Preparation For Early Retirement Requires Planning

Early retirement is a common fantasy for many people who feel sucked into the daily grind of work. They dream constantly of this as a form of escape. They may discuss the possibility of early retirement with their colleagues and friends. Without an action plan and personal discipline to achieve targets set, early retirement will always remain a dream. They will constantly talk about all the things they will do when they retire and the time they would spend with family and friends doing fun things.

Early retirement need not remain a dream or a fantasy. It can be achieved if financial planning starts early. There must be a determination to stick to a long-term plan to save and invest sufficiently to achieve the dream; no goal, of early retirement. During this process, the ability to delay gratification will be a distinct personal virtue.

A good starting point is to estimate the amount of cash you will need on a monthly basis to sustain your early retirement lifestyle. Make sure you identify the key cost factors and realistically assign costs to them. These factors can include rent if you do not plan to own a house by the time you retire, mortgage payments if the house has not been fully paid for, transportation, food, entertainment, travel, medical treatments and telecommunication. Remember to adjust the figures for annualized inflation. By the time all the figures are in, I will not be surprised if you are in a state of shock. Retirement costs a lot of money! Many people will realize that early retirement is probably impossible if they do not get their act together and start saving and investing soon.

Some Sacrifices Will Be Necessary On The Road To Early Retirement

Based on your retirement costs analysis and expected income flows prior to early retirement, you will realize that some compromises will have to be made. You might have to plan to stay in a smaller house or apartment in a low cost area. Whatever it is, you will need to adjust your future plans - now. This need not be if you are fairly certain that you can aim higher and perform better for far better pay.

The wrenching problem will also be that along the way to retirement you will be forced to make sacrifices as long as you remain financially sane. Your company may not have a pension plan or retirement account. Social Security funds may be insufficient to retire on - at least not for early retirement. There are generally age restrictions for receiving Social Security as well as for receiving benefits from many retirement plans.

If you are ambitious and entrepreneurial, you may have fewer sacrifices in the long-term for early retirement. However, you may need to make greater sacrifices in the short-term while you are working on your professional or business success.

The Internet has opened up opportunities for people to potentially develop multiple sources of income. If you are able to provide a valuable product or service, using the Internet as your conduit, you may be able to gradually build your nest egg from initial trickles of income.

If you do not fit an entrepreneurial profile, then your only chance is to save as much of your salary and learn to invest some of it in quality retirement plans, real estate or equities. You are highly unlikely to get to wealth by gambling. The odds are seriously stacked against gamblers. Prudent financial preparation may help some realize the goal of early retirement.

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