opportunities to carpool or combine errands to prevent too much running around.
- Eliminate non-essentials such as cable television, convenience store snacks, and going to the movies.
Tracking your spending habits will enable you to identify ways in which you can cut back. It will also help you adjust to living a minimalist lifestyle-something you should definitely consider if one of your goals is to retire at age 50. Keep a spending journal, and within the first month you should discover areas where you could trim your monthly budget.
Is it really possible to retire well before you are eligible for Social Security? The answer is “yes”, provided you make a few lifestyle changes now. The sooner you begin saving money, the faster you will be able to reach your goal of retirement.