5 Steps To Early Retirement

These five steps will help you reach your early-retirement goal.

For some working Canadians, the only thing that gets them through their day is dreaming of living in a beachfront condo somewhere warm when they retire. Why not make that dream a reality? No one said you have to wait until you’re 65 to retire. With some careful planning and some serious saving you may be able to retire early. Here are five ways to say sayonara to your working life and hello to retirement.

1. Save and then save some more.

The only way you’ll stop working early is if you have enough money to get you through those years of rest and relaxation. That means aggressively putting 10% of what you make in an account that you won’t touch until the day you say, “I quit, it’s over, I’m out of here.” Cover your living expenses and limit your discretionary spending to a reasonable amount. Anything beyond that goes into an account for emergencies and big ticket items.

2. Invest in equities.

Not only do you need to save, but your money has to grow. That can be tricky these days, but there’s still no other way to make decent returns than with a balanced portfolio based mainly on equities. You still need a portion to be invested in fixed income or bonds, but not too much. Equities can be individual stocks or equity based ETF’s or mutual funds. You certainly don’t have to buy risky tech stocks. Blue chip big mature companies that are dividend-paying tend to weather the financial storms better than most investments. Consult an expert before investing and understand your risk tolerance and what you are investing in.

3. Use your RRSP

The immediate benefit of an RRSP is that you can get a big tax refund when you make a contribution Some people use that cash to fund an RESP, or even take a vacation. If you want to retire early consider putting that tax refund back into your retirement account. To retire early; the more savings you have the better off you’ll be.

4. Be cheap (the smart way)

Cutting out posh high end restaurant in favor of family style eateries is one smart way to enjoy a meal out without breaking the bank. You may also look at the need to spend less on the stuff you buy. Example:

• You can buy a new car or go for last year’s inventory or a good used car with low mileage.
• You can buy designer clothes or go to stores that offer designer labels at a significant savings.
• Try shopping at outlet malls or buying at the end of the season for even greater savings.
• If you really need a vacation, get a reasonably priced vacation last minute or consider a condo or room with a kitchen to help reduce the food cost.
• Shop at the lowest-priced grocery store and check sites like Groupon or Craigslist to see if you can get discounts on items you need.

5. Create the perfect plan

The hardest part about saving, investing and spending with early retirement in mind is to “just do it”. No one wants to live ultra-frugally, but you have to keep your eye on the prize and spend smart. Create a plan and check it over and over again. Make sure you’re sticking to your budget, save 10% of your income each paycheque and invest with your risk tolerance in mind.