- October 3, 2022
- Posted by General Electric Credit Union
- 6 read
5 Steps to Take Now if Early Retirement Is Your Goal
Your golden years are in sight – but what if you want to bring them into focus, faster? Doing so is possible with the right strategy, resources, and support. Consider these five steps to chart an expedited course to an early retirement.
What to do if you’re striving for an early retirement
1. Determine your needs
How much money you need in retirement may differ depending on your needs and wants, which is why it’s wise to talk through benchmarks with a financial advisor. But some general factors to consider are:
- Where you’ll live. Will you stay put or move somewhere else? What is the cost of living in the location you plan to retire in?
- What luxuries you want access to. If your life is more simplistic and you want to live large in retirement, budgeting for the finest food and drink, vacations, and more should be considered.
- Any income you’ll have access to. Retirement income can come in many forms, including Social Security payments, annuities, pension plans (if you’re one of the lucky few who have one!), and pay outs from retirement and investment accounts.
Typically, you’ll want 70-90% of your pre-retirement income stowed away. For example, if you currently make $70,000 a year, you should expect to need $50,000 every year of retirement.
2. Earn more off your money
Retiring early will require you to have more money saved upfront. For this reason, it’s important to save smarter and earn more off your money. You can accomplish this with deposit products like:
- Interest-earning savings accounts. There’s nothing wrong with keeping your money in a traditional savings account. But placing those funds in an interest-earning account will allow you to grow your savings, faster, because they pay out interest on the balance. Plus, the nature of these accounts keeps your money accessible.
- Certificates. A credit union certificate works the same way as a certificate of deposit (CD) you’d open at a bank. You keep funds in these savings vehicles for a set period, which can range from a few months to a few years. During this time, you do not have access to the funds – and an early withdrawal will even incur fees. For this reason, it’s important to be realistic about what term you can manage. Typically, the longer the term the better the rate of return. These earnings are guaranteed and risk free, too, because they aren’t tied to the stock market. This makes them a perfect retirement savings opportunity if you’re more risk adverse.
- Investments. This is a broad term that includes things like bonds, stocks, and mutual funds. The value of these investments can fluctuate because they’re tied to the markets. But don’t let the inherent risk put you off from investing. Some investments are more conservative, like bonds, while others are more aggressive. There are options for every risk level! Despite the earning potential, only 56% of Americans own stock.1
- Retirement accounts. Retirement accounts are tax-advantaged savings vehicles. Some, like 401(k)s, are tied to your employment. Individual Retirement Accounts (IRA) are not, giving you more flexibility for long-term savings. Typically, mutual funds are part of the investment portfolio for both account examples. If you aren’t currently saving in either a 401(k) or IRA, it’s important to start. Even waiting a single year could cause you to lose out on $23,082 by the time you retire.2
3. Enlist help
Determining your readiness for retirement doesn’t have to be difficult. A financial advisor has the knowledge and tools to accurately gauge where you’re at and any steps you should take to get where you want to be. They’ll also help you nail down what retirement income you’ll have to fall back on – and even introduce you to options you may not have considered, such as annuities.
4. Minimize spending on non-essentials
Saving for retirement is a marathon, not a sprint. The small, consistent deposits you make to a savings account will add up over time to something substantial. And you can increase how big those deposits are by trimming your spending and committing the difference to retirement. First, use Money Management to see where your money is going. You can even link outside accounts to gain a complete financial picture. Once you know which categories to cut back in, you can put this strategy into action. This could look like eating out once a week instead of three times, reducing the number of streaming services you pay for, or swapping name brand products for generic.
- Did you know? General Electric Credit Union (GECU) members enrolled in Online Banking or our mobile app have free access to everything Money Management has to offer. Create budgets, monitor your net worth, track spending and goals, and visualize your debt payoff strategy all within one intuitive dashboard!
5. Enlist a FIRE method
Financial Independence, Retire Early (FIRE) is a financial movement that prioritizes frugality and aggressive saving to achieve an early retirement. Under this method, you’re supposed to analyze every purchase and think about how many working hours it would take to pay for it. This allows you to make more informed spending decisions – and save more in tandem. This is a crucial aspect of the method, as most FIRE followers dedicate up to 70% of their income to saving!
Ready to put yourself on a trajectory to an early retirement? GECU can help! We invite all Credit Union members to schedule a no-cost consultation with Investment Services, available through CUSO Financial Services, L.P. (CFS).3 These dedicated financial advisors will tailor their guidance to your shortened savings timeline – ensuring that when you’re ready to retire, so is your wallet!