Retiring early might seem like a pipe dream, but it's not — if you know what steps you need to take, that is.
But don't think you can work today and just retire tomorrow. Instead, implement the following tips to amp up your retirement savings, cut spending and find extra sources of income. Check out these 30 tips on how to retire early.
1. Create an Early Retirement Plan
While these retirement tips can help support your early retirement goals, you need a strategy to get you there. Figure out what it will cost for you to get into an early retirement and how much cash you will need to comfortably live on. A solid plan can help direct all your actions toward reaching the goal of an earlier retirement, and hopefully with less stress.
Read More: 35 Retirement Planning Mistakes People Make
2. Redefine 'Comfortable Retirement'
Less spending later constitutes the flip side of less spending now. If you imagine a comfy retirement as a vacation home and monthly cruise ship trips, revisit that vision so you don’t have to bleed cash but can still retire in style. Instead of two homes, for example, why not live in your favorite vacation destination and pocket the principal from selling your primary residence?
3. Take a Crash Course on Personal Finance
If you're not sure where to start but know you have more to learn, take classes on fiscal responsibility, investing and saving. There are numerous financial advisors and consumer education sources that offer classes and literature — online and offline — that can help you learn more so you can make better decisions.
4. Don't Stall
No matter what age you are, don’t wait to get started on saving for an early retirement. It’s easy to get caught up today and forget about what tomorrow brings. The longer you wait, the longer it will be until you can comfortably retire.
5. Live 2 to 3 Times Below Your Means
Sorry, folks: Simply skipping that $4 latte in the morning ain’t gonna cut it. It takes a much more committed approach where “sacrifices” are viewed in a new light.
"It’s amazing when I work through the numbers that some people think manicures, landscapers and maids are a need," said Michael Chadwick, a certified financial planner and CEO of Chadwick Financial Advisors in Unionville, Conn.
6. Pay Off All Your Debt
That's right, all of it. First: Is it time to pay off your home? You might not have the resources now to plunk down one huge check, but consider savvy alternatives such as switching from a 30-year to a 15-year mortgage.
Second: Do the same with loans and credit cards, as high interest eats up income fast.
7. And Keep Avoiding Debt
Once you get rid of your debt, do everything in your power to avoid falling back into it. Don’t rely on credit to get by or use your credit card to splurge on an item you know you can't really afford. If you overspend and carry a balance, you will be tied to paying off the debts plus interest when you could be saving that money for retirement instead.
8. Consider Overlooked Financial Resources
While it’s risky to count on unknowns such as an inheritance, you might have cash streams available outside the traditional retirement realm, said Jennifer E. Acuff, principal wealth advisor with TrueWealth Management in Atlanta. For example, “Understand your options with respect to any pensions you might be entitled to from current or previous employers,” she said.
9. Invest Early and Aggressively
If you’re in your 20s and start investing now, you’re in luck, said Joseph Jennings Jr., investment director for PNC Wealth Management in Maryland.
“Due to the power of compounding, the first dollar saved is the most important, as it has the most growth potential over time,” he said. As an example, Jennings compared $10,000 saved at age 25 versus 60. “The 25-year-old has 40 years of growth potential at the average retirement age of 65, whereas $10,000 saved at age 60 only has five years of growth potential.”
Calculator: How much will I need to save for retirement?
10. Married Couples: Play Retirement Account Matchmaker
The wisdom of taking advantage of a company match on the 401k is well established — but think about how that power is accelerated if a working couple does it with two such company matches.
"If your employer has a matching contribution inside of your company’s plan, make sure you always contribute at least enough to receive it," said Kevin J. Meehan, regional president-Chicago with Wealth Enhancement Group. "You are essentially leaving money on the table if you don't."
11. Practice Sound Cash Flow Management
The methodology is simple, yet the results can be profound: Put money into monthly, systematic investments during your working years.
"There’s no other element of investment planning or portfolio management that’s more essential over the long term," said Jesse Mackey, chief investment officer of 4Thought Financial Group in Syosset, N.Y.
12. Jump on Employer Stock Purchase Plans
How about some free money? The ESPP typically works by payroll deduction, with the company converting the money into shares every six months at a 15 percent discount.
"If you immediately liquidate those shares every time they’re delivered, it’s like you get a guaranteed 15 percent rate of return,” said Dave Yeske, managing director at the wealth management firm Yeske Buie and director of the financial planning program at Golden Gate University. "Add the after-tax proceeds to your supplemental retirement savings."
13. Start That Retirement Account Today
Whether you choose to open an IRA, Roth IRA, 401k or Roth 401k, it's important to choose a retirement vehicle that not only grows your savings, but also provides tax benefits. Don't just rely on a savings account.
14. Plan Smart Vacations — and Invest the Difference
There’s no sense in depriving yourself of every single thing, especially well-deserved time off. But Yeske points out that you can save a ton in 150 countries through a service called HomeExchange.com, which helps you "exchange" homes or apartments all over the world.
"My wife and I have stayed for free in London, Amsterdam, New York and Costa Rica," he said. "And when you’re staying in someone’s home or apartment, you don’t have to eat out at a restaurant for every meal, so your food costs nothing more than if you were at home."
15. Don't Let Your Money Sit Idle
To get to an early retirement, you have to periodically revisit your IRA, 401k or other retirement account to make sure your money doesn’t grow cobwebs. For example, the way your retirement account is diversified shouldn’t put too much emphasis on low-yield investments — such as money market funds and low-yielding bonds.
"Dividends can pile up in the money market account, typically earning one one-hundredth of a percent," Yeske said. "Make sure your cash is invested properly."
16. Hop Off the Hedonic Treadmill
In this curse of consumerism, you buy something expensive, feel excited and then scout for something else to purchase when the “new car smell” wears off. And it’s a huge trap if you want an early retirement, said Pete, a finance blogger who retired in his 30s. Another advantage: “Here in the rich world," he wrote for MrMoneyMustache.com, "the only widespread form of slavery is the economic type."
17. Look for Passive Sources of Income
Early retirement doesn’t necessarily mean retiring all of your income, especially if you find ways to bring in money without hard work. Investing in rental properties is one way you can create a cash flow stream — and you can minimize the labor by hiring a property manager. Or, set up an internet sales business, and hire a part-timer to fulfill orders and track stock based on volume.
18. Enlist in the Armed Forces
By serving in the military, you can also serve yourself. Members commonly retire after 20 years, living off generous pensions and health insurance. Although members of the military should expect 401k-style retirement plans in the future, an earlier-than-normal retirement should still remain an option for many men and women.
19. Cook Rather Than Eat Out
Not only does eating out cost considerably more than cooking for yourself at home, it also tends to involve more calories, sodium and fat that do not contribute to your well-being. Instead, planning and creating batch-style meals can cut your costs. Even creating a garden for some vegetables can help reduce your food bill, which means you should have more money to put in your retirement savings to help you retire early.
20. Take on DIY Projects
Although you might be busy, it can make more fiscal sense to do certain things around the home yourself. This means no maid service, gardener or pool technician. While paying for these services are convenient, they might be draining you of potential retirement savings.
Look at what household expenses you could reasonably cut, and channel that money into your retirement fund. An added bonus: You could even get in better shape as you take on more of these responsibilities. Also, you get the satisfaction from doing the work yourself.
21. Cancel the Overpriced Services
If you want to retire early, you need to cut back on some of your overpriced luxuries and services. Of course, it's important to allow yourself a balanced life — making time for entertainment, exercise, friends, family and so on. However, there are things you can do to cut back on expensive monthly services, such as cable TV, internet and phone. Instead, look for alternatives like new on-demand streaming services and affordable mobile phone plans.
Read More: 10 Ways Retirement Will Change in 2016
22. Turn to Nature for Recreation
Instead of pursuing hobbies that cost a lot of money because they require lessons and a lot of equipment, stick to activities that nature provides for free — and put those savings toward your early retirement. Some popular outdoor activities that you can enjoy on the cheap include taking a walk, hiking or riding a bike. Or, go tent camping rather than taking an expensive vacation.
23. Ditch the Car You Don't Need
While you love your car, it's probably costing you a significant amount of money in terms of the gas and maintenance, as well as the initial investment and ongoing car payments. If you live in an area that allows you to depend less on a car, take advantage of it. Find opportunities to walk or ride a bike. Or, take public transportation whenever possible, and reap the benefits of healthier and more cost-effective living.
24. Always Remind Yourself of Your Goal
Get off the couch, and do things that remind you of your mission to retire early. Although you don't want to waste money on activities you can do for free, it's OK to splurge a little on certain excursions and lessons — especially if they keep you motivated to retire early. So plan a cruise this summer, take up some golf lessons or treat yourself to a spa day.
25. Focus on the Positive
Many early retirees and successful people in general will tell you that staying positive helped keep them on the right track to accomplishing their goals. People who stay positive are also less likely to become ill and are better able to cope with hardship and stress, according to the Mayo Clinic.
As corny as it might sound, this positivity could keep you from overspending and help you stick to your early retirement goal.
26. Be Mindful
With each choice you make, ask yourself if your decision will make you happy. Impulses can lead to poor choices and bad spending habits. So, always think about how your everyday decisions can impact your life goals.
Read More: 20 Tricks to Retiring Richer
27. Stop Spoiling Your Children
This might be a difficult task for some parents to follow, especially for those surrounded by other parents who buy their kids whatever they want. However, when you stop spoiling your kids, you'll have more money to use for an early retirement. You might also find some good opportunities to teach your children better spending habits.
28. Don't Pay for Your Child's College Tuition
Never put saving for your child's college tuition over saving for your retirement — this is especially true if you're determined to retire early. With tuition costing tens of thousands of dollars over four years, it can take a big chunk out of your early retirement savings fund. Instead, focus on saving for retirement first and help your kid apply for scholarships, grants, work-study and part-time jobs to help offset college costs.
29. Downsize to a Tiny Home
Some middle agers are selling the bulk of their possessions — including their homes — and moving into tricked-out tiny houses, mobile homes and houseboats. These options open the door to a life of leisure travel and can eliminate major expenses, such as property taxes and mortgage payments.
30. Don't Give Up
You might think that because you've hit a certain age, it’s too late to retire early. It doesn't have to be. You can implement these tips at any point and start seeing the results. Even saving a little bit can start the momentum toward building wealth for your early retirement.