You’ve asked an interesting question. Asking how to retire at 50 must mean you have some pretty awesome future plans. Congratulations! I feel like retiring at 50 is the sweet spot. If you retire before 50, you miss out on a lot: a distinguished career, a fantastic return on your college education investment, the fulfillment of contributing to society in a big way… If you retire after 50, you may miss out on a lot as well: the ability to travel the world unencumbered, time with grandchildren, and time with your hobbies. Age 50 is the sweet spot. This article will tell you how to do it.
I will tell you right now, time is your greatest asset. Read this article, bookmark this article, and begin following its advice ASAP. If you wait to plan, you’ll wait to retire…
How to Retire at 50
First off, retiring at 50 is possible for most people living in a first-world country. Please, do not let the naysayers convince you otherwise. It is possible. Plenty of people are doing it. I myself will easily be able to retire at 50. Think positively.
Being able to retire means you have enough money to keep living indefinitely. Why indefinitely? Because people live for a long time! It’s quite possible you could spend half your life in retirement. Please do not retire until you are sure you have enough. You want the money to keep coming in for as long as you shall live. Worrying about death and money is a bit too much for any human to handle. In order to comfortably retire at age 50, you must be generating enough passive income to last you indefinitely.
The Magic Formula
You must make enough passive income to sustain your lifestyle. Passive income can come from investments, pensions, real estate, farmland, social security (although I wouldn’t recommend counting on it), etc. A basic rule of thumb is that you should safely earn 4% on your money each year without ever touching the principal. If you have $1,000,000 at retirement, you’ll be able to withdraw $40,000 each year for living expenses. It’s called a safe withdrawal rate.
Questions to Ask Yourself Decades before Retirement
“What will my expenses be throughout retirement?”
No one can fully predict the future but you can get a pretty accurate number. It’s important to determine how much money you need to cover your monthly expenses in retirement. Remember that this number will not remain consistent. Early in retirement, you probably won’t need much money. You’ll probably spend the first year relaxing and decompressing. You’ll not be commuting or buying professional clothing, so that’ll save some big bucks. After your first year, the expenses will likely ramp up: travel, hobbies, medical, etc. Remember also to take into account inflation. Each year, you’ll need more money to sustain yourself. Using a 3% rate of inflation, if you need $30,000 in year one, by year two, you’ll need $30,900.
Forecast out as long as possible. As they say, fail to plan, plan to fail. For example:
Year 1: No travel, no new clothing, but a new-to-you 1958 Thunderbird. Add 3% for inflation.
Year 2: 1 trip to Europe. Add 3% for inflation.
Year 3: $10,000 for home upgrades (this is typical in retirement since you’ll be spending a lot more time at home). Add 3% for inflation.
Forecasting isn’t easy but it’s not hard either. Use the past as an indication of the future. Expect to spend about 1% of the home’s worth for expenses. Remember to keep an emergency fund for what you cannot predict.
“Will I earn any side money during retirement?”
It’s so weird but when you retire, people will want to hire you. You’ll probably take some part-time work consulting or doing small jobs. If you foresee this happening, add this income stream. However, don’t count on this income as this is really just guessing. Plus, you don’t want to feel like you have to work in retirement. Consider any income like this to just be a bonus.
“How much of a legacy do I want to leave?”
Do you want to leave an inheritance? If so, how much? Make sure you have that amount left over when you die. This isn’t as stressful as it sounds. If you want to leave $500,000 to your 2 children, you can still be making a income off that money. Just make sure the $500,000 in principal remains intact. Don’t eat away at any money you want to leave as an inheritance.
“Where will my income come from?”
Have your money in places that earn you at least 4% each year like clockwork. This can be things like equities, real estate, pension, social security, etc. as mentioned earlier. For myself, I’ve realized most people get rich in the stock market. I plan on most of my income coming via equities when I retire.
Put These ‘How to Retire at 50’ Plans to Work
This blog is called First Quarter Finance. What I’m saying is if you want to retire at 50, you should start planning ASAP, preferably within the first quarter of life. It’s because of compound interest. The earlier you start saving money, the less you must to save in order to retire:
Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it. -Albert Einstein
If you haven’t started saving early, work on making as much money as possible. Switch companies if necessary. Switch industries if necessary! Cut your expenses and/or work on the side if needed. Retiring at 50 is doable for those willing to give it enough effort.
Comment below with any further questions and I will reply. You now know how to retire at a very early age. Carry out these plans and enjoy life!!!