Make these money moves to retire early

Dreaming of getting out of the 9-5 grind sooner? It might not be as far-fetched as you think. Ric Edelman, founder of The Truth About Your Future, joined TheStreet to discuss the steps Americans can take to achieve early retirement.

Related: Dave Ramsey Reveals Major Steps To Your Early Retirement

Full video transcript below:

CONWAY GITTENS: And what are some other secrets to successful early retirement planning?

RIC EDELMAN: Well, the best thing, the number one tip is simply to spend less than you earn. Too many Americans spend more than they earn. And the biggest problem is that they turn to credit cards because they don’t have cash available. What they do is they put that expense on a credit card, whether it’s dining out this week or buying a refrigerator. And what you do when you use a credit card is you obligate future income, which means the money you haven’t earned yet is already spoken for. By the time you get that income, next month’s salary or three months’ salary, you’ve already spent it by virtue of today’s credit card purchase. And that means that when the expense comes up in three months for something new, you don’t have the money because you’ve already spent the money on the previous purchase. And that creates the credit card spiral, and that’s a death trap.

So the solution is to spend less than you earn. Don’t spend money you don’t already have. That’s the number one thing. The second thing is to increase your savings. And the best way to do that is in your workplace retirement plan. If you have a 401.K or a 403b or work for the government with an economic savings plan, wherever you work, chances are they offer a retirement account of some type. Most Americans do not participate at all. Or if they are, they are not contributing the maximum allowed. So what you really want to do is go to your boss and tell him that you want to increase your contribution to your retirement account. This is painless. It will come right out of your paycheck. You won’t even know it’s happening. Everything is before tax. Many employers will match your contributions. It’s free money for you. And that’s a great way to jump-start your savings that too many Americans ignore.

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CONWAY GITTENS: So we have a lot of people coming in here and giving us different numbers. What’s your number on the percentage of your income you should be storing in that retirement account?

RIC EDELMAN: Well, you’re going to freak out, but give me a second. 25% is a scary salary. 25% of your income But, but, but don’t worry. It’s not as horrible as it sounds because that includes your social security contribution and the one between you and your employer is already about 15% So out of 25% you’re already halfway there. Then if you join your workplace retirement plan and put in 5% of your pay, many bosses will match it to maybe $0.50 on the dollar or 100 cents on the dollar, which is still 7 1/2 or 10% only. between social security and 401. K you are close to that 25% goal. So my point is very simple. You need to save more than you are, no matter how much you save. Save more. I’ve never met a customer in the 35 years I’ve been doing this. No customer has ever yelled at me for saving too much. So the big complaint is that people don’t save enough. You need to save more. No matter how much you save. Enlarge it. You’ll be glad you did.

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