Retirement is a dream for many people, but not everyone has the same idea of when and how to retire. Some people want to retire early, while others prefer to work longer. Some people have a clear plan for their retirement income, while others are unsure of how much they need to save.
According to a World Economic Forum survey, nearly half of people under 40 are hoping to retire by 60, despite the rising life expectancy and retirement age. The survey also found that there is a significant gap between the desired and projected retirement income, which could lead to financial insecurity and lower quality of life in retirement.
So, how can you achieve your retirement goals by 55, if that is what you aspire to do? Here are some tips and strategies to help you plan ahead and make smart decisions for your future.
1. Start saving early and invest wisely. The earlier you start saving for retirement, the more time you have to benefit from compound interest and grow your nest egg. You should aim to save at least 15% of your income for retirement, and increase that percentage as you earn more. You should also invest your savings in a diversified portfolio that matches your risk tolerance and time horizon. You can use a retirement calculator to estimate how much you need to save and invest to reach your retirement goals by 55.
2. Reduce your expenses and debt. One of the key factors that determine your retirement readiness is your expenses. The lower your expenses, the less money you need to save and the more you can invest. You should track your spending and create a realistic budget that allows you to save more and spend less. You should also pay off any high-interest debt, such as credit cards, as soon as possible, and avoid taking on new debt that could hamper your retirement plans.
3. Increase your income and skills. Another way to boost your retirement savings is to increase your income and skills. You can seek opportunities to advance your career, negotiate a raise, or switch to a higher-paying job. You can also develop new skills or credentials that could make you more valuable and marketable in your field. Alternatively, you can start a side hustle or a business that could generate extra income and potentially become your main source of income in retirement.
4. Take advantage of tax-advantaged accounts and employer benefits. You should make the most of the tax-advantaged accounts and employer benefits that are available to you. For example, you can contribute to a 401(k) plan, an IRA, or a Roth IRA, depending on your income and tax situation. These accounts allow you to save and invest for retirement while reducing your taxable income or avoiding taxes on your withdrawals. You should also check if your employer offers a matching contribution, a pension plan, or a health savings account, and enroll in them if you qualify.
5. Plan for health care and long-term care costs. One of the biggest expenses that could derail your retirement plans is health care and long-term care costs. To prepare for health care costs, you should maintain a healthy lifestyle, get adequate insurance coverage, and save in a health savings account if you have a high-deductible health plan. You should also consider buying long-term care insurance or setting aside a portion of your savings for potential long-term care needs.
6. Have a passion for something else. Retirement is not only about money, but also about meaning and purpose. If you want to retire by 55, you should have a passion for something else that can fill your time and give you fulfillment. You can pursue a hobby, a volunteer work, a travel adventure, or a lifelong learning opportunity. You can also continue to work part-time or as a consultant, if you enjoy your work and want to stay active and connected. Having a passion for something else can help you avoid boredom, loneliness, and depression in retirement.
Retiring by 55 is not impossible, but it requires careful planning, discipline, and flexibility. You should start saving early, invest wisely, reduce your expenses, increase your income, take advantage of tax benefits, plan for health care costs, and have a passion for something else. By following these tips and strategies, you can achieve your retirement goals by 55 and enjoy a happy and comfortable retirement.
Related posts:
How to Retire at 55: A Step-by-Step Plan | SmartAsset
How to Plan for Retirement (investopedia.com)
Six Steps to Achieve Financial Independence and Retire Early (FIRE) | T. Rowe Price (troweprice.com)
