How To Save For Early Retirement

By: Catherine Woods

Break Studios Contributing Writer

Everyone dreams of an early retirement but many people do not know how to save for early retirement. Many people think that they can passively save and still retire early. This is a mistake. Take control of your retirement savings and use these steps to save for early retirement.

Decide how early you would like to retire. Whether you would like to retire five, ten or even fifteen years early, set a goal for your retirement. Write that date down and keep it where you can see it, to help you stay focused.
Find out how much money you will need to sustain your lifestyle from retirement on. Find out how much money you will need to cover your expenses every year, and multiply that number by the number of years you think you will live after retirement. The number you come up with is the amount you will need to save in order to retire.
Divide that number by the number of months you have before your retirement goal. This will give you the amount you need to save every month to reach your early retirement.
Begin cutting your expenses so you can save the monthly amount calculated in step three. If you cannot set aside that monthly amount right now, start a budget to find that amount of money. Cut back on eating out, your cable bill or even your car insurance to free up the money you need.
Work extra so you can put enough money away for your early retirement. If you cannot find enough money after cutting expenses, find ways to make extra money. Work a few extra shifts at your current job, get a second job or even donate plasma. Whatever you do, find the extra money so you can save for early retirement.
Invest according to how long you have until you retire. Once you have the money you need every month, invest it in mutual funds and stocks that do well in the time frame you are working with. So if you intend on retiring ten years from now, invest in a stock that has a good ten year track record. Just make sure you diversify your income so you can retire despite dips in the market.