- I didn’t save for retirement until I was 30, but now I want to see how fast I can catch up.
- I spoke to 6 advisors who all gave me advice on what to do so that I can retire in 15 years.
- They told me to eliminate debt, reduce investment risks, be careful of tax debts, etc.
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For most of my 20s, the idea of planning for retirement was something I didn’t take seriously. I declined to fund my 401(k) and was not informed of the benefits of a Roth IRA. When I turned 30, I decided to get smarter about how to manage my money now and in the future.
After hearing about friends in their mid-thirties who are now working to retire before they hit 45, I’ve decided that 2022 would be the year I would be wise to plan my own early retirement. Since I’m toying with the idea of retiring before age 50 (I’m 33 now), I wanted to hear from financial experts about what I can do now if I want to retire in 15 years or less.
1. Plan tax debts
When deciding how to save for retirement, financial planner Erik Sussman said many people overlook tax obligations.
“Ideally, retirees should strive to be as tax-free as possible before retirement, either through Roth IRAs or other options to reduce taxes,” Sussman said. “If taxes are neglected or underestimated, people often find themselves short of money in retirement.”
2. Make sure your investments aren’t too risky
If you plan to retire in 15 years or less, financial planner Scott Turner recommends spending quality time developing an investment strategy that works within that timeframe and takes risk into account.
“Too many people in 2008-09 had pocketed $1 million of their hard-earned money, only to see it cut in half when the stock market crashed,” Turner said. “They were overweight equities and took big hits which meant they couldn’t retire in time.”
Turner added that if you plan to retire in 15 years or less, now is about the time to change your investments to make them less volatile.
3. Eliminate debt
Financial planner Colin Exelby says getting rid of debt is essential because debt is something that can damage your net worth for years or even decades.
“Being in debt narrows your options when times are good and can seriously destroy your financial well-being when times are tough because you’ve placed a claim on your future cash flow,” says Exelby. “If you’re considering taking on more debt and it’s not translating into increased cash flow, think twice.”
By debt that translates into cash flow, Exelby means things like investing in a mortgage for rental property, as opposed to things like credit card debt.
“Consumption should ideally be paid for with income, accumulated savings or investments,” Exelby said.
4. Be clear about what your retirement will look like
If you’re unsure how much money you want to have before you retire, financial adviser Jay Brecknell says a good step to take is to imagine what retirement will look like for you.
“For most people who are 15, they don’t have an accurate picture of what it looks like,” Brecknell said. “What hobbies or activities are you going to do? To travel ? All of these come at a cost and should inform your retirement budget to have a high impact on your goals. »
5. Give what you can
Whether or not you’re nearing retirement age, financial planner Mark Reyes recommends contributing what you can and getting started soon.
“How much each person’s pension contribution will depend on how much room they have in their budget,” Reyes said. “A good starting point is to set aside 10-15% of your salary for retirement, but the more you contribute, the better.
6. Save half of all your raises and bonuses
When unexpected money comes into your life, whether through a raise or a bonus, financial planner Patti Black says adopting the 50/50 rule is important for you. help save for retirement and save at least half of it.
“But the catch is that the 50% you spend can’t create a new monthly bill,” says Black. “For example, you can spend 50% on a vacation or new furniture that you pay for in cash, but not on a new car that you finance over 60 months and have to pay more.