People who want to retire early usually don't plan to spend those extra years under a beach umbrella. Not all the years, at least.
They want to escape the 40-hour workweek so they can travel the world, spend time with their family or chase a professional dream. And they want the
of relaxing on a beach if they so choose.
In other words, they want the freedom that comes with financial security and time. With some planning and dedication, it's possible to retire before you're 50 years old. But you must avoid the pitfalls that will keep you chained to your desk. They are:
Having children early:
It's not that children are a negative factor. It's just that Mom and Dad tend to focus on their kids and forget their own retirement funds. Families that bring in $59,300 a year will spend $197,700 on average, or $11,000 a year, on each child until he or she is 18, according to a 2006
. Families who make more spend more on their children.
If you expand your brood before you start investing in your retirement, you'll probably devote more money
. Failing to invest when you're young may force you to work more years when you're old.
Putting off saving:
"There's still plenty of time." It's a convenient excuse when you're young and money is tight, but you'll be punching the clock longer if you believe that rationale. The
, the more interest you accrue, adding to your retirement fund's principal. Even if you can only invest a token amount, putting money away when you're young will help your retirement dreams come true.
Tapping your retirement fund unnecessarily:
When faced with a crisis, such as a
or medical emergency, it's tempting to raid your retirement fund. It might not even be an emergency. Maybe you want to use some of your savings to pay your child's college tuition.
If you dip into your savings, you'll likely have to work longer than if you hadn't. You not only lose the benefits of compounding interest, but you might have to pay a penalty for taking money out early.
Failing to adjust as retirement nears:
Many people who expected to retire soon will have to postpone their plans now that the falling stock market has
. Some have less than half the money they thought they would have.
That's why it's important to invest more conservatively as you get older. If your portfolio is too risky, you stand to lose more if the market sinks, forcing you to work longer to earn that money back.
Building up credit card debt:
Before you buy something with a credit card that you won't be able to pay off right away, ask yourself if the item is worth the interest you'll pay, and the extra years you'll spend at the office earning enough to pay it.
It's quite simple: You should put your money into your retirement fund instead of giving it to credit card companies. There's no better way to extend your work life than to fall deeply into debt.
Saving enough to retire early takes planning and discipline, but the reward is clear: If you spend less now, you'll have more time to do what you enjoy later.
Jeffrey Strain has been a freelance personal finance writer for the past 10 years helping people save money and get their finances in order. He currently owns and runs SavingAdvice.com.