#Retire50 – A Pledge To Retiring At 50 Years Old

March 1, 2020
by Matt

If you’re anything like us, you dread the thought of never escaping the rat race and working until you’re too old to enjoy your golden years. Instead of working in a 9-5 for the next several decades, take control over your future so you can travel the world, explore new hobbies, and spend precious time with your family. Society dictates that 65 is the standard retirement age, however, who says that has to be the age YOU retire? Why not write our own rules?

We pledge to #Retire50. Leading up to 50 years old, we started taking the steps so come 50, we say goodbye to our 9-to-5 jobs and welcome in the next stage of our life. We encourage you to join the #Retire50 pledge that our close friends and we have committed to…because, retirement is more fun with your friends!

Most people can’t retire early because their nest egg isn’t large enough to support them. Granted, everyone has unique journeys, the truth of the matter is that with proper planning and dedication, retiring at 50 is completely attainable.

Below is our guide to #Retire50. We encourage you to learn from us and apply it to your own financial situation. Welcome to your early retirement and future freedom!

Step 1: Cover Your Ass

The first step to #Retire50 is to bolster your long-term, tax advantageous investment vehicles such as 401Ks and IRAs. Since these retirement investment vehicles benefit from the power of compounding returns and have multiple tax benefits, it is essential that you invest as much as you are able to as early as possible.

A 401K is very powerful because many companies will offer matching contributions, where they l put money into your 401K equal up to a certain percentage. Employer matching is free money and the only form of guaranteed 100% return on investment funds that you will ever get. 401Ks exist in two forms, Traditional and Roth. Check out this lesson to determine the right fit for you.

By investing properly in your long-term retirement vehicles, you are assuring that come the ripe age of 59 ½, you will have enough money available for the rest of your life.

If you’re late to the party and haven’t invested in a 401K yet, don’t worry because it’s never too late. Focus on maxing out your 401K until your 50 and your IRA until your 60 and you will be well set-up for financial freedom in your post-60 retirement years.

For most people, it may be difficult to max out contributions every year, which is why it is critical that you consistently put as much as you are comfortable putting into your 401K or IRA as early as possible.

Step 2: Make Smart Investments

Now that we’ve covered your 59 ½ future-self, we need to set ourselves up to be able to retire at 50 years old. These are funds that we will begin dipping into at 50 and will need to at least last us until we reach 59 ½.

This consists of the more widely-publicized investment vehicles, such as bonds, stocks, mutual funds, and ETFs. All money that is not going towards your day to day budget, living expenses, or retirement accounts is the money you contribute towards your investment portfolio. With proper management, your portfolio will grow over time into the nest egg you’ll need

By focusing on high growth, fluid investments, you have the opportunity to build wealth in a shorter time frame and the flexibility to move those funds around as the market shifts. While these are riskier investments, you can take solace in knowing you’ve already covered your ass with more traditional retirement investments in Step 1. As you approach retirement, you also shift your riskier assets to low-risk investments in order to preserve the wealth you grew over the years.

There are a lot of good sources out there to help determine the right investments if you’re not super comfortable with the stock market. Consider ETFs as a great way to invest in a diversified portfolio without having to manage individual stocks with extremely low fees.

Step 3: Create Additional Income Streams

Now that we are committed to retiring at 50, we need to work our tails off to make it happen. While traditional employment (the 9-5 job) provides great benefits (access to retirement vehicles and steady income) there are so many other ways to bring in additional revenue to boost your retirement savings or help pay for that next family vacation.

In our lives, we are always discussing new business ideas based on our interests and needs in the market. The key is finding a passion point and figuring out how to earn returns off of it. You like arts and crafts, sell home-made products on Etsy. You’re a skilled coder or project manager, take on side-projects as a freelancer through UpWork or Fiverr. The resources available to you are endless and some additional cash could be just a few projects aways.

Step 4: Setup Your Family For Success

For many people, kids provide a deep level of fulfillment and joy. While this is true, they are also extremely expensive. Not to mention the rising costs of attending college. If your kids are young or you are just thinking about starting a family, come 15-20 years it is going to be even more expensive.

That is why it is so important to start saving for your kids’ education as early as possible. By saving on a regular basis in a low-risk investment vehicle, you will be able to ensure you don’t need to dip into your retirement funds to help support your kids through their higher education. As someone who has felt the burden of student loan debt, this also helps set up your kids so they can avoid this burden and hit the ground running as they transition into young adults…and hopefully avoid moving back into the basement during your hard-earned retirement.

Educate yourself about 529 plans (Educational Savings Account – ESA) and Coverdell Plans, which are great vehicles to contribute towards in order to put enough away for (skyrocketing) education costs.

Step 5: Diversify, Diversify, Diversify

As we kick off 2020, we ended last year in a bullish market which yielded 28% growth in the S&P 500. This is unprecedented growth and has done miracles to those invested in the stock market. What I wouldn’t give to see that growth continue for the next 20 years and put all of us in an unbelievable financial situation.

But times aren’t always this good and the way in which the economy fluctuates is mostly unreliable and unpredictable. As of the end of February 2020, we are already seeing a softening of the market due to global events. Just 12 years ago, we fell into the toughest recession this generation has seen. Jobs were hard to come by, financial markets crashed, and many people defaulted on their mortgages. If you were trying to retire during this time period and your funds were in the tanking market, it was likely you had to postpone your retirement until the economy rebounded.

This is our nightmare! You’ve worked so hard to #Retire50 and all of a sudden the economy throws a wrench in your plans. The key to overcoming this risk is to Diversify, Diversify, Diversify. By spreading your investments across different asset classes and investment vehicles, you mitigate the risk of potentially losing your hard-earned savings at inopportune moments in your life.

Step 6: Live Within Your Means

One trap that is easy to fall in and is a killer towards your goal of #Retire50 is living outside your means. In today’s cashless world of same-day deliveries with a single click, it is easy to lose track of your long-term goals. Instant gratification is a great feeling at that moment, but could potentially harm your retirement goals.

With that said, we also work very hard to provide for ourselves and our families, and life is about living experiences and creating enjoyment. Don’t feel guilty for treating yourself to those new pairs of shoes or for taking your loved one out to a romantic dinner. Instead, create a budget that allows for these types of expenditures and stick to it. If you invest a sizable percentage of your disposable income towards your retirement, you can then carve out money to support the lifestyle you want to live.

Step 7: Practice Zen-like Patience

Earlier, we talked about creating two retirement savings streams: one for when you retire at 50 and one you can access at 59 ½. It is critical that you avoid taking out of your 401K or IRA early as this will have enormous negative consequences and could jeopardize your retirement. The savings used at 50 years old need to last you ten years so you can avoid dipping into your 401K or IRA early.

Barring no covered hardships, withdrawing funds early from your retirement accounts comes with a steep 10% penalty on everything withdrawn, plus taxes (if applicable). This could jeopardize the long-term viability of your savings and we’d recommend never withdrawing early unless under dire circumstances.

Additionally, once hitting 59 ½, it’s important that you only withdraw enough money needed to sustain you for a short period of time. If you want to remove more, be sure to continue to actively invest it so your hard-earned savings can continue to grow and sustain you throughout old age. A general rule of thumb is the 4% rule – never withdraw more than 4% of your assets per year and you will have enough money in perpetuity to sustain yourself.

Step 8: Collect Social Security

We’ve been hearing about Social Security failing for years, yet retirees are thankfully still collecting their checks from the government. I like to think of Social Security as the sprinkles on the sundae. Plan your retirement as if you aren’t receiving it and when you do collect it, it will bolster your current financial situation.

Considering Americans pay a portion of every paycheck towards Social Security and the political landscape is continuously shifting, I hope it is still available come our retirement. However, plan for the worst and hope for the best.

Step 9: Join the #Retire50 Pledge

Now’s your chance to pledge to #Retire50. Apply the above steps to your personal financial situation and begin making moves to best put you in a position to retire at 50.

It can seem daunting, but retirement financial independence is attainable with proper planning. It also helps to share these goals with your friends and families. Primarily it will help others understand your long-term goals and take the pressure off of you in FOMO situations that conflict with your savings. Also, by sharing with your friends and families, you can get them to pledget to #Retire50, because remember, retirement is more fun with friends!

Check out additional topics to make personal finance SLIGHTLY EDUCATIONAL on our Personal Finance page.