- I didn’t save for retirement until I was in my 30s, but now I want to see how quickly I can catch up.
- I spoke to 6 advisors who all gave me tips on what to do so I can retire 15 years from now.
- They told me to eliminate debt, reduce investment risk, watch out for tax liabilities, and more.
- Read more from Personal Finance Insider.
For most of my 20s, the idea of planning for retirement was something I didn’t take seriously. I refused to fund my 401(k), and wasn’t educated on the benefits of a Roth IRA. When I turned 30, I decided to get smarter about how to manage my money now, and in the future.
After hearing about friends in their mid-30s who are working now to retire before they reach 45, I decided that 2022 would be the year I got savvy with planning for my own early retirement. As I toy with the idea of retiring before 50 (I’m 33 now), I wanted to hear from financial experts about what I can do now if I want to retire in 15 years or less.
1. Plan for tax liabilities
When deciding how to save for retirement, financial planner Erik Sussman said that something big a lot of people overlook is tax liabilities.
“Ideally, retirees should strive to be as tax-free as possible prior to retirement, either through Roth IRAs or other options to reduce taxes,” said Sussman. “If taxes are overlooked or underestimated, people often find themselves running out of money during retirement.”
2. Make sure your investments aren’t too risky
If you’re looking to retire in 15 years or less, financial planner Scott Turner recommends spending quality time coming up with an investment strategy that works within that timeframe — and one that considers risk.
“Too many people in 2008-2009 had socked away $1M of their hard-earned money, only to watch it get cut in half when the stock market tanked,” said Turner. “They were overweight in stocks and took big hits that meant they couldn’t retire on time.”
Turner added that if you’re looking to retire in 15 years or less, that is about the time to you’ll want to change your investments to make them less volatile.
3. Eliminate debt
Financial planner Colin Exelby said it is essential to eliminate debt because debt is something that can hinder your net worth for years, even decades.
“Being in debt reduces your options when times are good, and can severely destroy your financial well-being when times are tough, because you have placed a claim on your future cash flow,” says Exelby. “If you are thinking about taking on more debt and it doesn’t result in an increase in cash flow, think twice.”
By debt that results in cash flow, Exelby means things like investing in a mortgage for a rental property, as opposed to things like credit card debt.
“Consumption should ideally be paid for with income, accumulated savings, or investments,” said Exelby.
4. Be clear on what your retirement will look like
If you’re not sure how much money you want to have before retiring, financial advisor Jay Brecknell said that a good step to take is to picture what retirement will look like for you.
“For most people that are 15 years out, they do not have an accurate picture of what that looks like,” said Brecknell. “What hobbies or activities will you engage in? Travel? All of these items have a cost and need to inform your retirement budget high affect your targets.”
5. Contribute what you can
Whether your retirement age is nearing or not, financial planner Mark Reyes recommends contributing what you can and starting soon.
“Every person’s retirement contribution amount will depend on how much room they have in their budget,” said Reyes. “A good starting point is to set aside 10 to 15% of your salary for retirement, but the more you can contribute the better.”
6. Save half of all your raises and bonuses
When unexpected money enters your life, whether it’s through a raise or bonus, financial planner Patti Black said it’s important to adopt the 50/50 rule to help you save for retirement and save at least half of it.
“But the catch is that the 50% you spend cannot create a new monthly bill,” says Black. “For example, you can spend 50% on a vacation or on some new furniture that you pay for with cash, but not on a new car that you finance over 60 months, and have to pay higher