Transamerica Retirement Research Center recently conducted a survey of more than 4,500 Americans age 50 and older. About half of those surveyed are retired and no longer working, while the other half are still working or looking for work. According to the survey, the median retirement age for retirees was her age of 62, and 58% retired before her age of 65. In contrast, the median expected retirement age for those still working is 67 years old. Almost one in five (19%) have no plans to retire at all.
Retirement Planning: Average Monthly Expenses for People Age 65 and Over
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That being said, life sometimes gets in the way. More than half (56%) of retirees left their jobs earlier than planned. Of these, 17% did so because they could afford it. Only 7% retired later than planned.
If you want to join the ranks of those who retired earlier than expected because they had the financial means to do so, here are some steps you can take.
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Save even more
There are two ways to improve your financial situation. Save more and spend less. When planning for retirement, saving more can have a big impact on your ability to retire, especially if you start early.
The first step is to make the most of your tax-deferred superannuation contributions. Put as much as you can into your 401k or IRA. If you are young and don't need a tax deduction for your contributions, choose the Roth option if available. You will make contributions after deducting taxes, but all withdrawals will be tax-free upon retirement.
If you're just starting out and having trouble contributing as much as possible, check out these tips. Contribute as much as you can, and each time you get a raise, increase your contribution by at least half of the raise amount. For example, if you contribute 10% of your salary to your 401k and get a 6% raise, increase your contribution to 13%. If possible, do it as soon as the raise starts so you don't notice any difference in pay.
Note that once you contribute the maximum amount to your 401,000 ($23,000 in 2024, $30,500 if you're 50 or older) or IRA ($7,000 in 2024, $8,000 if you're 50 or older), no savings will occur. please. I have to stop there. Non-retirement accounts (also known as non-qualified accounts) allow you to save and invest as much as you want. You have to pay taxes before you save money, but when you spend money, you only pay taxes on the income you earn.
reduce spending
While you certainly don't want to limit your spending so drastically that you no longer enjoy your working years, there are probably places where you can reduce your spending without significantly reducing your quality of life. If you're saving money, make sure to put the money you save towards your retirement savings. Go through all your non-essential purchases and see which ones you can eliminate. You may have subscriptions that you pay monthly but don't use. Let go of these and use the money to save.
Look at your other monthly bills to see if there are any savings opportunities. After you pay off your loan, drive your car for a few years and put your monthly payments toward savings. If you're still paying for cable TV, consider whether a streaming service and antenna will work instead.
pay off debt
Paying off debt, especially high-interest credit card debt, is a win-win. When you pay off your debt in full, not only do you eliminate your monthly payments, but you also eliminate the interest you were paying to repay your debt. To improve your financial situation so you can retire early, this should be your top priority.
make your house more compact
For many pre-retirees and retirees, their home is their largest investment. It can also be a source of funds for retirement. Consider selling your family property and moving to a smaller home, perhaps in a less expensive area. This is especially useful for empty nesters because they no longer need space for their children and “good schools” are no longer a justification for living in an expensive town.
Start your retirement now
Not only will this help you save for a comfortable retirement, but it will also help you determine whether your assumptions about your retirement expenses are accurate. First, determine how much you will spend in retirement. Include only the essentials. You can set up allowances for travel and other activities when you need to, but for now, decide how much you want to live on in retirement.
Add back the things you need to pay for now, but won't need once you leave your job, such as your commute or your work wardrobe. It's tempting to include medical expenses on this list, but even if you qualify for Medicare at age 65, you may face additional costs that Medicare won't cover. Fidelity estimates that the average married couple will need $315,000 in medical expenses during retirement, and that doesn't include long-term care.
Learn: 10 things baby boomers should consider selling after retirement
Once you've done the calculations, try living with this amount (retirement allowance plus expenses that are necessary while you're working but disappear once you retire) and see what happens. If that's not possible, you may need to adjust your expectations for what you need in retirement and adjust your savings plan accordingly. If you can do that, you're probably in a good position to retire early, but continue to monitor your plan over time.
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This article originally appeared on GOBankingRates.com: 17% of Americans Retire Early Thanks to Financial Freedom — 5 Steps to Retire Faster
