Here's what you need to save for retirement

5 minutes
Here's what you need to save for retirement

While many Americans fear they will never be able to retire, a fast-growing group of people in the Retire Early movement is not only planning to retire but also plan to do so decades before they're eligible for social security payments.

One of the guiding tenets of FIRE is to retire up to 75% of your earnings in order to save much earlier than the typical retirement age.

Retiring early will allow you to skip the headaches of work life, but you'll also miss out on the additional earnings that could make retirement more comfortable. With this in mind, plan carefully and make sure you have a sound financial plan before retirement.

Here are four signs of a financially secure retirement:

You have an emergency savings plan if you have one in mind.

You have enough money in your savings account to keep it that way.

You can easily access your money for free at any time.

1. You have an emergency savings fund.

Before you are retiree, you should monitor your cash flow and build up at least three to six months of personal finances in an emergency fund.

If you're hit with an unexpected expenditure in retirement, you can get cash from your emergency fund if you're having an unexpected expense or financial troubles. That's a better option than pulling money from your retirement savings, a move that might trigger an early withdrawal penalty.

In a traditional savings account or money market account, keeping the emergency fund could earn you an annual percentage yield up to 10 times higher than a high-yield savings account. These deposit accounts are FDIC-insured and often come with no monthly fee or minimum balance requirements.

Check out Credible to explore how you can earn more cash with a high-yield savings option.

2. Have some money in your savings account?

Before you retire, your savings should exceed or meet Rule 25, which defines a retirement savings target of 25 times your estimated annual retirement expenditures.

If you estimate that you will spend $50,000 annually in retirement, then by saying goodbye to your job you need to save $1.25 million.

To find out how much money you should save for retirement, calculate your expected expenses as well as your current expenses at retirement. These numbers help you estimate your annual retirement expenses.

Debt is a drag on anybody's budget, regardless of your retirement status. Mortgage, student loans, car loans, credit cards and other debts make it hard to save or invest for retirement. And if you enter retirement with debt, it can negatively affect your financial mobility and your lifestyle level of comfort.

And by paying off a mortgage for any real estate and using the balance of debt you have at your retirement party means you won't have to worry about making payments in retirement. You have more flexibility in your retirement budget, less stress and a greater ability to enjoy retirement.

Consider consolidating personal credit cards with a low-interest mortgage. Credit scores can be checked by multiple lenders without affecting their rate of score at Credible.

If you have student loans from non-government lenders, it may be worth it to refinance them. Use an online tool like Credible to compare refinancing rates from multiple lenders at the same time.

Starting a debt free retirement life with sufficient savings will better position you in the first year before you started working?

4. Ask questions regarding whether you're on the phone for a potential new assignment or if you have a question: You may access your money free from penalty-free access to it.

One common problem faced by those looking to retire early is the inability to access their money. They have enough money in their 401 or IRA accounts, but it may be years or decades until they can carry money from their account within their pay rates.

Most retirement accounts have no age requirement with penalties up to 10% for making early withdrawals. For example, 401 and IRA accounts have a minimum age requirement of 59 in most cases.

Diversification of your savings and investment is useful if you wish to retire earlier, and you may wish to open an individual taxable investment account before they go too long. While these accounts don't have the tax benefits of traditional or Roth IRAs or 401s, they are free of age restrictions on withdrawals.

A high-yield savings account can also offer you a measure of flexibility compared to a checking account. With a high-yield savings account, your money can grow in an FDIC-approved account without the risk of investing in the market and you can access it at any time penalty-free. Compare savings rates for a digital savings account at an online marketplace like Credible?

Starting a savings plan on the early stages of retirement is the best way to save enough money for your annual retirement expenses. Accurately knowing how much that expenditure will amount to is a common obstacle for many. Take time to calculate your anticipated annual expenses - perhaps consider consulting with a financial advisor or certified financial planner about the industry of housing, health insurance, transportation, car insurance, food, utilities and life insurance.

With an accurate picture of your financial need post retirement you will be in a better position to pick a suitable retirement date, one that isn't so late you can run out of money or so late you end up working longer than necessary.

Have a financing question, but don't know who to ask it? Email the Credible Money Expert at and your question may be answered by Credible in our Money Expert column.

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