While most people only dream about retiring at 50, there are people out there that turn this dream into a reality. What is their secret? Did they win the lottery? Rob an armored car? Print counterfeit money? While there may be a few people that did do those things, the reality is that most retire at 50 by following 3 simple pieces of advice.
How To Retire At 50 In 3 Steps
Step 1: Save More – A Lot More
Conventional thinking says that if you want to retire by 65, you need to put away about 10-15% of your income. If you want to retire at 50, you need to save more than this, to the tune of 40% or more. Why so much? First, you are going to need money to live on for a longer period of time while not earning an income. Secondly, you have to make up for the lost years that you won’t be contributing or saving to a retirement plan while you work – namely those last 15 years or so. With the power of compound interest, those last 15 years of saving really add up.
So how do you save 40% or more of your income? There are a few steps you can take:
Focus mainly on windfalls: If you get a tax refund, you need to invest all of it. Same goes for any bonuses you get at work. These chunks of money really make a huge difference in the long run. For example, if you are 35 and receive a $3,000 tax refund each year, investing that and earning 8% annually brings the investment value to close to $88,000 when you are 50.
If you get a bonus each year from work for $2,000 and invest that every year for 15 years earning you 8% annually, you have another $58,000. That’s close to $150,000 you have without really changing your lifestyle!