Retirement can seem so far away at times, and it can be difficult attempting to plan for it. Retiring early seems like an even larger challenge. There are, however, a few things that can be done or prioritized now that can help later in life.
Here are three tips to get you started on your early retirement plan.
1. Pay Off Your Debt
It’s extremely difficult trying to save money for retirement, while also dealing with debt. Debt hinders your ability to save for retirement if you are constantly owing money. Prioritize paying off your debt in conjunction with saving for retirement. High-interest debts such as credit card debt should be the first to go. The longer you wait to eliminate your high-interest debts, the longer period of time you may have before you can retire.
Remember to try to make the minimum payment on all your debts to avoid late charges.
2. Erase Non-Essentials and Establish a New Budget
Saving enough funds to exit the workforce early means you’ll have to be without some luxuries at an early age. It doesn’t mean giving up all enjoyment in life, but it does mean that you should focus on saving money over spending on impulse purchases. There are two ways you can do this: The first is to cut out all the unnecessary spending that you can, and the second is to establish a budget.
3. Max Your Contributions and Prepare for Unexpected Costs
When depositing your savings money, make sure you’re prioritizing your retirement accounts. Trying to max out your retirement accounts every year is a good goal. Ask a financial expert what your maximum contributions cap is and try to hit it.
When preparing savings for retirement it helps to know and understand all the options you can take in the future because things can happen unexpectedly and throw a wrench into your plans. A HECM loan* is a type of loan that homeowners who are retired, or are retiring sometimes choose to take. Homeowners who are at the age of retirement and occupy their home as their primary residence, are eligible to apply for a HECM loan, which doesn’t require payments until the home is sold. If you qualify for a HECM loan you may be able to tap into your home’s equity in the form of cash. It can be a smart way to financially cushion yourself during your retirement years, especially if you are lacking enough savings, have some unexpected health care costs or even for other expenses like home repairs.
If you believe that a HECM loan is a solution you may want to explore, I’d like to talk about your options. I’m available to answer any questions you may have regarding applying, qualifying or even just the terms of the HECM. Contact me today and let’s talk about planning for your future.
*(1) at the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds; (2) charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees; (3) the loan balance grows over time and interest is charged on the outstanding balance; (4) the borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home; and (5) interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment. This material is not from HUD or FHA and has not been approved by HUD or any government agency.