5 Steps to Early Retirement Planning

Retire by 30s or 40s?? Sound too good to be true?

After all, it is not a good idea to work until you age or die. Retire early is achievable if we start working on it earlier. It’s never too early to start planning for early retirement. In fact, the earlier we start right out of college or university the earlier we can retire.

Other than allowing us to enjoy everything that we want after leaving the work force, early retirement planning is also one of the critical steps to achieve financial freedom.

Of course, early retirement planning also implies a lot of works and things to be considered. When we see the word “planning”, it already tells us that a lot of steps and long winded processes to follow through.

However, I am going to show you a simple 5 steps to early retirement planning. It is definitely worth investing time and working on it when statistic showing us that 95% of the people retire dead broke! I don't want to worry for my retirement or struggling when retired after working so hard before retirement.
Then, it is better start taking action and working on it now…

Step 1: Set our goal

First of all, we need to know what kinds of retirement lifestyle we want i.e. what is our goal. The number one reason most people don’t get what they want is because they don’t know what they want!

Write down our needs on a piece of paper and rank each of them as either absolutely necessary, most important, nice to have or least priority.
Knowing how we want to live now and in the future will help us set our financial goal.

Below are some ideas on things that we might want to consider and plan for early retirement:
1. At what age we want to retire at?
2. How do we want to spend our time after retirement? Fishing every day?
3. Where to stay after retirement? Big bungalow? Sea facing apartment?
4. Travel around the world
5. How much we need to maintain our desired lifestyle?
6. Children education if you already have kids
7. Any mortgage payments during retirement?
8. Life and healthcare/medical insurance coverage
9. Contribution to society? Other than financially, volunteer your time and talents to help others?

Step 2: Decide our financial target for tomorrow

Based on the desired retirement lifestyle and project the required expenditure on a piece of paper.

Need some guidance here? you can use this Worksheet - budget for tomorrow.

Step 3: Conduct a financial inventory count

Assess our current financial situation by doing an inventory count of what we have today. A financial inventory is simply a list of what we have and where we have it.

List down the following on another piece of paper.

1. All our Assets
2. All our Liabilities
3. Calculate our net worth (Assets less Liabilities)
4. All our Income
5. All our expenses
6. Calculate our net income or Savings (Income less Expenses)

If you need an easier way to do it, you can use the free online worksheets/tools to have an overview of our current financial situation.

Worksheet for Networth
Worksheet for Net Income

Step 4: How much do I need for early retirement

Try this free Retirement Planner to have an idea how much do we need for our early retirement.

Below are some tools/calculators to explore further:
Are You On Track With Your Early Retirement Plan?
List of Retirement Planning Calculator
How Much Will You Need For Retirement?
How Much Do I Need To Save For Retirement?

Step 5: Start taking action with a financial plan and evaluate the progress

Work out a detailed financial plan and start taking action to achieve our financial goal.

If you still find it a bit challenging to work out a financial plan, with the information that you workout from the earlier steps, you can seek advice from a professional financial planner to help mapping out your financial plan.
Next, we need to act and monitor the actual financial performance against our plan on monthly or even weekly basis, if needed.

Evaluate the performance for further improvement or changes due to change of economic situation, interest rate, job, marital status, addition of new family members, etc.

At the same time, keep record of all the short term goals that we have set and attained. Give ourselves a pad at our shoulders and say, “Great job! Keep it up!”

With early retirement planning, Financial Freedom is now a possible dream…

Find out more Tips on Early Retirement Planning here...