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.
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.
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.
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.
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:
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.