Many people in the workforce would love to know how to retire by 40 but think it would be impossible. Though retiring by age 40 can be difficult, it is definitely possible with a little planning and some hard work. By following these steps you can stop working at the age of 40:
- Calculate how many working years you have until age 40. Simply subtract how old you currently are from forty and that is how long you have until retirement.
- Estimate how much money you will need to live comfortably after age 40. Decide how much money you believe you will need every year to live on and multiply that number by how long you believe you will live past age 40. Make sure to take into account at least a 4% increase in living expenses due to inflation.
- Calculate how much you will need to save and invest every month to reach that number. Once you have determined how much you need to retire on, enter that number into a retirement calculator along with how long you have until retirement and how much interest you expect to receive from your investments. You will then be given how much money you will need to save and invest every month so you can retire by age 40.
- Cut back on your monthly expenses and find ways to make extra money. Many people will look at the monthly amount they need to save and realize they need to raise their income and cut expenses to reach that monthly goal. Remember that you will need to make sacrifices to retire by age 40. So get a second job and down grade your cable plan so you can reach that number. You will be glad you did.
- Invest your savings mutual funds and stocks that have a high yield over the last five to ten years. Since you are most likely going to be investing over the short term, look for investments that have high returns over a five to ten year period. This will ensure that your investments will earn you the most money possible by the time you retire.
- Finally, pay off your debt early. Find money every month to get credit cards and loans paid off. The more debt you have when you retire, the more money you will need every month. So the less debt you have, the less money you need to retire on.