The 250 Personal Finance Questions Everyone Should Ask by Peter J. Sander

Author:Peter J. Sander
Language: eng
Format: epub
Tags: subject
Publisher: F+W Media
Published: 2010-10-10T16:00:00+00:00

Question 130: Scenario: I am forty and really want to retire early. Can I? How? My assets are income $80,000, home $250,000, mortgage $175,000 at 7.5 percent, current savings $40,000, and retirement savings $60,000.

The first step is to decide how early to retire. Retirement before fifty-five really puts a burden on savings, for you need to plan at least thirty years of retirement and at least seven years without Social Security. You also need to consider health care and whether you can retire early from a job with some health benefits.

Without repeating the detailed analysis of Question 129 (it is more detailed because of the Social Security issue), it's best to think in terms of a three-part strategy. First, plan to pay off the home before you retire. That implies a 15-year mortgage or shorter. Next, you should practice living cheap for two reasons: first, it will help later to survive on something less than the rule of thumb of 70 to 80 percent of current income, and second, because it allows some power savings during the next fifteen years. Finally, those power savings should be invested aggressively with the notion that, if successful, you can indeed retire early; if unfortunately you are less successful, you still have some time to build the nest egg. The bottom line is pay off the mortgage, learn to live frugally, and stretch your investments a bit, and you have a shot at it.

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