So, you’re giving thought to retiring early in Australia. That sounds like an excellent idea, but before you launch into this plan, you need a strategy to get you there. Here are four early retirement strategies that may be of some assistance.
Strategy #1 - Early Retirement Financial Foundations
Your expenses don’t end the moment you retire. This is why it is important to have savings and investments to help support your retirement lifestyle. But how do you know what you need financially to live comfortably in retirement? This is where your math skills will guide you.
Determine Your FIRE Number
FIRE stands for Financial Independence, Retire Early. The number that results from this calculation represents the amount of money you will need to maintain your chosen retirement lifestyle without having to get a job.
It is not a simple calculation as it involves your current net worth, your annual retirement expenses, and defining your desired income level. There are online tools to help with this as many other factors will impact the formula.
Aggressively Saving
This is where you bank at least 30 percent of your monthly income during your working years. This should produce a massive amount of money if you stuck to the plan and lived as basically as possible, making countless sacrifices to get to this place.
Growth Investing
Hopefully, as you planned early on for retirement in Australia, you also comducted wise investing. This would mean you bought shares, bonds, real estate, and exchange-traded funds (EFTs) along the way. Plus, if you were really thinking ahead, you would have spread those investments across multiple asset classes to diversify your portfolio.
Strategy #2 - Early Retirement Income
During your working years, you could plan for early retirement if you built several different streams of income. With various income sources, your financial health is secure and flexible in retirement.
Age Pension and Superannuation
These are the standards in Australia, and you need to fully understand your eligibility. The Age Pension is available to you once you turn 67. Your Super can impact retirement income, so it is vital to maximize contributions to yours whenever possible.
Residential Real Estate Investments
Real estate ownership is a great way to generate wealth as you save for early retirement. There are many factors to consider ranging from capital growth and rental yield to property location.
Dividends and Interest Revenue
Having a portfolio with dividend-paying shares can produce a solid retirement stream of income.
Part-Time Employment
One of the most enjoyable ways to supplement your income in retirement is with part-time employment. A job not only keeps you connected with a social network, but it also produces a purpose for each day.
Strategy #3 - Lifestyle Adjustments
Early retirement may mean cutting back, trimming, and just generally reducing the amount you spend and the volume of things you have.
Downsizing
Reducing your living space will be beneficial in many ways. The most significant of which are lower housing and maintenance costs. A simpler lifestyle is easier to maintain and costs far less than you think.
Medical Requirements
Healthcare expenses are going to become a larger part of your life the longer you live, so it is wise to look at your options and understand what they provide. Your basic choices are Medicare or private health insurance.
Tax Planning
With accurate and effective tax planning, you can do two key things. First, you can reduce the amount of tax you may have to pay the government each year. Secondly, with a solid tax plan, you can maximize your retirement income.
Consider Relocation
Sometimes moving to a different community can save you more than it costs to get there. Essentially, a community with a lower cost of living could be the answer to your question about why everything is getting so expensive.
Strategy #4 - Mental/Physical Well-Being
Although having a solid financial foundation is crucial in early retirement, you also need to be strong mentally and physically. Good health is an important factor to experiencing a satisfying retirement.
Purpose
Why do you get up each day? Does every day feel like Wednesday? A sense of purpose and fulfillment should provide the fuel you need to enjoy each day and fill it with good times.
Stable Finances and Peace of Mind
If you achieve early retirement and reach financial independence, you will have peace of mind. Curveballs and sudden unexpected expenses won’t derail your day or plans.
Keeping Healthy Habits
Staying active both physically and mentally will help you enjoy early retirement even more. Whether you exercise, engage in sporting activities, and eat a well-balanced diet, you can experience all that early retirement can offer for a long time.
Look to Best Retirement for Retirement Information
Are you ready to enter the exciting world of early retirement? If you are retiring in Australia, contact Best Retirement today to learn more about the Australian pension, aged care in Australia and everything else you need to embark on your very own journey to early retirement.
Conclusion
Early retirement is a goal of most individuals. Many factors will determine your financial health, which should guide your decision. Fortunately, there are a handful of strategies that can offer insight into your retirement plan. If you can retire early and maintain a comfortable lifestyle, congratulations!