Many people have plans to retire early. What they don’t always think about is how to retire with enough money to live comfortably. Sure, you might have enough in the bank to cover age-related medical expenses and the occasional vacation. But do you have enough to live the kind of life you want after you’re done working? More importantly, do you have enough to sustain you through an early retirement?

Lots of people stash money away in a 401(k) or in other retirement vehicles. But they’re not saving toward a goal – they’re just saving because they know that’s what they should do. Then, when they reach retirement age, they take their required distributions and hope the money lasts. This is no way to live. And it could get you into trouble. 

If you want to retire with enough money to live comfortably through retirement, the best thing you can do is start planning now – no matter how old you are.

A woman who learned how to retire comfortably 

What Kind of Lifestyle Do You Want to Live?

Are you the type of person who wants to travel? Domestically or internationally? Would you prefer to buy a boat and spend every possible day on the water? Or do you embrace a hobby like woodworking? Whatever your lifestyle looks like, you’re going to need to support it in retirement. 

Some lifestyles are easier to fund than others. It doesn’t take much of a financial investment to take up baking or cooking. On the other hand, if you’re planning to jet around the world as a globetrotter, you’ll need a hefty savings account to fund your adventures. There’s nothing wrong with either lifestyle – you just need to know how to plan for each one. If you don’t, you won’t have the funds to enjoy the things you want to do. 

To live comfortably in retirement, get comfortable with budgeting and planning. Try to do as much as possible within your budget. Making a spur-of-the-moment purchase is fine, but only if you’ve budgeted the rainy-day funds to make it feasible. 

Consider Medical Expenses

As we get older, our bodies begin to break down. If you’re fortunate, you might need only a few precautionary visits to the doctor on occasion. If you’re living with a chronic condition or have a family history of severe illness, you’re going to need to factor that into your retirement planning. 

Healthcare is expensive and unpredictable. While you might plan and allocate amounts to cover your growing healthcare expenses, it’s still difficult to predict what you’ll spend on your health in retirement. The best you can do is equip yourself with excellent health insurance and budget heavily for medical costs. 

Look into not only Medicare Parts A and B but also Part D for prescription coverage. If you’re retiring before age 65, the age at which Medicare enrollment begins, look into private insurance plans that cover the essentials. 

Be Mindful of Inflation and Other Forces

If your retirement funds are in a qualified account, they’re likely vested – which means they’re earning returns. It’s important to make sure these returns outpace inflation. Likewise, money that’s sitting in a low-yield account will actually lose value over time if the yield doesn’t beat inflation. Retirees need to be mindful of how their investments and wealth perform through the years. If your holdings don’t outpace inflation, you could be inadvertently shrinking your retirement time horizon. 

Likewise, it’s important to allocate your funds for maximum diversity. If your retirement portfolio has an aggressive position in stocks and there’s a stock market crash, you’re going to suffer massive losses. Worse, you might not have the time to gain them back before you’d planned to retire. Assess your allocations in retirement and make sure you’re being more defensive than aggressive. Your portfolio should still pace and outperform the market, but not at the expense of catastrophic risk. 

Set Targets and Calculate Cash Burn

To live comfortably in your golden years, you need to have the peace of mind that comes with a clear time horizon. No one can predict when they’re going to pass (and it’s morbid to think about). What you can do is plan for the indefinite. The best way to do this is to set benchmarks. 

What age do you want to retire at? How much money do you want to live off of each year? With these numbers in mind, how much do you need to save to reach age 70? 80? 90? 100? Draw up a financial road map as far out as you think is necessary. Then, work backward to figure out your cash burn through the years. You’ll end up with a figure that tells you how much you need to save. 

Another way of assessing this is through a Monte Carlo simulation. Any certified financial planner can run one for you and adjust the variables to give you a clear retirement outlook. 

Plan for Emergencies

The simplest thing you can do to live comfortably in retirement? Plan for emergencies. Even an act as simple as setting aside $20,000 in emergency money can give you tremendous peace of mind when something major goes wrong. You can’t plan for everything, but you can prepare for anything. 

Always Plan Beyond Your Means

Learning how to retire with enough to live comfortably means planning beyond your means. If you want to live on $80,000 per year, plan to save for $90,000. Or, if you’re a diligent budgeter, save for $80,000 and stick to it at all costs, with a backup plan in place. Retirement means making your savings last until the end of your days – and beyond. 

Retiring comfortably means being able to do what you want with your life. Plan for these things and set goals that allow you to achieve them – whether that means travel, hobbies or maintaining the lifestyle you already love. You shouldn’t have to compromise in retirement – and that means not pinching pennies to make ends meet.