Retire Young and Wealthy » Retirement

How Much Money Do you Need To Retire?

Mike — Tue, 29 Nov 2011 10:52:05 +0000

We all dream about it – the day we can walk out of work for good and know that we never have to go back. Retirement is something that we work towards all of our lives, and while recent media stories have many people scared that they will have to work long past the traditional retirement age in order to be able to survive, this is not necessarily the case for everyone.

Here we look at just how much money you might need to give up your job on a permanent basis, and what steps you can take to ensure that you will be able to remain comfortable in the years after your career comes to an end.

Calculating Your Own Retirement Provision

The question of how much money you will need to retire really is one that depends very much on your won circumstances and on the lifestyle that you hope to be able to lead. For example those who have paid off their mortgages and own their own homes outright will need to make a smaller provision for housing costs than those who are still paying off debts secured on their home or renting properties from social housing providers or the private sector. If you live a frugal and less extravagant lifestyle, you may feel it is possible to retire and be comfortable on a smaller income, while those who are accustomed to being able to spend lavishly on luxury experiences and costly hobbies will need to put together a bigger nest egg before they can comfortably step out of employment.

Building a Retirement Fund

There are a number of ways in which people put money away towards their eventual retirement including:

Pensions: A pension is the cornerstone of any retirement plan. Without a pension you may have to continue working, or live a severely reduced lifestyle dependent on state benefits. Pensions can be private – you can purchase your own pension plan from a licensed financial services provider or can join a work pension scheme if you are employed, with you employer topping up your own contributions. These days there are even opportunities for those who work for themselves to enjoy the benefits of bigger group pension schemes, which are offered by some contractor payroll companies.

Savings: Putting away money towards retirement is always a good idea and if you plan to lock your savings away for a long time then you are more likely to be able to receive a higher rate of interest than a traditional and more readily accessible savings account. Calculate what percentage of your disposable earnings you can spare each month and set up a direct debit.

Investments: Whether it is stocks and shares or property, putting your money into solid investments can help towards retirement. A property portfolio can even replace a pension scheme in since a buy to let income is likely to yield returns for years to come.

Early Retirement

If you are hoping to be able to quit the rat race as soon as possible it takes a concerted effort and you may need to make sacrifices in order to secure this future. Look at investments that will offer stable long-term yields and focus your spending on these in place of purchasing consumables and luxuries.

The Cost of Living: Cheap European Countries to Retire to

Mike — Fri, 30 Sep 2011 22:32:05 +0000

Ensuring a comfortable retirement means more than shoring up as much money to see you by as possible. To truly enjoy the best quality of life available, you need to make sure you’re living in the most appropriate place. By choosing to spend your retirement years in some of Europe’s cheapest and more beautiful countries, you can cut the costs associated with some of the best things in life and the low costs of living mean many people find they are able to take retirement early.

Austria

Austria may not be the typical first choice for many retirees, but it claims to be the cheapest country in Europe, making it an excellent option for those wishing to stay somewhere that will help them make their money go further.

The strategic positioning of Austria in the vital east-west and north-south trade routes has historically kept the commerce strong and real estate prices are said to be rising, according to Real Estate Loan. The gorgeous winter season and opportunity to live away from the big cities makes Austria a firm favourite, as does the fact that it remains a tax haven, despite the best efforts if the EU.

Portugal

Portugal is particularly loved by golfers, but offers good opportunities for all sun worshipers.

While many of the holiday homes on offer in Portugal remain quite expensive, the cost of living is cheap. Portugal has been less badly hit by the economic crisis than many of its counterparts, but bargains can still be made thanks to a stagnant property market. Both the sunny Algarve and Lisbon, the capital, are popular destinations for retirees. If you are planning to bu property in Portugal (or any other European city), it’s worth taking a few short breaks to explore what’s available. Hotel prices in Lisbon are considerably cheaper than many of its European counterparts, so there’s no need to rush your visit here.

Italy

There are many Italian towns offering easy access to the countryside, and a combination of cheap property prices and the promise of space and sun to relax in, makes Italy a tempting choice for those looking for somewhere to settle in their later years.

Spain

Always a popular choice for ex-pats, Spain is an excellent location for anyone hoping to enjoy a little sun, sea and sand during their retirement. South eastern Spain is particularly welcoming to retirees, offering heat, a spot by the sea and cheap house prices.

The number of people choosing to move to Spain has dropped in recent years, thanks to the global economic crisis and a crash in the property market. There have however been recent signs of recovery, and it could be a time to secure a cheap property while prices remain low.

5 Ways to Retire Early

Mike — Tue, 20 Sep 2011 00:11:12 +0000

A dream of retiring early may seem unreachable for many in the workforce. Few are willing to apply the necessary effort and implement the needed steps to actually attain the goal of retiring before 50 or even before 40 in some cases. To achieve the goal of leaving the workforce a step ahead of everyone else requires diligence and tenacity. It can be very hard to give up some of the things one’s fellow workers are enjoying. Resting secure in the knowledge of being able to leave the cubicle and leave as one pleases may not be enough to offset the perceived costs. The first thing one can do is save on recurring expenses like car insurance!

Save

The key to all retirement planning is savings. Putting away a goodly portion of monthly income into an investing account such as an Individual Retirement Account (IRA) or 401(k) is the only way to take advantage of compound interest. The wonder of compound interest works especially in a young person’s favor, such as when a 20-something saves a third of his income every month and puts it into an IRA. The younger a saver begins, the more money he will have when he retires. Compound interest works harder the longer it is allowed to operate. Savings can also be applied to saving on insurance!

Live Frugally

To save the amount of money needed, it is necessary to cut back on current spending. Shopping at thrift stores, eating at home, canceling expensive cable subscriptions and other frugal lifestyle decisions are often necessary. This is the hard part of putting a plan centered around retiring early into action. The frugal lifestyle is being forced upon many people who have lost their jobs or who are drowning in debt. Adopting it voluntarily helps ease the sting, but it may still hurt socially to see other people enjoying the fruits of their labor today. Nonetheless, cutting back on unnecessary expenses is absolutely the right thing to do when pursuing early retirement. One should always be checking their credit card and make sure they are never overdue on their payments. This could greatly hinder early retirement!

Invest Aggressively

Saving enough money is only the first step. Over time, inflation will eat away at the value of an all-cash position or a conservative fixed-income portfolio. Younger workers who are putting away a good portion of their income can afford to be very aggressive with their investments. Allocating 75 to 90 percent of their money into stocks will ensure that compound interest will transform their returns into a sizable pile of cash by the time they are ready to sell. The reason for this aggressive stance is the investor’s long time horizon. Younger investors can handle the ups and downs of the market more easily because they have more chances to regain and exceed their losses. The investor would do well to focus on dividend-paying stocks as well as so-called “growth” stocks.

Use a Roth IRA

A young worker can do no better for himself than to take the money he is saving, park it in a Roth IRA and set up a portfolio heavily allocated to stocks. A Roth IRA allows the investor to contribute after-tax income, but the withdrawals made later are tax-free. The contribution amounts change from year to year, and even with an aggressive savings strategy, the investor may not be able to meet the current allowable contribution of $5,000. The Roth IRA provides tax-advantaged compounding and the ability to avoid the tax man when the investor does retire.

Avoid Debt

The absolute key to this entire plan is to stay away from all forms of debt. Debt is used to finance present consumption at the cost of foregoing future consumption. Using debt is exactly the opposite of saving money to retire early. Deferring consumption until the future allows a young worker to enjoy more later. Debt reverses the situation. By allowing the young worker to live a high life now, debt ensures that the worker may never retire. He has to keep working in order to pay the debt off. If he does ever retire, he will enjoy less rewards than if he had saved.

Retire Early

Retiring early may seem like a dream, but it can be made real by following these steps. Accumulating enough money to live off of comfortably for a few decades into the future is possible. The only thing that must be done is to decide whether that goal is desired enough to cut back now in exchange for having more abundance later. Early retirement makes it all worthwhile in the end.

5 retirement planning mistakes that you should avoid

Mike — Tue, 24 Aug 2010 09:33:25 +0000

Planning for retirement is an extremely crucial task that each citizen needs to focus on while still employed. Around 40% US citizens retire before they turn sixty. If you are planning to retire at such an age, its now time to choose a proper retirement plan according to your needs.

A retirement plan is aimed at providing you with a regular earning after your retirement. This eventually means, you would not need to depend on your children financially.

There are a few common mistakes that people make while planning for their retirement. Read on so as to avoid committing the mistakes and live a stress free life:

1. Plan your retirement well ahead:

The life expectancy of human beings has seen a growth at the recent times. It has been observed that people spend an average of 30 years in retirement. Hence, it is absolutely crucial to plan your savings properly so as to maintain a decent living standard post retirement. While planning you need to consider a few basic things like- your retirement age, minimum amount you require to maintain a healthy lifestyle, etc. Also check the worth of your Individual retirement account (IRA). Learn more about your pension schemes and various social security benefits.

2. Do not take out money from your retirement savings:

In case you want to take out the money, utilize it for smart investment moves. You should ideally aim to increase the cash flow into your account.

3. Start saving early:

Most people wrongly assume that they will have a lot of time for their retirement planning once all other financial affairs fall into place. But then, by the time you are 50, there is no time to plan for your retirement savings. So, it is wise to start as early as possible.

4. Monitor your investments:

Your retirement assets need regular monitoring just like your other belongings (for instance, home and car). You should regularly check your retirement account and reallocate your assets. It is absolutely necessary to do an investment assessment once a year to make sure that you are aware of the risk levels in your portfolio.

5. Relieve your debts:

You would not want to retire with the burden of debt on your shoulders. Make sure to repay all your debts. If necessary, enroll yourself for a debt settlement program.

Contribute as much as possible to your tax deferral accounts like Roth IRA and annuities. Also remember, you have to pay a 10% early withdrawal penalty if you withdraw your money from the retirement account before you are 59 years 6 months old. This will exhaust your savings earlier than usual.

Tips for an early retirement

Mike — Wed, 25 Feb 2009 12:13:31 +0000

The Street.com has posted five things to avoid if you would like to retire early.

Their tips are so you can retire at 50 years of age. So, if you are in your 30′s or 40′s, 50 can still be a long way away. I much prefer mini-retirements as advocated by Tim Ferris author of the 4 Hour Work Week.

Their first tip is to have children early.

Families that bring in $59,300 a year will spend $197,700 on average, or $11,000 a year, on each child until he or she is 18.

I don’t have any kids, so I suppose it has made it easy for me to stop working a regular 9-5 job and travel where I want. $11,000 does seem a lot though, and they say for each child.

Their next tip is to save. You can’t argue with this, but it is important not to just save, but to actually save and invest your money in something that is going to appreciate in value like stocks, property and businesses.

Their other tips include, not dipping into your retirement fund, adjusting to economic slowdowns like we are experiencing now and avoiding credit card debt. All no brainer tips if you ask me.

I would suggest people to build multiple streams of income, preferably passive income. Property and internet websites have done pretty well for me, but there are plenty of other ways you can be successful, if you try to get a little creative and think beyond financial advice on sites like the Street.

Where is the best place to retire

Mike — Sat, 04 Aug 2007 14:50:45 +0000

Where is the best place to retire? Mexico? Thailand? I am sure everyone has there own opinion, so I have added a poll to my site.

You can see it on the left side of my blog, you may need to scroll down a bit to see it. It is a bit of fun, but I am trying to experiment with a bit of stuff here on my blog.

Retiring in your 30s

Mike — Tue, 26 Dec 2006 22:44:22 +0000

I found this interesting article on how one could possible retire in your 30s via. Even just the thought of being able to retire in your 30s would have been unheard of until recently. For people who plan their finances and have some success with them, it is entirely possible.

I don’t think anyone who has the financial ability to retire in their thirties would just quit their work entirely and take up lawn bowls, but it does give people who have the financial means to quit their corporate jobs and pursue their own dreams and aspirations.

Not having a regualar income means you need to rely on money to come from a business or investments. This does take some time to manage, but hardly the time and stress it takes to fulfill the requirements of a regular job. The other advantage is that if you structure things correctly, you can live in almost any location, preferably with a lower cost of living.

My requirements for a suitable location would include:

- good food
- close to the beach
- low cost of living
- good internet connection
- friendly locals
- relatively safe