The future is now: how you can retire young
For the vast majority of Australians, retiring early is a pipe dream with one very flimsy strategy – a Lotto ticket. But for the more financially aware and driven among the younger generation of today, there are plenty of tools, strategies and opportunities to achieve their money goals quicker than ever before – and retire earlier as a result.
So how about you, could you retire sooner than you thought?
Well, most people will continue working into their mid-60s, based on a combination of their wealth, their health and their employment situation. Most people also know that you have to be at least 55 before you can access your super, with the specific age varying between 55 and 60 depending on your date of birth.
Likewise, when you become eligible for the age pension varies - recently increasing from 65 to 67, depending on your date of birth.
However, if you aren’t looking to rely solely on traditional pension options and have the desire to investigate other opportunities, it is possible to retire much sooner.
How can you exit the workforce early?
Early retirement is possible, but in the majority of cases it takes planning and discipline for this to be a financially viable option. In fact, there are simple and practical ways to achieve an early exit from the workforce, and coming up with a well-thought plan could make all the difference. There are many strategies you can think about employing to make the dream of early retirement a reality, including reducing your expenses, increasing your savings, and investing in property or shares.
There is even a movement that is taking a grip in Australia called FIRE - Financial Independence Retire Early. To put it simply, the idea begins with living a frugal lifestyle while you’re young so you can build up an investment portfolio and live off that in your 40s and beyond. Here are some examples of people following the trend. FIRE flips the idea of how to save money, offering an alternative approach on how to make it to retirement – by following an extreme savings plan.
FIRE might not be for everyone, and there is an argument that enjoying things like travel, incidental spending, nights out and other expenses might form part of any happy and rounded life. It is definitely a strategy worth researching, and there are hundreds of books and articles about this plan online.
You may be thinking this is hard to determine, but in reality, it isn’t that hard to work out how much you need to retire. Moneysmart has some great tips, and asks a very poignant question that you need to consider, “You may know how much super you have now, but do you know how much you’ll have when you retire?”
This government planning tool from the Moneysmart website is a great calculator for working out exactly what that amount is for your needs:
- How do you want to spend your years in retirement?
- What sort of budget will that take?
- What age will it start?
- And how long do you expect it to continue?
If you’re already thinking by this stage that early retirement is beyond you, then here are some other planning tools to play with, because whether early or not, the goal is to retire at some point.
How can you retire at a younger age in Australia?
Really it comes down to building wealth. Partly through superannuation, but also through other financial investments.
Here are 6 great steps to follow which could help lead to early retirement:
- Have a plan and a savings goal
- Reduce expenses
- Pay off your mortgage
- Top up your super
- Create a retirement budget
- Build an investment portfolio
In addition, the 4 key points to note within these steps are:
- It takes planning and discipline
- Work out how much you need to retire
- Cut expenses, so you can save and invest
- Consider working with a qualified financial advisor
Is there anything else to consider before retiring young?
It is important to consider if retiring early is actually something you really want to do! If your answer is a definite yes and you have the drive and discipline to follow the early retirement suggestions, then building financial security to achieve early retirement is not out of reach.
Retirement can be whatever you want it to be – the chance to travel, the chance to do something more meaningful and philanthropic, the chance to reinvent yourself. So, the real question is, how soon can you make it happen if it’s what you want?
As you surge forward with early retirement plans, it’s just as important to consider having insurance such as life insurance in place as protection against unexpected events. Planning for unforeseen events and looking after those you care about most is important. Consider what would happen to your loved ones if you were to pass away or suffer a terminal illness? Find out more about Guardian life insurance today and see how you can put protections in place for those you care about the most.
20 Apr 2022