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If retiring early sounds like a dream reserved for millionaires, let me assure you that it doesn’t need to be.  In fact, there are many people out there working toward retiring early, some as early as age 50.  There is not one special secret to retiring earlyor finding some great investment to sink your money into; retiring early requires a combination of financial discipline, a strong strategy, and aligning your resources.

The first place to start is with some calculations.  Using a retirement calculator based on your actual income, rather than a proposed average, can help you determine the type of life you want in retirement and how your retirement income needs to reflect that. You can also use a 401(k) calculator to see how your contributions will accrue as you prepare for retirement.

 Find the gap and fill the gap

Now that you’ve done your calculations and have some real numbers to look at, it’s time to identify the gap and come up with a plan to fill the gap.  The gap refers to the difference between your steady income sources and your monthly spending.  This is the perpetual gap you will need to fill, and it is also an amount that will need to be adjusted higher over time due to inflation.  In retirement you’ll want to find a way to structure your nest egg to generate a steady income stream that can fill this gap without actually having to use the money in your investments.

The way to fill the gap is to start crunching the numbers and consider the things that affect those numbers and your savings.

The list below outlines five considerations that you should make, but bear in mind that there are many more.

1.  Part-time work.  If you plan to retire early, then you are still young enough to continue working.  Working part-time is a great way to create extra income for your savings and also prevent you from depleting your retirement savings.

Many retirees feel that working part-time adds to their quality of life.  If you find part-time work in a field you love, you can enjoy keeping your brain active and support yourself while your retirement dollars grow.  Some retirees enjoy taking on part-time consulting projects.  Consulting is a great way to get paid for some of the same things you were so good at before you retired.

2.  No more mortgage.   A great way to control your expenses is to pay off your mortgage.  Owning your home free and clear not only gives you peace of mind, but also gives your retirement budget flexibility.  My general rule of thumb is to pay off your mortgage if you can do so using no more than one-third of your non-retirement savings.  If you’re not sure where to start, click here for four tried and true methods to pay off your mortgage.

3.  Healthcare.  You won’t be eligible for Medicare until you’re 65, so retiring early means keeping your healthcare in mind.  You’ll need to look into a private policy once you’re no longer working to take care of your healthcare needs until your Medicare kicks in.  You might also look into other options such as long-term-care.  Healthcare will vary depending on your age and benefits, so examine all of your options.

4.  Taxes, Savings, Life (TSL). You’ll need to weigh how much you’re spending with how much you’re saving.  Using the TSL strategy is a great way to do this. Split your money into three categories: taxes (30% of your gross income); savings (20% to a 401(k) or paying off debt); and life (50% for housing, food, and other expenses).  This will allow you to live on only half of your income each month, creating an excellent nest egg for your retirement.

5.  Discipline.  Retiring early is feasible, but not without a lot of hard work and discipline. Seeing the bigger picture is important, so keep in mind what you want your retirement to look like as motivation to make good decisions now.

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