By Barbara Pronin
Exiting the workforce early is a common dream—some might say fantasy—for many of today’s employees. It can be done, as MSN Money recently reported, so long as you plan ahead.
To retire at age 55, follow these tips:
Live Below Your Means
It’s tempting to upgrade from your starter home or buy a new car every few years, but, as The Millionaire Next Door author Thomas J. Stanley points out, retiring early happens for most people only after years of frugality. In general, it’s best to save 25 times your annual salary by retirement.
– Experts say it’s a misconception that conservative asset allocation is the only way to go. All but the very wealthy will need a healthy allocation to stocks for growth. Joe Heider, president of Cirrus Wealth Management in Cleveland, recommends that people within a few years of retirement scale back their portfolios to 60 percent stocks, and hold steady at that allocation into their retirement years.
Budget for Healthcare
– Since you won’t be eligible for Medicare until age 65, you will need to secure health insurance. If you won’t have retirement health benefits, one option is to buy an individual or family plan from your state’s marketplace. Retiring couples can expect estimated healthcare costs of $17,000 per year until Medicare eligibility, according to a recent Fidelity study.
These strategies, coupled with a trip (or two) to a financial advisor, can pave the path to an early—still financially secure—retirement.