According to a recent CNBC survey, 53% of Americans feel like they’re falling behind when it comes to retirement planning and saving. With the median retirement savings account balance sitting at about $87,000, according to data from the Federal Reserve, the idea of retiring early may seem like a pipe dream. But we spoke with someone who retired early, and we’ll share tips on how you can do it too.
What are some common money tricks that can help you retire early as a millionaire?
Watch: I'm a Self-Made Millionaire: 6 Steps I Took to Get Rich on an Average Salary
Read more: 6 Subtly Genius Things All Rich People Do With Their Money
Rich people know the best secrets of money. Learn how to copy them.
Advice on how to retire early
Since early retirement is a goal that many people strive for, we want to help you create a plan to make it happen.
Enter the numbers
Paul Gabrail, the founder and host of Everything Money, left a traditional job to focus his energy on projects he was interested in. He considers himself retired because he has the cash flow to cover his expenses and can spend his time however he wants without having to look for work. He was able to quit his job and live life on his own terms at age 43 by focusing on the math involved in retirement planning.
“There are no magic bullets when it comes to retiring early,” Gabrail noted. “Spending less and saving more is timeless, tried and true.”
You should do your best to determine how much money you need to live comfortably in retirement. Your retirement amount will depend on your lifestyle and housing costs. The goal, however, is to crunch the numbers so that you can determine how much money you need to save or invest in assets so that you can quit your job 10 years or sooner. In many cases, you should focus on becoming a self-made millionaire so that you are wealthy enough to quit your job as soon as possible.
Once you determine the amount you need, you'll want to find a wealth building strategy to speed up the process.
Money Expert: I Followed Mark Cuban's Genius Advice and Am on My Way to Becoming a Millionaire
Build a real estate portfolio
“A tactical investment tip that can help increase revenue (and increase opportunities to save) is to build a rental property portfolio,” says Gabriel. While there are several options for building wealth, such as starting a business or pursuing a high-paying career, Gabriel chose to focus on building a real estate portfolio.
He cautioned that investing in real estate isn’t free money and it still requires a lot of work, but it can be worth it if you want to retire early. Investing in rental properties allowed Gabrial to build a passive income stream that helped him cover his expenses so he wasn’t dependent on his day job. Now he can spend his time on projects that matter to him.
Gabrial added: “By building a rental portfolio and starting early (by buying one rental property a year from your mid-20s), you can get closer to retirement much sooner.”
Expert advice on what you can do to retire early
Want to start planning for early retirement? Here’s expert advice on what you can do to kick-start the process.
Set a target date
“First, you need to decide what your target retirement date is,” says Erika Kullberg, an attorney, personal finance expert and founder of Erika.com. “You have flexibility here if your financial goals or plans change over the years, but you need to know what year you want to work toward.”
If you want to retire 10 years early, you need to choose a rough timeline and work backward to create a plan to achieve this goal.
Work with the numbers you have calculated
The next step is to crunch the numbers and understand the finances to figure out what it will take to retire early. This includes figuring out how much money you can pull out of your investment accounts.
“Rather than thinking of yourself as wealthy, focus on how much income your portfolio can safely generate over time,” says Katherine Fox, a certified financial planner and founder of Sunnybranch Wealth. “If you’re in your 30s or 40s, you’ll want to use a particularly conservative estimate in the early years of retirement. As time goes on and you get more comfortable living off a steady income from your portfolio, you can make adjustments as needed.”
The goal is to work with your numbers and timeline to figure out how to become a millionaire and retire early. If you’re going to invest in real estate, this includes figuring out how many properties to invest in or what kind of cash flow you need to create to quit your job.
Once you know how much you need to save for retirement, divide that amount by the number of years left until the deadline. This will help you determine how much you need to save each year.
Take advantage of retirement accounts
“Simply maxing out your company’s 401(k) probably won’t get the job done, although that’s a good place to start,” Kullberg noted. “Maximizing your 401(k) will help you take advantage of the most tax benefits that can stretch your retirement savings further.”
Once you've done this, you may want to consider depositing additional money into an IRA to save money on taxes now or in the future, depending on which account you choose.
Evaluate your lifestyle choices
“For most people, saving enough money to retire early will require a lot of sacrifices right now, so you may need to reconsider your current lifestyle choices,” Kullberg said.
It is worth emphasizing that these sacrifices can be worth it if you can enjoy your retirement longer than most, but you will need to make some serious lifestyle changes while you are still working.
Kullberg concluded, “Life is expensive, and if you retire early, you'll not only have a steady income sooner than most people, you'll also have less time to earn the money you need to build your retirement savings. To retire early and live comfortably, you need to have a savings plan and be willing to be very disciplined.”
More from GOBankingRates
This article originally appeared on GOBankingRates.com: I Retired a Millionaire 10 Years Early: Try These 6 Money Tricks to Get Rich Too
