Retirement Funding Solutions: 10 Crucial Steps to Ensure Retirement

Retirement Solutions: 10 Steps You Can Take to Ensure Early Retirement

Early retirement is an aspirational goal, and one we’d love to help you achieve. Being able to have a future that is secure enough to leave our working lives behind early, is a reward for having well-managed finances. Getting to this goal will take hard work and discipline, but it is possible if you are committed to your plan and partner with a financial professional that shares the same vision as you. Here are ten steps that you can take to ensure that you get to your early retirement goal.     

1. Get your current finances in order

The most important place to start is with the present. That means building a budget. Make sure that you have a basic understanding of how much you are taking in and spending each month, then build yourself a budget that accounts for all of your regular expenses as well as long-term savings room for unexpected expenses such as medical bills, car maintenance, and home maintenance. Next, take an assessment of your debts, especially your consumer debt, and create a plan for how you can either get it under control or paid off over time.

An ideal end of the month budget outcome should leave you ample surplus for saving and investing. If not, then you’ll need to go back through your budget to determine where you need to cut costs and control spending. If you need help with this, a certified financial planner, such as a Trust Point team member, can be a great asset to you. Remember if you don’t have your current finances in order, early retirement in the future is unattainable.

2. Create a retirement budget

Building a budget for your future might be just as important as building one for your present.  Will you be able to maintain a standard of living where you are comfortable? When you retire, you will be living off of the income generated by your assets, savings, and entitlements. Many of the things you spend money on will be the same (i.e., food, basic utilities), and some things may be significantly more expensive (i.e., healthcare). Trying to anticipate all your costs in the future will be hard, but a good estimate will go a long way towards giving you saving and investing goals. In general, you should add up expected retirement income, including social security, pensions, dividends from investments and other assets.

You should then subtract all expected expenses, which should be somewhat similar to your present expenses, except you may want to build in more costs for health care. This will give you a good idea of how much you’ll need for retirement. Retirement calculators such as the one here, can also be a good guide for helping you figure out what your retirement outcome will look like with your current financial situation. A retirement professional can also help you pull together all of the anticipated, and unanticipated, expenses of retired life so that you have an accurate picture of your future.

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3. Save aggressively

It may sound overly simple, but the underpinning of all successful financial planning is keeping more of your money than you spend. If you’ve got a solid budget, you should know what you’re capable of saving today. A baseline goal should be to save 10% of your take-home income. If you want to retire early, then you may way to save in excess of 20% to 30%, and possibly even more. Look at your current budget and retirement calculations.

Does that number get you to your goal of retiring early? If the answer is “No,” then you need to save more, hitting your savings goal should be just the bare minimum that you do. Because life is unpredictable, you should try to save well in excess of your target every month, as some months it might be difficult than others. The essence of aggressive saving is to plan on saving until it “hurts.”  Does it mean that you can’t have fun like going out occasionally or going on vacation? No, but if you’re planning to retire early, you need to have a plan to make sure these expenses don’t erode your long-term goals.

4. Invest. Invest a lot.

Now that you’re saving aggressively and have a handle on your finances, you should look to invest those hard earned savings. Simply saving your money will not be sufficient to get you to early retirement. You’ll need to build a diversified portfolio of equities, bonds, real estate, and other financial products that will appreciate over time and accumulate value via growth, dividends, and interest. A good savings account currently produces an annual growth rate of about 1.0-1.5%.

Over the long term (10+ years), a diversified stock portfolio can grow at a rate of 8%-10% annually. These investments should also spin off income in the form of dividends and interest payments, which you can use to purchase more of these assets now, and then cash flow for you later in retirement. While the markets can be volatile, the long-term outlook for smart and steady investors is very good. Create a strong and diversified portfolio, and you will be on your way to early retirement.  If you need help setting up an investment plan and asset allocation that will help you reach your goals, make sure you utilize a financial professional who understands your goals and can help you develop a successful investing strategy.

5. Grow your career

A great budget, goals, and an investing plan will lay the groundwork for success, but it’s also important that you grow your most valuable asset: YOU. Having a career that continues to grow in compensation and keeps you employed will be the engine for meeting your early retirement goals. Are you stagnant in your current position? Make sure that you are getting compensated fairly for the work you do, and constantly look for career growth opportunities. Keep up with the latest trends in your industry and continue learning new skills that will improve your value to an employer. Take a proactive approach to your career if you want to reach your top earning potential. A lifetime of consistent and growing wages will propel you to a prosperous retirement.  

6. Control your housing and living costs

Where you live can make a big difference in how much you can save for retirement. Most people will spend 20-30% or more of their income on housing, so it’s important that you consider how you spend the biggest piece of your budget. The conventional wisdom has said that owning a house can be a simple method of increasing your asset base and savings, while providing housing at the same time. A home that is fully paid off can be a significant cost saver in retirement as it removes a monthly housing payment. However, home owning can be expensive and market conditions can make it difficult to buy a home that isn’t overpriced, and to find a mortgage that offers a good rate.

While a house can be valuable, you are more likely to get a better long-term return on money invested in the stock market than making an interest-heavy monthly payment. In certain situations, it might be a better choice to rent for a while and invest some money in the market to build your assets, especially if housing is overpriced. So, make your housing decisions carefully, and whether you are renting or buying, consider how much you can afford. Affordability calculators can help you get a sense of whether it’s better to buy or rent in your area.

7. Manage your taxes

How you save for retirement will make a big difference in the returns from your investments.  Start by maximizing tax-advantaged retirement savings accounts. 401(k)s and IRAs provide you various tax advantages for your contributions that traditional bank and brokerage accounts can’t provide. For example, contributions in a Roth IRA can grow tax free while in the account and are untaxed when you make a withdrawal. Whereas in a standard brokerage account, you would have to pay taxes on all asset sales, dividends, and interest payments. 

Make sure you know what your maximums are for your current income level and work to meet them as annual goals. Many employer-provided 401(k)s have the added benefit of providing matching funds for your contributions. This is essentially “free money” for your future self, and you should take advantage of this as much as you can.

8. Catch up if needed

In 2023, the government allows people under age 50 to contribute 100 percent of their salary up to $22,500 to their 401(k)s. Those age 50 and older are able to contribute 100 percent of their salary up to $30,000. If you are able to contribute the maximum, this is a great way to make up for any lost time, or push your retirement date farther forward.

9. Insure yourself from major setbacks

Buying insurance can be one of the most unsatisfying parts of personal finance, but if you aspire to stay ahead of the curve on retirement, it’s necessary. Use insurance to protect you from rare but potentially highly costly life events. Make sure you have the basics covered such as Medical, Car, and Home. Another piece of insurance that can be helpful is Disability insurance (Short and Long Term) to protect you if you are out of work for any significant amount of time, which can cause some serious financial distress if you aren’t prepared.  Additionally, make sure you purchase enough insurance to sufficiently protect you from costly events, such losing your house in a fire or totaling your car, but not so much that you are paying a premium for extras that you are unlikely to use. Avoiding major financial setbacks can make sure you stay on the road to an early retirement.

10. Meet with a financial professional

Planning for retirement, especially an early retirement, is no small feat.  Several of the steps outlined can be done on your own, but many of them will require that you make some important decisions, understand complex financial products, and carefully consider all the factors involved. Using the expertise of a financial consultant, like a financial professional at Trust Point, can help to steer you in the right direction throughout the entire process. It’s our mission to preserve and increase your wealth, in a manner that serves your values.

If you’re ready to start down the path to early retirement, then we can help. Trust Point’s certified financial planners are ready to work with you today on a roadmap for your future! Get in touch with us today! 


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