Even though many people won’t admit it, they hate living in the rat race. They despise driving to work in the morning during rush hour, praying they make it to the office or the job site on time.
Taken a step further, many people won’t admit they don’t like their jobs. They expected more in life than work, TV, bed, rinse and repeat. They expected riches and, along with them, vacations to exotic destinations and a life that would be the envy of all their friends.
However, there is a way to get out of the rat race sooner than later, and it’s called early retirement.
If you and your spouse are on the same page, it’s entirely possible to sit down with a certified financial advisor to plan for early retirement. Perhaps this means retiring when you are in your fifties or even when you hit the magic age of 62. You’re still middle-aged and able to do just about all the things you could do when you were young. It’s just that your time will now be your own to explore the world and live your life in any way you choose.
But all this takes money. One sure way to fund an early retirement is to plan on applying for a reverse mortgage as soon as you turn 62. Even if, technically speaking, you’ve retired in your mid-fifties, you can make it a part of your overall retirement plan to acquire a reverse mortgage that will allow you to tap into all that equity you’ve been building up for decades by paying religiously on your monthly loan.
You can take your proceeds in one lump sum payment (which can be in the hundreds of thousands of dollars), or you can take them in equal monthly payments. Plus, you need never pay your mortgage back unless you leave the house or you die. You can get a good idea of the reverse mortgage you will qualify for by using this online reverse mortgage calculator (https://reverse.mortgage/calculator)
Reverse mortgages aside, what are some other things you need to do to plan for early retirement? According to a report by The Motley Fool, early retirement is an admittedly ambitious goal, but if you create a realistic plan, you can most definitely quit your job and the rat race earlier than your coworkers.
Figure Out What You’ll Need To Live In Retirement
Too many people incorrectly begin planning for retirement by coming up with an almost arbitrary number. For instance, you might overhear a friend saying, “If only I could win the lottery for one million bucks I would quit my job immediately.”
Sadly, the reality is far different. When it comes to quitting the rat race and early retirement, it’s not about how much money you have in your bank account; it’s about the passive and sustainable income you can create from investments, plus other incomes producing sources such as creating a YouTube Channel, or influencing, or writing books for Kindle Direct Publishing. All of these income-producing activities can be performed in your pajamas at your kitchen table and from anywhere in the world.
You need to speak with a financial planner who will help you determine exactly what you need to stay afloat. For example, if you plan on traveling from one exotic destination to another for the rest of your life, you’re going to need a larger source of passive income and investments. Similarly, you can calculate your retirement pension fund in Iceland to ensure you have enough passive income for a comfortable retirement.
But if you plan on staying in your home and living a quiet life, you won’t need as much income, plus you can apply for your reverse mortgage when you hit 62. You will also collect social security at that time.
Calculate Fixed Income Sources And Social Security
If you’re dead set on quitting the rat race early on, years before you can collect Social Security, then it’s a good idea not to include it in your early retirement calculations. But if you have annuities and pensions that will kick in even if you retire early, those should be taken into account.
If you need $60,000 per year ($5,000 per month) to survive annually, and you can count on $2,000 every month from annuities or a pension, then you will need to come up with some additional income streams. These can come either in the form of savings and investments or gigs that produce income that can pay out $3,000 per month.
Come Up With Your Number
Says The Motley Fool, this is the time to make a final determination on your savings target if you plan on retiring early. Figure out the income you’ll need from your savings, and then determine how much you can securely withdraw every month for the rest of your life.
Many retirement planners are said to use a “4 percent rule,” which means you can take 4 percent of your savings during the first year of retirement. From that point on, you adjust the amount according to your cost-of-living increases that will happen in the future.
If you feel that you will run out of savings ten years down the road, then by all means, figure out ways to make some passive income, or you can enter into the gig economy just to keep some cash flowing in. You can even put your hobbies to work like painting portraits, landscaping, or becoming a private driver. Most of these gigs are fun and a far cry from being trapped in the rat race.