How to retire sooner

Created date

May 21st, 2013
Man and his granddaughter

Plenty of headlines lately tell us traditional retirement has gone by the wayside that we have to work until we re 70 or launch an encore career. If you d still like a good old-fashioned retirement, complete with afternoon golf and frequent travel, it may be possible with some savvy financial planning. The first step toward retiring sooner is figuring out exactly how much money you ll need. You never want to risk outliving your nest egg, but consider what your retirement will actually look like. Kimberly Foss, founder of Empyrion Wealth Management, Inc., and author of Wealthy By Design: A 5 Step Plan For Financial Security, says many of her clients find they need more money at the beginning of their retirement for travel and leisure activities like dining out. So, we start carrying down [projected financial need] as they get older, Foss says. But, how do you grow that nest egg when you re nearing retirement?

Avoid taxes

Foss s number one piece of advice is to avoid taxes. Two investment vehicles she uses to reduce clients tax liability are Roth IRAs and no-load variable annuities. Both allow money to grow tax deferred, so withdrawals can be made during retirement when most people s tax brackets are lower. If you can control the distribution amount and when it comes out, you can control your taxes, Foss says. If your goal is to retire earlier, Patrick Kelly, author ofStress-Free Retirement, offers one succinct suggestion: Don t lose money. Believe it or not, Kelly says, There are ways to build significant pots of money with products that present zero risk of loss. Kelly recommends indexed annuities that track the commodities market. When markets go up, Kelly says indexed annuities return up to four times more than CDs, but when markets go down, you won t lose money.


If dropping out of the rat race is your top goal, it may be worth it to make lifestyle adjustments. Foss says the fastest way to take a bite out of your budget is to downsize to a smaller home or pay off your mortgage before you stop working. People don t realize it in their earning years, but a $1,500 to $2,000 mortgage payment is a big part of a fixed-income budget, Foss says. Many of us yearn to stop working so we can finally see the world, but travel takes money. Foss suggests instead of taking a $10,000 trip to Hawaii, consider three lower-cost mini-vacations like a long weekend in Napa Valley for $1,500. That way, you d travel more frequently, but spend less money in total. Elle Kaplan, CEO of Lexion Capital Management, offers yet another spin on travel in retirement: move to the place you love to visit. We live in a given city because of our jobs, Kaplan says. Once you re no longer constrained by that, then you have the freedom to move to an area with lower tax rates, such as Texas or Florida. It s an instant way to give yourself a raise without doing anything more than changing your scenery.