How to Save for an Early Retirement

 Most Americans wait until their 60s to retire and withdraw their 401Ks even though there are plenty of other ways to save money and build a nice little nest egg for yourself on the side. The key: start early.

Here’s how you can save enough to tender your resignation sooner rather than later, according to CFA Charterholder Francisco Faraco.

Evaluate Your Daily Spending

If you don’t check your receipts until tax season, now’s the time to break this habit. Reexamine your daily spending and see where you can save money. This can be tricky because some people tighten the strings on their daily budget to the point where they’re pinching pennies on necessities. 

 

You could make small changes like:

 

· Make your coffee instead of getting one to go.

· Negotiate affordable car insurance.

· Change your health insurance plan.

· Bring homemade lunch to work.

· Cancel rarely used subscriptions.

Set a Target

You can set your retirement goal after cutting your daily spending or somewhere between calculating your daily budget and identifying non-essential expenses. You can also calculate your retirement savings by deducting your daily expenses from your money savings and adding them over the years.

You might have to account for:

· Inflation

· Pay raise

· Taxes

· Bonus

· Unpredictable expenses, such as clothes, dinnerware, etc.

Finally, decide the goal you’d like to reach before turning 60 and whether your additions, expenses, and new spending habits can help you achieve it. If not, strategize saving and investment opportunities to compound your monthly earnings.

Take Advantage of Catch-Up Contributions

A catch-up contribution lets individuals 50 and above make extra contributions to your IRA accounts or 401Ks. In other words, you might be caught up on your monthly or annual contributions, but you can contribute more than the designated amount to your retirement savings after turning 50.

If you’ve recently come under the possession of extra funds—small inheritance or severance package—you can put some of them aside for daily expenses and contribute the rest to these nest eggs to reach your target before the average retirement age.

Early Bird Made Easy with CFA Designated Expert Francisco Faraco

An article can only tell you so much about retiring early. Let the Teaching Assistant in the Masters of Science in Financial Mathematics at the University of Chicago, and CFA CharterholderFrancisco Faraco guide you through early retirement by applying the above saving methods or trying other conventional and unconventional means to increase your retirement funds.

Consult Faraco to retire early and have enough in the bank to last another half-century.  

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