How to Retire at 50
If you want to retire at 50, cut down on unnecessary expenses and start saving as early as you can. Next, invest in a 401K plan and look into other investment opportunities like dividend stocks, rental properties, and bonds to capitalize on your income and savings. Then, clear up any existing debts you have and pay down your mortgage, if you have one. Finally, come up with a realistic post-retirement budget that you can stick to.
Come up with a realistic post-retirement budget. To formulate your budget, you'll need to have an idea of how much money you'll have saved up by the time you stop working. Estimate roughly how much you think you'll to pay for your basic living expenses each month, then check that figure against the amount you can afford to take out of your savings. Try living off your budget for six months as an experiment. If you're able to do so without difficulty, you might feasibly be able to retire by the time you hit your savings goal. If you discover that you're burning through your savings or forced to rely on credit, you're not yet ready. Start saving as early as you can. It's never too early to begin saving, even if it's just a few dollars here and there. Getting a headstart on your savings will improve your chances of being able to retire as planned and expand your monthly post-retirement budget. The ideal time to begin preparing for retirement is when you enter the workforce in your teens or early 20s. If you're behind the curve on building your retirement savings, you'll have no choice but to set aside more of your annual income later on. Be prepared to set aside up to 75% of your money for savings. The average annual savings rate in the U.S. is around 3.7%. However, if you hope to retire by 50, that number might need to be as high as 60-75% for you. This is doable, but it will require a degree of sacrifice on your part. Aim to have about 30 times as much money as you expect to spend during your first year of retirement saved up by the time you hit 50. The exact amount you'll need to save each year will vary depending on your estimated budget and lifestyle. Ideally, you should save at least 15% of your average annual income before taxes. Wait until your children are grown to quit working. Kids are expensive. If you have children who still rely on you financially by the time you're 50, your savings may not go as far as you they would have otherwise. Devote yourself to their needs now, then shift your focus once they've left the nest. The same applies if you're responsible for supporting parents or other relatives. It's still a good idea to be saving during this time, even if you're unable to set aside as much. Take on investments outside of your 401k to add to your funds. Look into investment opportunities like dividend stocks, rental properties, bonds, and peer-to-peer lending. Your goal is to build an investment portfolio that's large and diverse across many different asset classes. This is the best way to ensure that it can withstand losses and survive poor market conditions. Tax-deferred or tax-free assets are preferable to assets that can be taxed, as they'll allow you to hold onto even more money. Start investing more conservatively as you get older. The riskier your portfolio is during the later stages of life, the more you stand to lose if the market takes a sudden turn. Try not to dip into your retirement funds before it’s time. If you find yourself in a tight spot financially, you might be tempted to take money out of your savings. However, it's generally wiser to look for ways to decrease your living costs or add to your incoming cash flow. Avoid draining your retirement funds unless it's absolutely necessary. When you take money out of your 401k early, you risk losing the benefits of compounding interest and leave yourself with less of a cushion for the future. In some cases, you may even have to pay penalties for early withdrawals. The only times you can use your retirement money without incurring penalties is when you become disabled, face foreclosure on your home, or have medical costs that exceed 10% of your adjusted gross income. Pay down your mortgage. If you're still in the process of paying off your house, make eliminating your mortgage a priority. For most people, their mortgage is the biggest expense they have. Getting it off the books will free up a significant amount of money, which you'll then be able to put towards other things. If possible, pay a little extra with each mortgage payment. When you do, more of your subsequent payments will be used to decrease your principal balance. Another option is to switch to biweekly payments. Instead of making a full payment each month, you'll pay half the amount every 2 weeks. Depending on your loan's interest rates, this could take up to 8 years off of a 30-year mortgage. Clear up any existing debt. Make sure your school or business loans have been paid in full, along with your vehicle, credit cards, and any major purchases. If you still owe money to lenders or creditors when you begin nearing your ideal retirement age, you could end up saying goodbye to a significant part of your savings. Start putting as much expendable income you can towards paying back your debts. Outstanding debt can severely hamper your ability to save. You won't be able to accumulate any significant amount of money until you've gotten rid of (or at least shrunk) your debt. Use credit cards only as a last resort. Reserve your credit card for cases of emergency, like when your vehicle needs a brand new transmission or a relative dies unexpectedly and you're left to foot the bill for the funeral. Credit cards make it all too easy to fall into the trap of debt. The more debt you rack up, the more of your savings you'll lose to fees and interest. It's always a good idea to pay cash for as much as you can. The cost will be the same, but there won't be any interest to come back and bite you. When you do use your credit card, make sure you pay off the full balance on time. Delayed interest and default fees can be devastating. Hold off on starting a family until you’ve started planning for retirement. Having kids doesn't make it impossible to retire early, but it can make it a lot harder. You'll be less likely to generate enough funds to retire early if you have mouths to feed at the time when it's most important to begin saving and investing. If you're not careful, you could even end up owing money. Families with a combined annual income of around $60,000 spend an average of $11,000 per year on each child under the age of 18. By establishing responsible saving and investing practices before you take on the commitment of having kids, you're more likely to have more money left over by the time they strike out on their own. Cut down on unnecessary expenses. Look over your monthly expenses and determine if there's anything there you can live without or at least reduce. This could include things like a landline phone connection, cable TV, or expensive plans for your mobile device. If you need it, find out how to make it cheaper. For example, you could cut your cable TV and go streaming or change your family phone plan to another carrier with lower monthly costs.  To shave down the cost of expenses that are necessary, try to eat out less, start a carpool with your friends or neighbors, and keep your thermostat set to a moderate temperature throughout the summer and winter months. If you really want to slash your spending, think about selling your car and buying a bike or making use of public transportation instead. Even an economy vehicle can eat into your budget quite a bit when you factor in fuel, insurance, and regular maintenance. Downsize to a smaller house or condominium. Instead of living out your golden years in a lavish estate, consider opting for a more moderately-sized home or condo that provides the minimum spatial requirements for you and your family to live comfortably. A more modest living space usually means less expense, less upkeep, and less room to fill up with unnecessary belongings. If you can't get away with a smaller house, one alternative is to move to a less expensive part of town where property values aren't quite as steep. Another way to reduce your housing costs is to switch to a shorter mortgage. Being able to pay off your house in 15 years rather than 30 will help you save money that you would otherwise lose to interest. You might also consider renting out part of your home. The added income will make it easier to pay off your mortgage. Move to a low-tax state or territory. Some states have significantly lower income, property, and sales tax rates than others. Relocating to one of these places will allow you to save more and live on less during your retirement. Some of the states in the U.S. with the lowest tax rates include Nevada, Colorado, Wyoming, Texas, Kentucky, South Carolina, Georgia, and Florida. An added benefit of moving to a low-tax state is that you'll get a change of scenery, which may be a breath of fresh air if you've lived in the same place your whole life. Sign up for more affordable health insurance. Shop around for a policy with relatively low deductibles and copays that cover doctor visits, prescriptions, hospitalization, and dental and vision care. Your insurance plan should provide for emergencies, but shouldn't put too much strain on your monthly budget. Medicare doesn't kick in until you reach age 65. Since you won't receive health insurance through your employer after you retire, it's essential that you have an affordable and reliable plan in place. Do as much comparison shopping as you need to find a policy that fits your budget. Inexpensive plans are getting harder to come by, but they're out there and worth searching for. Trade for the things you need whenever possible. If you have special skills that you think could be of use to others, see if others would be willing to accept them in exchange for goods and services. That way, you won't have to pay out of pocket for so many things. If you're an expert in IT, for example, you might offer to design a website for someone with the tools and know-how to fix a broken air conditioning unit. Work part-time to supplement your retirement funds. If you're not able to quit working completely by the time you reach the age of 50, consider picking up a part-time job. Doing so can help you earn enough money to live on while you continue growing your nest egg. Jobs like store clerk, bookkeeper, consultant, handyman, and personal or medical assistant are perfect for people who are partially-retired. Take your time searching for a part-time gig. There are all sorts of fun, interesting jobs out there that you can do with minimal training. 
Come up with a realistic post-retirement budget. Start saving as early as you can. Be prepared to set aside up to 75% of your money for savings. Wait until your children are grown to quit working. Take on investments outside of your 401k to add to your funds. Try not to dip into your retirement funds before it’s time. Pay down your mortgage. Clear up any existing debt. Use credit cards only as a last resort. Hold off on starting a family until you’ve started planning for retirement. Cut down on unnecessary expenses. Downsize to a smaller house or condominium. Move to a low-tax state or territory. Sign up for more affordable health insurance. Trade for the things you need whenever possible. Work part-time to supplement your retirement funds. 