Early Retirement Planning Strategies

The first step of early retirement planning is to figure out how much money you'll need. If you're young, the rule of thumb is to have enough to provide 70%-90% of your current salary for the duration of your retirement.

However, if you're older and closer to the age at which you'd like to retire, you will need to estimate your needs more accurately. Make up a retirement budget to figure out exactly how much money you will need to get by.

In order to retire early, you will also need to start minimizing your expenses. You should devote the maximum amount of money possible to your retirement portfolio, which means you will need to reduce other expenses.

As you plan your early retirement, you should also consider whether you intend to work part time in another career. Early retirement is much more plausible if you have supplemental income from a part-time job during your retirement years.

Retirement Financial Planning Calculators Often Inaccurate

At a recent retirement conference, financial advisers complained that retirement financial planning calculators are often inaccurate. The software relies too heavily on outputs and neglects outliers, retirement planners say.

The online calculators are intended to provide users with a snapshot of the kind of retirement they can achieve with their current path. Ideally, users should be able to estimate what kind of nest egg they'll have given their present income and assets.

However, retirement software manufacturers have struggled to find an accurate model. Some financial advisers want a big-picture look at clients' retirement outcome, while others want a more detailed formula that accounts for things like inflation and market fluctuations.

To mitigate the inaccuracies of these calculators, advisers recommend accepting a degree of uncertainty. No software model can possibly predict future events perfectly, so allow for variations in your retirement plan.