Want to retire early? Start planning now

The average American retires at about age 63, according to data from the U.S. Census Bureau. If you enjoy your work, of course, you may want to go well beyond that age. But what if you don’t want to wait until 63 or so? Can you afford to retire early?

Possibly – if you follow these suggestions:

• Research the costs involved. What will you do during your retirement years? Will you travel the world or stay close to home, pursuing your hobbies? Will you downsize from your current home? How will you pay for health care until you’re old enough for Medicare? You will need to answer these and other questions to determine how much you will need to sustain a comfortable lifestyle as an early retiree.

• Invest more – and invest for growth. One big advantage in retiring at the usual age, or even later, is that it gives you more time to invest. But if you’re determined to retire early, you will almost certainly need to accelerate your investment rate – which, in practical terms, means you’ll likely have to contribute more each year to your IRA and 401(k) or similar employer- sponsored retirement plan than if you were going to retire later on. Plus, you may have to “ratchet up” the growth potential of your investment portfolio. However, because growth oriented investments typically are more volatile than other investments, you will be taking on more risk than you might otherwise. If you are truly uncomfortable with this risk level, you may need to re-evaluate your plans for retiring early.

• Cut down your debt load. It’s always a good idea to enter retirement with as few debts as possible – but if you want to retire early, you may need to be even more diligent in controlling your debt load.

• Know the rules…

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