Want to Retire by 50? Here’s how Much you’ll Need to Save
Many individuals find the idea of retiring from the workforce at age 65 so overwhelming that they haven’t even given a second thought to the possibility of being able to retire when reaching the age of 50. However, this does not mean that it will be impossible to retire at this age – especially if you plan accordingly. If you would like to retire a decade and a half sooner than anticipated, the advice below can help you achieve this goal in a practical manner.
Aim to Save Approximately $1,000,000
The average employee will require approximately $1,000,000 in savings if they intend retiring by the time they reach 50. This means that the earlier you compile a practical savings plan and put it into action, the sooner you can achieve this financial milestone. While it’s strongly recommended that you start saving for your golden years in your 20s, you can still make a plan if you’re older. Financial experts recommend that your savings be invested in such a way that they will be able to provide you with a return rate of at least 6%.
If you follow this advice, you’ll need to save approximately 35% of your earnings if you make $40,000 annually. However, I you’re earning $60,000 a year, you will need to set aside a little less than 25% of your paycheck. If you’re fortunate enough to earn six figures, you will only need to save a little less than 15% of your earnings.
Practical Ways to Save
Just the thought of having to try and save $1,000,000 in a 25 to 30 year timeframe can seem like an impossible undertaking, but it is quite possible to achieve this goal. Some individuals have even been able to achieve this savings figure before they reached 40. Below are some ways that early retirees were able to reach their savings goals:
- Automating savings. When a specific amount of money is deducted and placed into savings each week or month, the chance of you saving regularly is increased substantially. In most cases, savings in this way will also mean that you won’t miss those funds
- Wait as long as possible before moving out of your starter home into a larger property, and pay as much extra into your mortgage as possible during this time
- Eat at home more than you visit restaurants or drive-through lines. This will benefit your wallet and your waistline over time
- Reduce transport expenses wherever you can. If your car is paid off, keep it as long as it’s safe to do so. Walking, cycling or even using public transport wherever possible can help cut your gas and maintenance bill substantially over time. Combining as many errands as possible into a single trip will not only save money, you will save a lot of time as well
- Eliminate, or at best, drastically reduce junk food consumption and trips to the mall as a form of entertainment. Your wallet and retirement fund will thank you
Keeping track of everything you spend your money on will help you determine where it’s possible to make budget cutbacks. The best way to do this is to keep a dedicated spending journal, where even the smallest expense is noted. Taking action by implementing the advice above will help get you on your way towards saving for a comfortable retirement.