9 Tips To Hit the Minimum Savings You Need To Retire Early

4. Track Your Expenses

One of the biggest early retirement mistakes is underestimating your expenses. Rodriguez advises tracking your spending for six months to a year and adding a 20% to 30% buffer to account for unexpected costs.

“If you are unaware of what you are spending on a monthly basis, begin tracking your current expenses for six to 12 months and add a 20% to 30% buffer on top of your expenses to create a cushion.”

For example, if you are spending $40,000 annually, it would be a good idea to plan for expenses in retirement to be around $50,000 to $60,000 annually. If you plan on retiring before you are eligible for Medicare (age 65), it is important to factor in healthcare costs as well, he said.

5. Maximize Social Security Benefits

If you are, or will be eligible for Social Security, make sure you are maximizing the amount you receive, which usually involves waiting until age 70, Rodriguez urged. Waiting until age 70 allows you to receive 124% of your full retirement benefit, which can be significant over the course of your retirement.

6. Consider Partial Retirement or Side Hustles

If your savings fall short, partial retirement can help bridge the gap. Working part-time or starting a side hustle can reduce the strain on your portfolio and extend your financial runway.

“If you are able to find work that you find fulfilling that also allows you to work at a level that is comfortable to you in retirement, this can help you significantly extend your portfolio in retirement,” said Rodriguez.

7. Account for Inflation

You also need to account for inflation in your planning, Stoddard said. Inflation generally affects expenses that retirees still pay, such as housing and insurance, which, she explained, “statistically ascend in alignment with the inflation rate. Sometimes, even at a faster pace.”

While inflation tends to have a relatively stable rate of increase, unexpected changes can cause unusually high rates of inflation.

8. Diversify Beyond the Stock Market

Stunning dips in the stock market this month reveal that it’s important to have assets that are not invested in the stock market. Stoddard suggested alternative investments “like precious metals,” which tend to hold some sort of value as they’re a tangible asset, and their value tends to work inversely to the stock market.

Likewise, owning real estate is typically viewed as owning an inflation-protected asset.

Some retirement accounts that allow for alternative investments include self-directed Roth IRAs, self-directed traditional IRAs and solo 401(k) plans or Roth solo 401(k) plans, Stoddard said.

9. Analyze Your Retirement Goals and Tradeoffs

Ultimately, early retirement isn’t just about hitting a number; it’s about aligning your finances with your values and the lifestyle you want to have. Fox encourages people to ask themselves why they want to retire early. In the end, an early retirement may not be the right fit for you. Cox said that retirement planning requires not “obsessing over the number” and “talking about tradeoffs.”

The right plan doesn’t always mean retiring early. Sometimes it means retiring smarter with more purpose, more clarity and more alignment with what matters most to you.

Caitlyn Moorhead contributed to the reporting for this article.

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