For generations, retirement has been an end goal – a clear dream within reach. Today, millennials see retirement more as a fantasy than as an actual goal they can attain. Thanks to higher costs of living and massive student debt, it’s becoming harder and harder for millennials to think about retirement, let alone early retirement. According to a recent study by NerdWallet, millennials who graduated from college in 2015 won’t be able to retire until they’re 75 years old, two years later than millennials who graduated in 2013.
Millennials are making all sorts of sacrifices to jumpstart an early retirement, including living in tiny homes and putting off starting their families. However, by following the tips we’re providing, millennials may be able to retire earlier than they expect.
Start With an Early Retirement Calculator
If you’re not sure where to begin when it comes to saving for early retirement, a good place to start is with a retirement calculator. There are lots of different retirement calculators online that can help you figure out how much you need to save per year to retire by whatever age you decide on. Play with different numbers to see how it affects your monthly saving amount. This can give you a broad idea of what you need to do to reach your retirement goals.
Hire a Financial Planner
It might seem counterproductive to pay someone to tell you how to save money, but hiring a financial planner can help you reach your retirement goals. A certified financial planner will walk you through the different stages of planning and help curate a personalized system that works for you and your lifestyle. This will outline every step of your early retirement savings and investments. Financial planners typically charge a one-time fee for this type of professional financial help, so you’re getting a lot for one price tag.
If you don’t trust yourself to stay on the right path to retirement after one meeting with a financial planner, hiring someone long-term might be worth the extra money. If early retirement is a serious goal of yours, a financial planner is well worth the investment.
Don’t Rule Out Social Security Just Yet
Although 80% of millennials feel worried that Social Security benefits will run out by the time they can retire, it’s important not to rule them out of your retirement plan just yet. Although the system will probably change before millennials retire, financial planners don’t advise writing off Social Security benefits any time soon. Instead, they suggest sticking with your initial retirement savings plan until changes are certain.
Contribute More to Your 401(k) Before Early Retirement
One of the easiest ways to reach early retirement is by contributing as much as possible to your 401(k) plan, especially if your employer matches your contributions. On top of your regular contributions, dedicate an extra portion of money every month to your 401(k) plan. This can be money you earn from side hustles like taking online surveys or driving for a rideshare service, or even money you save by not eating out as much. Over time, every extra dollar you contribute adds up. Most financial planners recommend putting at least 10% of your income into a 401(k).
Pay Off Debt Strategically
Saving money is much easier when you have fewer bills to pay every month. By paying off your debt, you can allocate more money towards your retirement fund. Before you start aimlessly paying off loans, though, evaluate your debt’s interest rates. Whether you have credit card debt, student loans or a car payment, it makes the most sense to pay off the debt with the highest interest rate first. This will save you more money down the line.
If you have student loans, find out if your interest payments are tax-deductible. The IRS allows anyone paying student loans to deduct up to $2,500 of interest paid on a qualified student loan if you earn less than $80,000 per year. If you’re thinking of paying off your student loan all at once, you can actually save yourself more money down the line by paying for it over a few years to receive this tax deduction. The more strategically you pay off your debt, the more money you can save for retirement.
Opt Into a Roth IRA
Whether you have a 401(k) or not, you can also save for early retirement by opting into a Roth IRA. This is a way to save for retirement with tax-free growth and tax-free withdrawals after age 59.5. Roth IRAs allow you to contribute up to $5,500 per year if you’re under age 50 or $6,500 if you’re 50 years old or older.
Once you withdraw your money for retirement, you won’t have to pay any taxes on it! This is useful for those who have hit their 401(k) contribution cap for the year but still want to set money aside for retirement.
Avoid Credit Card Debt
If you’re set on early retirement, do yourself a favor and avoid credit card debt like the plague. Once you create credit card debt, you will have to pay interest, which can cause you to spend more than you initially wanted to on your purchases. If you want to reap the benefits of your credit cards like earning cashback, points or miles, pay off your credit card’s balance every single month. This will help you stay on track for early retirement while still enjoying the benefits of reward credit cards.
Only Buy What You Can Afford
Just like you shouldn’t get yourself into credit card debt, you also shouldn’t buy more than you can afford. For example, if purchasing a $60,000 car is going to impact your monthly savings goal, choose a cheaper car. If early retirement is a serious goal for you, you need to live a frugal lifestyle. If you want to make a large purchase, save money in advance to pay for it upfront so you don’t have to pay interest. For example, if you want to go on a tour of Europe, save money for the trip and then book it. Buying more than you can afford will eat away at the savings you were planning to put towards retirement.
Create Passive Income
You can save even more money for early retirement by creating passive income for yourself. Passive income allows you to make money without constantly working for it. Whether you want to start a blog, invest in a business, rent out a room or create videos for YouTube, there are tons of ways to create passive income to help you invest more in your retirement plan.
Start a Side Hustle
You can also invest in early retirement by starting a side hustle. This can include selling arts and crafts on Etsy or driving for a rideshare company. Each of these side hustles can bring in extra income for you to invest in your retirement. If you have a set savings goal you need to reach every month for your retirement, working a side hustle can help you get there.
Rethink The Process
Do you actually want to abandon the workplace for good when you hit your retirement age? You can always work part-time, do contract work, continue working side hustles or be a part-time business owner to bring in extra income after you reach retirement. This can be a time where you explore your true passions and potentially make money doing them. Even bringing in a small amount of passive or side income during your later years can help you retire earlier without having to save as much.
If you’re ready to invest more money into early retirement, consider taking online surveys with Branded Surveys. Taking surveys regularly can provide you with even more money to save towards retirement. Sign up for Branded Surveys today to get started!