Whether you are wanting to retire young or are simply getting a late start in saving for retirement, it is important to know how to retire in 20 years. Though it takes work, it is possible to save enough money to retire in this short period of time. Just follow these steps if you need to retire in only 20 years.
First, you need to figure out exactly how much money you need to save in order to retire. Typically, 70% of your current annual living expenses times the number of years past your retirement is considered the standard amount to save. However, things like having a paid off home mortgage, no debt and frugal habits can help you significantly reduce that amount. Look at how you live and adjust this percentage accordingly.
Next, divide the amount you would like to have saved by retirement by 240. This is the number of months you will have until you retire. By dividing your savings goal by the number of months you have to save, you will get the monthly amount you will need to save in order to retire in 20 years. Yes, it is probably a large number, but if you can get into strong investments it should help off set how much you need to save.
Get out of debt and pay off your house. Debt will only keep you from achieving your dream of retiring in 20 years. So while you are working on saving and investing for your future, be sure you are paying off your debt so you have more money to enjoy during retirement.
Start living very frugally and create a budget so you know exactly how much money is coming and going every month. Write down every expense you have along with your current income. If you do not have enough money every month after paying the bills to save for your retirement, then you need to cut back. Things like shopping for new car insurance, reducing your cable and cell phone bills and eating out less can all be strategies to come up with the money.
If you are like most people, you will not be able to find enough money in your current budget to retire in 20 years. So, start trying to find ideas to make extra money. If you are still falling short on your savings goal after cutting back on your spending, you need to find a way to bring in more money. Take up a part time job on the nights and weekends, pet sit or even start selling items on eBay to get yourself up to your monthly goal.
Once you have the money necessary to reach your monthly goal, invest that money in different markets to avoid major set backs. As the latest recession has proven, it pays to diversify your investments. Though one market may be strong right now, tomorrow it could severely weakened. So spread out where you put your money, so if one market crashes right before you plan on retiring, it will not dramatically effect your plans.
Now that you have started to save money toward your retirement, continue to save and invest until you retire in 20 years. Never make excuses to stop saving. There will always be days when the stock market is down and there will always be emergencies that will make you think you cannot meet your monthly goal. No matter what tough situation life puts you in, continue to save and work through these steps. If you do, your goal of retiring in 20 years can come true.