Five Key Tips to Retire Early

Most people would like to have the choice of whether to work or not.  In a world of rising social security pension ages and increased taxation, retirement is becoming more and more difficult.

We have therefore come up with our Top 5 Tips to Retire Early and ensure you avoid most of the common pitfalls.

1. Have a target – Work out how much you will need and when you will need it.

This isn’t rocket science and is probably the most important step to take, yet very few people actually do this!   You simply need to work out what level of income you need and when.  For example, you may want to be financially free in 10 years time, and in order to do this you need passive income of $40,000 per year.

It doesn’t stop there, however. You need to factor in inflation otherwise you might be disappointed and have a rather uncomfortable retirement.  So, in 10 years time, you will need something like $50,000 per year if inflation runs at 3% between now and then.  There is your target!

2. Review your existing arrangements.

Once you have your target, you need to work out how best to hit it.  The first step is to look at what you have already.  The key here will be to know what level of income you can expect from your existing pensions and other investments.

There are people who blindly throw $200 per month into a retirement account and think they will be OK as “at least they have a pension”. Yet they have no idea what level of income this pension is likely to provide them!

So, start by making a list of all your existing retirement accounts & investments (and your business, if you will keep it into retirement) and estimate what income they are likely to provide in your retirement.  There are many factors involved in calculating this, such as likely investment returns, taxation, and charges.  You might want to talk to a financial advisor.  You may be pleasantly surprised – or quite disappointed – but either way, you will have a much better idea of where you currently stand and what you need to do next.

3. Diversification is key.

Retirement is not just about pensions – far from it.  It is also not just about your business, nor should it be just about property.  Had you been relying on a single asset class for your retirement in recent years, you probably would have been very disappointed and are now facing a longer working life than you were planning.

Your retirement money should be in different investments.  It is very high risk to rely solely on your business or the sale of your main residence – however these things are important in building a diversified portfolio of assets to provide you with an income in retirement.

Once you have your target, and know what assets you have, you need to make sure you are not overly reliant on any single asset.  This will significantly improve your chances of retiring early.

4. Keep more of what you earn.

Sounds obvious, but many people lose thousands & thousands of dollars to the taxman over their working lives.  By ensuring your affairs and investments are structured in the most tax-efficient way,  you can move your retirement date up by many years.  This is where we, Bressler & Company, excel.  Our passion is tax planning — finding you the most tax credits and deductions legally possible and giving you strategies to make changes before the end of the calendar year.  After December 31, it’s too late to make most changes for the next tax bill on April 15.

5. Regular Reviews.

Having a target and knowing where you currently stand is great, but if you are to be successful in achieving your retirement goals you need to review your progress every year.

The key questions to address are:

Is my target still the same?
What progress have I made? Am I closer to my target or further away?
How have my assets performed?
Are my pensions & investments still cost-effective?
What tax-planning strategies can I implement to make sure I keep more of my profits & income?

How can we, Bressler & Company, help?

If you have any questions about this article or what strategies you can follow to lower your tax bill, call today (559.924.1225) to get on the waiting list for an appointment before year end.  Our tax planning consultations are book up through December 31, but there could be a cancellation.  Or, call and book an appointment for after January 1 to get a head start on next year.

The article was reprinted from TheWowCompany.com