Wish you could retire right now? Give up the rat race, embrace a life of independence, reduce your stress, and have more time for what you value most — your family, education, travel? That might seem like a fantasy but early retirement is within reach of most people, if they would only take the steps to make it happen.

While many think of retirement planning as a complex process, it doesn’t have to be. Below, we outline the key strategies learned by people who have done it — people who, without being millionaires, managed to retire in their 30s, 40s and 50s. If you’re eager to join the ranks of the financially independent, get going by following the steps below.

Step 1: How much do I need to save?

These days, a better term for “retirement” might be “financial independence.” That is, retirement isn’t connected to a specific age, and it may entail continuing to work or volunteer. It’s all about doing what you want, when you want.

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And anyone can do it. Financial independence, after all, is a simple concept: you need enough money to create income to support your lifestyle for the rest of your life. That points to the crux of retirement planning: How much you need to save depends entirely on how much you spend.

“Your spending rate is the single biggest factor determining when you’ll be wealthy enough to retire,” says Mr. Money Mustache, also known as Pete, the operator of the blog MrMoneyMustache.com. He and his wife retired when they were just 30 years old.

The first step to financial independence is figuring out where your money is going now. Monitoring and, if possible, reducing, your current spending has two important benefits: it frees up more money to be put aside in savings, and it reduces the amount you need each year to live on, thus lowering the total amount you need to save.

Another early retiree couple, Skip and Gaby Yetter — they quit full-time work in their early 50s and blog at TheMeanderthals.com — work with a U.S.-based financial adviser as they travel the world. But they, too, say that their early retirement, which included selling their three-bedroom, waterfront home in Marblehead, Mass., north of Boston, has fostered an awareness of just how consumer-focused they’d been. “As we rid our lives of accumulated things, we began to realize how much happiness we found in living simply,” writes Skip Yetter in their book “Just Go! Leave the Treadmill for a World of Adventure.”

One note: There is always an element of uncertainty in financial planning at any stage of life. For example, you could lose your job or face a debilitating illness. So, like any other financial planning, it’s necessary to embrace a little uncertainty.

Step 2: How do I invest?

Just as reining in spending is a recurring theme among early retirees, so is the idea of investing in a diversified portfolio of low-cost index mutual funds. Generally, mutual funds that track an index, such as the S&P 500 index SPX, -0.13% , will charge investors lower fees than mutual funds where the portfolio of investments is chosen and “actively” managed by a fund manager.

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Databank’s Mfund, FirstBanc, HFC are among banks you can invest in. Worried about investing for retirement? All you need to do is try to match one of these portfolios. That doesn’t mean you need to invest in precisely the same mutual funds; the point here is to pick a portfolio and then mimic it by investing in similar mutual funds, e.g. an index fund that invests in a broad group of international stocks.

Step 3: Housing costs in retirement

A key piece of retiring early is keeping your housing costs low. Many retirees cite the significant psychological value of carrying no debt when they quit working, but with interest rates as low as they are, others argue that holding the mortgage and investing in the financial markets the cash that otherwise would pay off the mortgage can be a smart financial move.

The danger of relying on home equity to fund retirement is that it assumes the local housing market is strong when it comes time to sell the house and retire; it’s crucial to take this uncertainty into account and build a flexible timeline into one’s retirement plan.

Step 4: Paying for health care

Early retirees deal with the issue of health insurance in a variety of ways. Individual costs will vary widely, depending on the situation. Certainly, the availability of health insurance in the U.S., thanks to the Affordable Care Act, has made it easier for individuals to quit jobs they might otherwise have kept for the health insurance.

Mr. Money Mustache, the popular blogger and early retiree based in Colorado, said last year that he relies on a low-cost, high-deductible health plan purchased on the individual market. The plan costs about $275  (Ghc 1229.00) a month to cover his wife, son and himself. Should that plan expire, he said he would switch to a bronze plan, available via his state’s health exchange under Obamacare.

Step 5: Manage your taxes

Just as when we’re working, taxes are a consideration in retirement, whether you retire early or not. It’s crucial to include an estimate of your annual tax bill in your “total savings needed” amount.

Your tax bill may come in a variety of flavors. If you’re pulling your income out of a taxable brokerage account, you’ll most likely owe capital gains on those distributions.

Also, your Social Security benefits are taxable if your income exceeds a specific amount.

Keep in mind that, if you continue to do consulting or part-time work after your official retirement, then any Social Security benefits you’ve claimed will be temporarily reduced.

 

Source: Market Watch

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