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seven tips for retiring early


Although the idea of retiring early may be appealing, ensure that early retirement makes financial sense before going through with it. – PowerPoint PPT presentation

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Title: seven tips for retiring early

Seven Tips for Retiring Early
  • Although the idea of retiring early may be
    appealing, ensure that early retirement makes
    financial sense before going through with it.
    Risks involved with early retirement include tax
    penalties, loss of health benefits and debt
    collections. Save as early as possible and keep
    your debts low to make early retirement a
Limit Debt
  • Large amounts of debt accumulated over the years
    can get in the way of your early retirement
    plans. Don't purchase more than you can afford,
    and do not rack up large credit card bills than
    you are unable to pay off. Pay the balance of
    your credit cards off each month. Put any extra
    money you make into an account where you cannot
    access it easily.
Calculate Your Financial Need
  • Determine how much money you need to live
    comfortably during retirement. Retirement funds
    need to cover your day to day bills along with
    any extra expenses. For instance, if you are not
    old enough for Medicare, you may need to pay for
    your own health coverage upon retirement.
Don't Wait
  • If you want to retire early, planning should
    start as soon as the idea enters your mind.
    Investments take a long time to become
    profitable, and the earlier you start saving, the
    sooner you will be able to retire. If you plan
    for early retirement in your 20s instead of your
    30s or 40s, you can stash away less money and
    still make it happen.
Find Out Your Investment Options
  • According to Charles Schwab, your main retirement
    savings fund will likely be an IRA and a
    qualified employer plan such as a 401(k), 403(b)
    or 457. For employer sponsored plans, employers
    typically match your contributions up to a
    certain percentage of your salary. A traditional
    IRA allows contributions to be tax deducible
    while a Roth IRA allows for tax-free
Be Skeptical
  • Be aware that investment schemes for early
    retirement may not always pan out. Investments
    depend on the market, and a down market will hurt
    your ability to retire early. The NASDAQ website
    warns of free seminars sponsored by brokerage
    firms that suggest an investment in high-risk
    securities as a way to retire early.
Know the Penalties
  • When you cash in your retirement savings plans
    early, you put yourself at risk of tax penalties.
    According to Section 72(t) of the Internal
    Revenue Code, you are imposed a 10 percent tax
    penalty on withdrawals taken from a qualified
    retirement plan made before the age of 59 ½.
Consult a Financial Advisor
  • Although early retirement may make sense on
    paper, speak to a financial adviser before taking
    any steps to stop working. Advisers can review
    tax penalties, your estimated annual earnings and
    risks involved with early retirement. For
    instance, if you owe child support, alimony or
    any unpaid debt, your retirement earnings may be
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