FIRE-rörelsen (finansiellt oberoende, förtidspensionerad ) har personer som går i pension så tidigt som 35 eller 40.
Men såvida du inte har en allvarligt över genomsnittet inkomst tidigt i livet och kan leva bara ben, kommer det förmodligen inte att vara ett alternativ för dig.
Det näst bästa alternativet kan vara något förtidspensionering . Som att gå i pension vid 55.
Det är inte samma sak som att gå i pension i trettio- eller fyrtioårsåldern, men det är mycket bättre än att vänta till 65, 67 eller till och med 70. Och du kommer fortfarande att gå i pension i ditt livs bästa – eller åtminstone sen prime .
Var inte för upprörd om du inte kan gå i pension tidigare. Det finns faktiskt även vissa fördelar med att gå i pension vid 55.
(Och det är fortfarande mycket bättre än att gå i pension vid 65 år.)
En bra proffs kan göra en värld av skillnad när det gäller att nå dina ekonomiska mål. Att gå i pension i förtid kan vara en komplicerad blandning av att spara och investera ordentligt, och de flesta har stor nytta av rätt vägledning.
Om du menar allvar med att gå i pension i förtid finns det ingen bättre investering än att få hjälp med att kartlägga rätt kurs för dig.
Annonser efter pengar. Vi kan få kompensation om du klickar på den här annonsen.Annons
Livet är oförutsägbart. Din pensionsplan borde inte vara det. Ta kontakt med en oberoende finansiell expert för att se om du är på väg att nå dina pensionsmål. Klicka på ditt tillstånd för att komma igång. Get Started With this strategy, you’re creating the extra room in your budget to save money at an above average rate.
The less money you need to live on, the more you can save, and the more you’ll have available for retirement.
You can cut down a big expense just by refinancing your mortgage and paying it off early.
There are a couple of variables here, too. If you’re really good at cutting your living expenses to the bone, you may be able to retire sooner than 55.
If you’re coming to the early retirement party a bit late in life, cutting expenses will be even more important to reach your goal of retiring at 55.
Everyone talks about cutting living expenses, but exactly what does that involve?
And more specifically, how much harder do you have to work at it if you want to retire early? Naturally, it’ll be easier to budget if you make more money.
For example, if you make $150,000 per year, you can free up $30,000 for savings by cutting your expenses by 20%. But if you make $75,000, you’ll need to cut your living expenses by 40%, to free up $30,000.
Cutting expenses can be done on just about any income. After that, it’s mostly a matter of turning it into a habit.
If you’re really serious about cutting expenses, to where you’re considering selling certain assets, you can bank the proceeds. By getting creative, you’ll reduce some of the pressure on cutting your living expenses.
Annonser efter pengar. Vi kan få kompensation om du klickar på den här annonsen.Annons 
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It should go without saying that early retirement requires that you begin saving early as well. The sooner you begin, the less effort you’ll have to make.
Let’s work an example to demonstrate how this plays out.
Let’s say you decide you’ll need $1 million to retire at age 55. Your average income between now and retirement is $100,000 per year.
You can invest your money in a blended portfolio of stocks and bonds producing an average annual rate of return of 7%.
Without going into any calculations, it’s pretty safe to say that if you’re over 40, and starting from zero, you probably won’t be able to retire at 55. To even attempt it, you’d have to be saving something close to 100% of your income.
One of the challenges of saving for early retirement is that you pretty much need a high-risk tolerance. You won’t reach your goal by investing in safe assets, like certificates of deposit.
While you may be able to have some money in safe assets, the vast majority will need to be in higher risk investments.
This includes primarily stocks, and either mutual funds or exchange traded funds (ETFs) that invest in stocks.
You may also be able to include real estate investment trusts (REITS), since they often provide returns comparable to stocks. The bottom line is you’ll have to invest heavily in assets that carry a large degree of risk. That means the risk of loss of some of your investment.
In any given year, you can lose money on a stock portfolio. In fact, you might even lose money two or more years in a row. You’ll have to be prepared for that.
Investing in risk assets is investing for the long-term.
Yes, you can lose money in any given year, but the real returns come through multi-year investing.
Fortunately, the numbers work to your advantage. The stock market has returned an average of between 9% and 11% over the past 90 years.
If you want to be really aggressive, keep 100% of your money invested in stocks. Over 20 or 30 years, that should get you an average annual return of around 10%.
If you want to be a little bit more conservative, a 90% stock allocation will reduce your return to 9%, and an 80% allocation will reduce it to 8%.
But both are still solid returns, particularly if most of your money is invested in tax-sheltered retirement plans.
To accomplish early retirement, having as much of your investments in tax-sheltered retirement plans as possible will be an absolute necessity.
You’ll reach your goals faster on money that isn’t subject to immediate taxation.
For example, if you’re in the combined 30% tax bracket for federal in state taxes, a 10% return on investment will produce a net yield of just 7%. To break that down by numbers, if you invest $10,000 per year at 10% for 25 years, you’ll have approximately $1,036,000. Mission accomplished!
But if your net return is reduced to 7%, due to being in the 30% tax bracket, after 25 years you’ll have $656,000. Mission NOT accomplished.
Do you see the importance of tax-sheltered investing?
Tax-sheltered investing could be the difference between early retirement, and waiting for your traditional retirement age.
It may not be possible to invest all your money through tax-sheltered retirement plans. After all, there are limits on how much you can contribute. For example, on the 401(k) or 403(b) plan, the maximum contribution you can make from 2019 on is $19,000.
Once you reach 50, you can add a catch-up contribution, increasing that to $25,000. And since many employer-sponsored retirement plans also provide an employer matching contribution, all the better.
You may also be able to add an IRA contribution to the mix.
That amount has increased to $6,000 for 2019, and $7,000 with a catch-up contribution beginning at age 50. By contributing to both plans, you’ll be able to contribute a total of $25,000 each year.
One of the best places you can house a tax-sheltered retirement plan is Blooom.
Blooom stands out as the premiere robo-advisor dedicated solely to retirement specifically 401(k) management.
Contributing to the two retirement plans should get you close to your savings goal.
But if it isn’t, you can always save additional funds in taxable accounts.
Even though the return won’t be as good, taxable accounts can still serve an important purpose once you reach your desired retirement age. You won’t be able to access funds from your retirement plans until you reach age 59 ½.
Yes, you can access them early, but not only will you have to pay ordinary income tax on the withdrawals, but you’ll also have to pay a 10% early withdrawal penalty.
If you have a substantial amount of your portfolio in taxable accounts, you can access those funds between 55 and 59 ½.
The withdrawals won’t be taxable at all.
That could provide a valuable bridge between early retirement and penalty-free withdrawals from your retirement plan.
There’s another way to deal with the early withdrawal problem with retirement plans. That’s the Roth conversion ladder.
It’s neither easy nor inexpensive, but it will provide you with tax-free income in early retirement.
As you may or may not know, withdrawals taken from a Roth IRA are completely tax-free if you are at least 59 1/2, and have been in the plan for at least five years. But there’s also a provision to have tax-free withdrawals before reaching that age.
That’s where the Roth conversion ladder comes into the picture. Funds held in either an IRA or a 401(k)/403(b) plan can be converted to a Roth IRA.
Once there, they’re eligible for tax-free withdrawals.
There’s a provision in the Roth IRA plan that enables you to withdraw either Roth IRA contributions or conversion balances tax-free and penalty-free. These are known as Roth IRA withdrawal ordering rules.
Those rules mean that the first money withdrawn from a Roth IRA are either contributions or converted balances. Only when those have been taken are investment earnings withdrawn.
Now you have to be in the Roth for at least five years avoid the 10% penalty, so timing is everything with this strategy. That’s where the Roth conversion ladder kicks in.
By making annual conversions, beginning five years before you will need to begin making withdrawals, you can create a tax-free source of income for early retirement.
The strategy works especially well if you are planning on retiring at 55.
Since you only need to cover less than five years until you reach age 59 ½, when you can begin taking regular withdrawals from your other retirement accounts penalty-free, the ladder will have you covered.
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With low trading fees and a nice selection of investment offerings, the platform is a solid choice for your Roth IRA.
Let’s assume you’ll need $50,000 per year when you retire. Let’s also assume your Roth IRA will be the entire source of that income.
To enable you to be able to begin making tax-free withdrawals from your Roth IRA, you need to begin creating your conversion ladder by age 50.
You do this by making annual conversions from your IRA and/or 401(k)/403(b) plan to your Roth IRA at $50,000 per year.
Once you reach 55, you’ll be able to begin taking annual tax-free withdrawals of $50,000 from your Roth IRA as a result of the successive conversions.
This is how it will work:
| YEAR | AGE | AMOUNT OF ROTH CONVERSION | AMOUNT OF ROTH WITHDRAWAL | SOURCE OF FUNDS WITHDRAWN |
|---|---|---|---|---|
| 2019 | 50 | $50,000 | 0 | N/A |
| 2020 | 51 | $50,000 | 0 | N/A |
| 2021 | 52 | $50,000 | 0 | N/A |
| 2022 | 53 | $50,000 | 0 | N/A |
| 2023 | 54 | $50,000 | 0 | N/A |
| 2024 | 55 | $50,000 | $50,000 | 2019 Conversion |
| 2025 | 56 | $50,000 | $50,000 | 2020 Conversion |
| 2026 | 57 | $50,000 | $50,000 | 2021 Conversion |
| 2027 | 58 | $50,000 | $50,000 | 2022 Conversion |
| 2028 | 59 | $50,000 | $50,000 | 2023 Conversion |
What’s especially convenient if you begin taking withdrawals at 55 is that those distributions will cover you straight through to age 59 ½. At that point, you’ll be able to tap other retirement plans penalty-free.
In the table above, we’ve shown Roth conversions continuing even after age 55.
But in truth, you may not need to make additional conversions after that point.
The ability to take distributions penalty-free after 59 ½ might make additional conversions unnecessary since you’ll just be transferring the tax liability from one stage in your retirement to another.
As good as the Roth IRA conversion ladder strategy looks on paper, there is one major downside.
It applies to Roth conversions of all types. You must pay income tax on the amount converted in each year a conversion takes place.
Depending on your tax bracket in the year the conversion is done, that text bite can be substantial.
For example, if in the year of conversion, you’re in the 24% tax bracket for federal, and 6% for your state, a total of 30% of the conversion will go to taxes. With a $50,000 conversion, that’s $15,000.
That doesn’t mean it’s not worth it to create a Roth IRA conversion ladder for early retirement. But you will have to weigh out the cost before implementing the strategy.
As mentioned earlier, an alternative strategy is to build up a portfolio of non-tax sheltered investments.
You can use those funds to pay for living expenses, between retirement at 55, and reaching 59½, when you can begin withdrawing funds from your retirement plans penalty- free.
50 is a common age that people want to retire early at. 45 is another common target, and for the more ambitious, it’s 40. Yes, you can really retire at 40.
But as attractive as it can seem to retire that early, retiring at 55 can actually work much bette r .
Det finns flera anledningar till att detta är sant:
Let’s say you begin saving and investing at 25.
Over the next 25 years, you save and invest an average of $20,000 per year, at an average rate of 7% per year. By age 50, you’ll have $1,181,209.
But if you continue saving and investing for an additional five years, by age 55 you’ll have $1,776,038.
That’s almost $595,000 by delaying your retirement by just 5 years. And it’ll make a real difference and how well you’ll live in retirement.
Still another benefit is that you’ll have an extra five years, just in case your retirement investment plan doesn’t quite go as well as you hope.
If you expect to live to be 90, you’ll need to provide for yourself for 40 years if you retire at 50. But if you retire at 55, that number drops down to 35 years.
Your money won’t need to last quite as long, a benefit you’ll appreciate throughout the entirity of your retirement years.
Health insurance is one of the biggest issues with early retirement. You won’t have the benefit of Medicare, so you’ll have to get coverage on the health insurance exchanges.
Use Healthcare.gov’s plan estimator to see what you’ll pay. It’ll help you appreciate why retiring five years later will be good for your wealth.
People often think of early retirement as something of a pipe dream.
And if you have low income or high expenses, it’s admittedly a difficult goal to achieve. But it’s a worthwhile goal no matter what your circumstances are.
Consider the possibilities of what may develop by the time you’re 55:
In the end, early retirement is mostly about creating options in your life. And by the time you reach your 50s, you’ll almost certainly need those options.
Based on our discussion, you can see that to retire at 55 you’ll need to create a series of many strategies.
It’s almost impossible to carry out one without also doing the others.
But if you can get everything working in the same direction, you will be able to retire at 55 or sooner. Just remember that preparing for early retirement is a long-term process.
Realistically, you’ll need at least 20 or 30 years to make it work. Be realistic, and be persistent, and you’ll get there.
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