Retiring Early Without Going Into Debt

A growing aspect of the great American dream is taking an early retirement. The idea of working well into a person's mid-sixties (or beyond) is simply not very appealing to a large portion of the population. People want the freedom to travel, play with their grandchildren, enjoy their hobbies, and contribute time to churches and charities. The obvious catch to fulfilling this dream is having the means to financially afford it. This requires some serious advanced planning to ensure that your golden years aren't spent accumulating debt.

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Tips for Early Retirement Savings

Start early. The later in life that you start saving the harder it will be to accumulate the necessary funds.

Be realistic about how much money you will need. It does a person no good to low ball their budgetary figures. This will cause problems during retirement and could seriously affect the quality of life.

Don't rely solely on your 401K. This investment vehicle should be a big part of a person's retirement plan; however, it is designed to have access at 59 1/2. If you retire in your early fifties than a large financial vacuum is created. A failure to fill this vacuum can result in a severe deficit of funds that may require an individual to run up debts or return to the workforce.

Be realistic about life spans. The average person's life expectancy continues to get longer. This means that a person's retirement income needs to stretch further. Budgeting for too short of a time will cause problems.

Take advantage of Roth IRAs. This is one of the best investment vehicles available for those considering early retirement. Because the Roth is a pre-taxed investment it can be withdrawn at any age. The money is available with no penalties and is tax free upon withdrawal. If possible it is wise to fully fund the maximum allowable limit on an annual basis.

Don't sacrifice your emergency savings. It is important to always maintain a proper level of liquid savings that is available for emergency purposes. It is a temptation to forgo these savings in an effort to accelerate retirement savings but resist the urge.

While many dream of retiring early few actually have the financial means to carry this out. Proper planning is essential in reaching your retirement goals and avoiding debt. The earlier you enact a plan the more likely your dream will become a reality.

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About the author:

Mark Carney is a professional consultant with First American Debt Consolidation and Loans, a debt consolidation service specializing in financial education, credit counseling, and debt management services nationwide.