How to make early retirement a reality

Retirement is something millions of professionals aspire to. Retirement isn’t necessary when a person stops working forever. In fact, many retirees continue working as part-time volunteers and consultants.

Individuals have traditionally retired at the age of 65. However, the United States Social Security Administration indicates the normal retirement age (NRA) is the age at which retirement benefits are equal to the primary insurance amount. The primary insurance amount is based on a certain formula that includes the year of birth. For most people born in 1960 and later, NRA is 67. Choosing to retire earlier may result in reduced benefits. But people who have financially planned for early retirement may not view a decline in SSA benefits as a deterrent. If early retirement is a goal, these strategies could make it happen.

• Use a retirement formula. The retirement planning resource New Retirement says that the basic formula for retirement is to accumulate 25 times your annual expenses and then plan to draw down no more than 4 percent of that value every year. For example, if you spend $50,000 per year, then you need to have $1,250,000 in savings to be able to retire. Budget to realize that savings goal. For those who have trouble calculating retirement figures, utilize this planner:, which offers various retirement strategies.

• Trim extra expenses. Reduce your spending to put more cash toward your future. Comb through credit card statements and look at various bills to see where you can save.

• Reduce your biggest expenses. Food, transportation, and housing comprise most people’s largest expenditures. Instead of routinely buying new cars, look for certified pre-owned models, which are equally reliable. Carpool to save money on commutes. Reduce food expenses by shopping sales and making eating out a luxury and not a regular thing. Downsize your home, or rent out a room (or apartment if it is a two-family) to offset mortgage costs.

• Consider a government gig or another pension-backed job. Pensions used to be part of many companies’ benefit packages, but now they’re harder to come by. Focus employment on companies or careers that offer retirement perks that go beyond what a 401(k) offers. A pension waiting for you may mean you don’t have to do as much personal scrimping and saving for early retirement.

With the right savings strategies, early retirement can be a reality.