How Careful Wealth Management Can Help Buffalo Grove Residents Retire Early
by Gabriel Lewit
Retiring early is a common dream – one that may seem impossible to reach in the modern economic climate. But if you start early, plan ahead, and engage in comprehensive wealth management, you may be able to retire years earlier.
Here are seven retirement planning tips to keep you from feeling shortchanged in your pre-golden years.
1. Know What You Want in Retirement
The first step to retiring early is knowing what you want to do in your early retirement. While the life you envision now may seem ideal, there’s only so long that fishing, reading, and watching TV can entertain you. You should consider whether you want a part-time job, a volunteer position, or to finally obsess over your creative hobbies.
Moreover, knowing what you want to do in retirement informs your financial goal setting now. For instance, if you plan to live in an expensive location or travel, you’ll need more money than if you settle down in the country. And if you retire early enough, you may have children living with you, which can change your plans.
Remember: early retirement isn’t just about financial independence. It’s also about what you do with your time once you reach your goal.
2. Budgeting is Key
Budgeting is the hallmark advice of any comprehensive wealth management strategy (for good reason). By getting your finances in order now, you can start saving the extra dollars you need later. After all, as an early retiree, your savings may need to last you up to half your life. As such, figuring out what you can spend during your working years is crucial. Many people who retire early try to live on 50% or less of their monthly income. The rest goes toward their saving and investing accounts.
You should also start estimating how much you’ll need to fund your retirement. Having a ballpark number for your annual spending will help you set realistic goals. Since retirement planning involves a lot of estimates and math, it may be wise to contact a fee-based fiduciary to walk you through your options.
(And if you’re not sure how often should you meet with your financial advisor, it’s time to contact one!)
3. Plan for Healthcare Expenses
One of the biggest expenses you’ll face in retirement is healthcare. Exiting the workforce early means leaving your healthcare plans behind. If you don’t have these expenses built into your pre & post-retirement budget, you’re doing your future self a disservice.
Planning for healthcare is especially prudent for early retirees as you don’t qualify for Medicare until just before you hit 65. As such, you’ll have to budget for at least a decade or two of insurance premiums. And the more medical concerns you have, the more you’ll need to save.
Bear in mind that many retirees do take on part-time jobs, so you may not be entirely on the hook for your healthcare. For instance, Starbucks and Costco both offer healthcare plans to their part-time employees. But if you’re not planning to work, that’s all the more reason to invest in a health savings account, buy long-term care insurance, and stash away as much as you can.
4. Pay Down Your Debts Now
A key component of any comprehensive wealth management plan is paying off debts while you have an active income. Whether you’re paying down your mortgage, credit card debt, or student loans, the more you eliminate now, the less of your retirement savings you’ll use later.
5. Invest in Passive Income
Passive income is any money that you don’t have to work for, which comes in handy when you’re retiring early. For instance, you may decide to invest in real estate or long-term financial instruments that will return rent or dividends for years to come. Either of these options require capital that you can finance or save for – but the earlier you get started, the greater your long-term returns.
6. Nail Down Your Investment Strategy
And speaking of passive income: your investment strategy is a crucial piece of the early retirement puzzle. The earlier you want to retire, the more important your strategy becomes, as you have less time to rebound from a bad market
You can start by heavily investing in any work-sponsored retirement programs with matching contributions. Every dollar your employer invests on your behalf is another dollar you don’t have to earn. If your employer doesn’t offer matching, tax-advantaged investment vehicles can still build your wealth and promote your retirement goals.
You should also look into an aggressive investment style to boost your savings. While this injects extra risk into your portfolio, it’s one of the best ways to build your retirement portfolio in a hurry. The key is to choose the right investments and properly diversify your assets.
If you’re not sure where to start, a fiduciary financial planner in Chicagoland can point you in the right direction!
7. Plan to Work Post-Retirement
Your job is one of the most important components of your wealth management strategy. If you don’t have an income, reaching your financial goals is not just improbable but impossible. And though retirement is about gaining your financial freedom, every dollar you earn is another dollar you don’t have to withdraw.
Whether you start a side hustle, run your own business, or work part-time, the sense of satisfaction and financial freedom that comes from working is hard to beat. And if your job has benefits like health insurance, 401(k) matching, or PTO, you can boost your dreams higher.
Retiring early isn’t an impossible dream, but it takes sacrifices, hard work, and a solid investment strategy. Fortunately, if you’ve found yourself googling “retirement advisor near me,” you don’t have to look any further.
Here at SGL Financial, we’re here to help you succeed in your goals – whatever they may be. Planning for early retirement doesn’t have to be a hassle with a fee-based comprehensive wealth management team on your side. Get Started with SGL.