Everyone dreams of ditching work forever, retiring early, and living life to the fullest. But is it possible to do so with only $500K in your retirement fund?
The short answer is yes, BUT — it will take some very careful planning, a lot of craftiness, and some wise financial guidance from a skilled and experienced wealth advisor. If you think you’ve got what it takes to break free of the rat race sooner rather than later, keep reading for some valuable tips and tricks to help you reach your goals.
Young at heart
You deserve to retire before the age of 65, of course, but the younger you are, the more money you’ll need to have socked away so you can live comfortably throughout your golden years.
If you’re currently in your 40s and without kids, it might be more realistic for you to plan for early retirement than it is for someone who has several children who want to go to college.
Do you own your home free and clear? Then early retirement on $500K could be in your future, especially if you’re able to sell the property, bank a tidy profit, and move somewhere much less expensive.
Are you generally healthy and working hard to stay that way? Eating right and getting plenty of exercise will not only help you live longer so you can enjoy all this, but it will also give you the energy and creativity to think outside the box when it comes to stretching your dollars.
In the old days, many people assumed Social Security would be there to support them once they stopped working. Unfortunately, with the dramatic increase in the cost of living and other factors, that’s just not the case any longer. You’ll need to have a healthy independent retirement fund and a strategic plan.
When it comes to retirement planning, you may have heard of “the 4% rule.” This concept was developed by a financial advisor in the 90s to help retirees determine how much to withdraw from their retirement funds each year as living expenses without depleting their nest egg too early.
This idea was created by studying stock and bond returns over the tumultuous 50-year period from 1926 to 1976, which included the legendary crash of 1929 and severe market downturns of the early 70s.
While adjusting slightly for inflation, a withdrawal rate of around 4% ensured a retirement portfolio that lasted around 30 years or more. At current rates, if you have a fund of $500K, you’d have a yearly income of around $20,000.
The 4% rule also recommends maintaining a portfolio that’s split between conservative stocks and Treasury bonds to eliminate the chance of losing money on high-risk investments. That’s not always the smart move these days, however, due to current conditions.
It’s crucial to speak to a trained advisor who can help you plan for a sustainable retirement.
The frugal life
Why waste your time with a daily grind when you’re ready for adventure? If you’re willing to imagine a more unique lifestyle, then it becomes much more possible to live well on less money.
Now that Florida is prohibitively expensive, retirees have been moving abroad for many years to enjoy a lower-cost lifestyle, warm weather, a seaside location, cheaper healthcare, and other advantages.
Relocating to another country might seem daunting and expensive, but it’s easier than you think. Here are a few places that have a very low cost of living, beautiful surroundings, and welcoming communities:
- Chiang Rai, Thailand
- Northern Belize
- Nha Trang, Vietnam
If you prefer to stay closer to friends and family in the US, you can still live a low-cost retiree life while still having fun. Many people these days have decided to buy an RV or other type of motor home to enjoy the freedom of unrestricted travel while having all the comforts of home.
While van life isn’t for everyone, it has distinct advantages, the main one being lower overall living costs. But unforeseen circumstances can always pop up, so it’s best to have a plan B in case life on the road isn’t your cup of tea.
A good way to make sure you can retire with at least $500K in the kitty is by working with your financial advisor on a way to add passive income to your portfolio.
If you’re not exactly sure, passive (or residual) income is simply additional money that you earn on a regular basis with little or no work on your part. The most common way to get this income is via investments like rental properties.
Investing in real estate can have its ups and downs, but it’s traditionally a good way to build wealth for your retirement. Being a landlord can quickly become hard work, so you may want to consider working with a property management company for truly passive income.
Don’t stress — plan
You won’t enjoy your early retirement if you’re constantly worried about running out of money. The best way to reduce this financial anxiety is to have a solid plan and a strict budget, and figure out ways to make your money go further.
Minimizing your fixed expenses is crucial. These are the costs that don’t change from month to month, such as housing, insurance, and food. Your retirement advisor can guide you through planning for variables like taxes, inflation, and medical costs.
It also makes sense to do a bit of penny-pinching, even if you feel like you’re sitting pretty. Moves like negotiating your recurring monthly bills, comparison shopping, growing your own food, and maximizing your credit card points and benefits can save you thousands of dollars per year.
Reach your financial goals
Can you retire with just $500K? It’s possible, especially if you start now and work closely with a certified professional who specializes in building financial stability. Having a strategic plan in place will help you feel less stress when it comes to thinking about your retirement situation.
It’s vitally important to stay focused on your long-term goals in these uncertain times, and getting individualized investment advice will ensure you come out ahead. At SRI, we provide comprehensive financial planning solutions that are tailored specifically to your values and goals.
Questions? Reach out today!