How to Plan an Early Retirement – 2024 Guide

Retiring early is the dream. However, making that dream a reality can be a little bit tricky to achieve if you don’t prepare for it properly. It may seem like more of a pipe dream, but with the proper planning and preparation, you can turn that dream into a reality. By putting the right plan in place beforehand you’ll be able to retire early and enjoy your golden years with your loved ones.

Let’s take a look at how you can plan an early retirement to make the most of your newfound freedom.

How do I start an early retirement plan?

One of the first things you should do when making a retirement plan is to be realistic about what it will mean for you. You will need to consider whether you will be able to realistically afford to go on endless vacations abroad or buy that dream yacht.

Work out how much money you have for expenses


It will be important to work out just how much money you will have to live on each year. You will need to consider whether this can fund a comfortable lifestyle, and whether this is an attainable goal for you. You should work out how much you have put aside in your savings, as well as how much money you will be able to access from your pension.

Not entirely sure where to start? The CreditNinja retirement calculator can help you to figure out just how much money you need to set aside so that you can retire early.

Once you’ve worked out how much money you have available to you, you will then need to calculate your expenditure. You should consider your daily expenses, including any household bills, insurance, pet care, amenities, as well as any debt you have left to pay off. These will all play a factor in how realistic it will be for you to retire early.

Financial independence

Ultimately, the best way to retire early is to achieve financial independence. This will mean paying off all of the debts that you have accumulated, including your mortgage. You will also need to ensure that you have enough income to cover all of your daily needs.

Once the bills and essentials have been covered, you will need to also account for additional funds so that you can enjoy doing things in your spare time. It will also be a good idea to keep a savings fund for emergencies.

Additional income


Another factor to consider is what additional source of income you will have if you were to retire early. This will include things such as a private or workplace pension, savings, any investments you have made, whether you can downsize your home to get additional funds, or any other property you own.

It will be important to note whether any of these can achieve a regular income, or whether they are a lump sum. Of course, if your aim is to retire early, your state pension won’t factor into this. But once you reach the age where you are eligible to claim your state pension, this can then be factored into your retirement plan.

Discretionary expenditure

You will also need to come up with a rough estimate of how much you expect to spend in your early retirement. This doesn’t include things such as bills – this will be more like any holidays you want to take, any new car you want to buy, any boat you want to own, or any other interests you will want to pursue in retirement.

Of course, this can be a fairly difficult figure to quantify beforehand. You should assume that these costs will rise along with inflation and that your wants and needs may adapt as you grow into retirement. Giving yourself an estimate of your discretionary expenditure on top of your basic needs will give you more of an idea as to whether early retirement is an achievable goal for you.

Calculate how long your retirement will last


In order to come up with an accurate retirement plan, you will need to work out how long your retirement is likely to last. You should assume that your retirement will last for at least 30 years or even longer and that you have the funds and additional income to cover this.

It will be best to overestimate just how much money you will need to cover this, so that you can get a better idea of your target retirement age.

Is early retirement a good idea?

Determining whether early retirement is a good idea or not will entirely depend on your particular circumstances. There are of course many benefits to retiring early. You will have more opportunities to travel, or finally have the time to dedicate to the hobby that means so much to you.

However, it will be important to be realistic about how achievable this is. You should make sure to plan your retirement thoroughly so that you can enjoy it stress free. You won’t want to have blown through all your savings or private pension funds to then have to go back into the working world to cover your expenses.

It will also be worth consulting with a financial expert to ensure that you have everything covered. They will be able to better advise you on things like taxes that you will still have to consider. A reputable financial advisor will also be able to give you the right advice on choosing the right investment schemes.

In summary

So there you have it! Early retirement may not be the impossible dream that you thought it was. As long as you start saving early, and make a sufficient amount of planning, there’s no reason as to why you can’t retire early and enjoy life to the fullest. You will need to ensure that you have enough of a nest egg or additional income to cover your basic expenses, as well as give you enough money to spend on things that you can enjoy.

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