In today's climate of rising prices and inflation, many people think that they need millions to retire comfortably. When you actually look at your current spending and add income like social security to the mix, you will notice that you don't need as much.
Also, most people don't have millions by the time they retire, so it may be helpful to see how you can retire on less.
When surveyed by Schroders, 56% of Americans expect to have less than $500k when they retire. On top of that, 36% even expect to have less than $250k available by the time they retire. When asking actual retirees, more than half (57%) had less than $250k saved at the time they retired.
Here are 7 ways to make sure you will retire comfortably with $500k.
How Much Can You Spend With $500K?
The first thing you want to know is how much you have to spend. You can do that using the rule of 25, also called the 4% rule. The rule of 25 is a way to calculate how much money you need for (early) retirement. That amount is 25 times your expected expenses in retirement.
How to calculate how much you have to spend: your retirement nest egg divided by 25
In the example of having $500k to spend in retirement, you would have $20,000 to spend per year (500,000 divided by 25) and $1,667 per month (20,000 divided by 12 months).
Improve Your Chance of Successful Retirement
When you’re working toward 25x times your yearly expenses, be aware of the fact that you have two options:
- You never want to work again. In that case, it may be best to add a little safety margin to your financial freedom number.
- You are flexible. If you are flexible, saving 25x your annual expenses is great. You don’t work as long, but you know there’s an opportunity that you need to pick up some gigs at times.
Whether you’re flexible in retirement or you never want to work again, there are some things you can do to improve your chance of a successful retirement.
1. The First 10 Years Are the Most Important
Pay attention to the first 10 years. The early years of retirement are important. If things aren’t going well early on, it impacts the rest of your retirement. When you notice things aren’t going as planned, you can decide what decision fits you best at this moment.
2. Focus On Decreasing Your Spending
If you notice that your retirement isn’t going as planned, you can decide to reduce your costs for a while. You can do that by cutting back on certain expenses or moving to a cheaper country. Correct allocation of your monthly income between your daily needs and retirement funds will help your plan to retire.
We all know the people who pick on people for enjoying their daily latte. It comes from a place of wanting to help! If you are focused on increasing your income, that’s great. The most effective thing is to save some money.
Here are some ways to save money:
- Cutting your cable – savings $360
- Bringing lunch to work – saving $360
- Switch Energy provider – saving $500
By implementing these simple steps, you will save an extra $1220 this year.
If you cut these expenses, they will become part of your lifestyle. This means that your spending permanently drops and you will need less money to spend for the rest of your life!
Want to know how far you are with decreasing your expenses? Do a monthly money routine to see where you are with your finances.
3. Find a Side Hustle
Do you have a lot of spare time? Then doing a side gig may be the best fit for you because it can add up to your savings. You may do side hustles after work or during weekends.
You may visit Upwork, Fiverr, or Flexjobs to look for side gigs that will suit your schedule. Some of the side hustles that you can do are:
- Earn some extra cash by dog walking.
- Join highest-paid clinical trials to get paid up to $17,550.
- Get paid as a DoorDash driver.
- Get paid to lose weight. Try HealthyWage to earn extra money while being healthy.
- Start your own blog and work on it over time to build up extra income.
- Reach out to invention companies that buy ideas if you love thinking of things and selling them to others to execute.
Tip: If you work a 9 to 5 job, you may ask for a raise, especially if you think you deserve one. You may also work extra hours to get some extra pay if you don’t want to have a side hustle. That strategy can also help your personal capital to reach your desired early retirement age.
4. Keep Track of Your Finances
If your retirement plants are coming close, it is important to keep track of your finances.
Know how your expenses have increased, what your buffer is, and how much you can spend per month in retirement. Budgeting has never hurt anyone. The amount of money you have earned, used, and saved is an important factor in the computation of your retirement calculator.
5. Invest More
When we talk about investing, it is always intimidating because of the risks involved. But this can be a huge boost to your savings plans and your retirement money in the future. There are a lot of investments that you can apply and experience good returns.
You may try investing in stocks, bonds, or ETFs. Get over your fear of the stock market and start investing your first dollar. You may earn 7% per year on stocks on average.
Investing your money will help you shorten the years of saving for retirement. Grow your portfolio and achieve the best returns. Do your research and due diligence when investing. It is best that you choose the one that suits your financial status.
Summary – How To Retire Comfortably on $500K
Retirement is like music to our ears. We may think that being independently wealthy is not achievable, but starting early and educating yourself will surely achieve your retirement plans.
Prioritize your personal finances so that it includes retirement income planning and a retirement savings plan.
These retirement strategies will provide your working life with something to look forward to because we all deserve a comfortable retirement in our lives.
Dreaming is free, so make that dream into reality, start planning your retirement, and achieve financial freedom.
Related Articles From the Wealth of Geeks Network:
- How to Invest And Make Money Daily [Starting Today]
- 31 Odd Jobs Near Me + Apps And Sites That Pay Well
- 14 Data Collection Apps to Make Money
Marjolein is the founder of Radical FIRE. She has a finance and economics background with a master’s in Finance. Radical FIRE is a personal finance blog that helps you live your dream life through making more money and investing. We want you to reach your financial goals and have fun while doing it!