Early Retirement Financial Planning

Early retirement planning is a process that you will need to undertake if you plan on retiring before the normal retirement age. When planning, there are many different variables that you will need to consider. Here are the basics of early retirement financial planning and how the process works.


Determine when you would like to retire. Look at your current situation and figure out when you would like to be finished with your working life. Without knowing exactly when you would like to retire, it is impossible for you to plan a way to get there. You have to have a specific time in mind in order to plan accordingly.

Net Worth

When planning for early retirement, you need to understand the basics of net worth. In order to retire early, you are going to have to develop a substantial amount of net worth. Net worth essentially refers to the amount of money that you have after you subtract all of your liabilities from your assets. For example, you are going to include the value of your investments, the equity in your house, and any liquid assets that you have in your account. Anything that is of value can be included in this calculation.

Instead of focusing on how much money you want in your bank account, try to calculate how much you would like to be worth when you plan on retiring. This is a much better way to assess your early retirement goals. Assets can be converted into cash when you retire. Therefore, you need to take a broad look at your financial situation by assessing your net worth instead of looking at smaller variables.


When planning for early retirement, you are also going to want to take some time to determine how much money you are going to be spending when you retire. In order to determine how much net worth you are going to need, you need to figure out how much money is going to be going out each month. You need to include housing, utilities, taxes, groceries, and travel expenses in your calculation. If you know where you would like to retire, get an idea of what real estate prices are in that area. If you are going to rent a place, figure out what the market rent is and use this in your calculations. You should also include something for inflation when making these calculations as the prices will not be the same when you retire.


Once you know exactly what you want to do and how much money you need to accomplish it, you will need to evaluate your investment strategy. Sit down with a financial planner and determine how much money you need to put away each month in order to reach your goals. They will also be able to help you select a mix of investments that will give you the best chance of reaching your goal.

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