Retirement Strategy: Preparing To Retire Early

Do you dream of retiring before you turn 60? How about before you turn 50? If so, you might want to think twice before you make the move. If your heart is set on leaving work early, be sure you leave with the right mindset and a realistic understanding of your financial situation. 

Retire With a Realistic Picture of Your Income Needs 

If you’re like many Americans, you may find that your retirement expenses are roughly 75–80% of your pre-retirement expenses. However, your actual needs will depend on your lifestyle and individual circumstances. You’ll need to determine whether income from your 401(k), 403(b), pension, and other sources will be sufficient to cover your expenses. Keep in mind that you generally cannot claim Social Security retirement benefits before age 62. 

Retire With the Idea That You’ll Live to Be 100 

With recent advances in health care, you could live to be 100 or older. That means your retirement income may need to last 20, 30, 40, or even 50 years. Your current income sources may need to be supplemented or adjusted to account for unforeseen needs and inflation.  

Many new retirees make the mistake of withdrawing too much from their portfolios during the first few years of retirement. They enjoy a higher level of spending initially, only to discover later that their retirement savings are shrinking because they are spending more than their portfolios can sustainably support. 

Additionally, you may have to pay for health insurance if you retire before age 65, when most people become eligible for Medicare. All of these considerations may point you toward part-time employment rather than total retirement. 

Retire With Purpose 

Leaving work behind can be exhilarating. But after the first few months of enjoying your newfound freedom, you may also face the question, “Now what?” Early retirement is more fulfilling when you have a plan for a purposeful and meaningful life, regardless of your finances. 

If you search online using the right keywords, you’ll come across a number of articles about people who chose to work longer than they originally planned. Some kept working out of passion, while others did so out of necessity. If continuing to work is not for you and you are ready to retire, give us a call. We can review your financial plan, evaluate whether you’re financially prepared for retirement, and discuss your options. 

How Do You Picture Your Future? 

If you are like many people who are contemplating retirement, your outlook may be more pragmatic than your parents’. That doesn’t mean your future has to be “plain vanilla.” Even if your retirement savings are not as substantial as you would like, you still have plenty of opportunities to design the life you want. 

With that in mind, here are some key questions to consider. 

What Do You Absolutely Need to Accomplish? 

If you could accomplish only four or five things in retirement, what would they be? Answering this question might lead you to compile a short list of life goals. While they may have nothing to do with money, the financial decisions you make may be integral to achieving them. 

What Would Revitalize You? 

Some people enter retirement with no particular goals at all. Others are simply burnt out. After a few weeks or months of rest, their motivation may return. They start to think about what pursuits or adventures they could pursue on to make these years special. 

Others have known for decades what dreams they will pursue, and yet, when the time to do so arrives, those dreams may unfold differently than anticipated or give way to new ones. 

In retirement, time is one of your most valuable assets. With more free time and opportunities for reflection, you might find your old dreams giving way to new ones. You might discover a passion for volunteering or feel motivated to return to work in a different capacity. 

Who Should You Share Your Time With? 

Retirement gives you another important choice: deciding with whom you want to spend your time. For many retirees, the quick answer is “family.” Today, we have nuclear, blended, and extended families. Some people think of their friends or their employees as family. You can define family however you wish and decide how much time you want to spend with them. For some people, retirement means more time with family; for others, it means finding a better balance between family and other interests. 

Regardless of how you define family or how much time you want to spend with them, you probably don’t want to surround yourself with “dream stealers.” If you have a big dream for retirement, you may encounter people who try to thwart it or urge you not to pursue it. Limiting the influence of these negative voices can help you stay focused on your goals and enjoy retirement more fully. 

How Much Will You Spend? 

While you can’t control all retirement expenses, you can take steps to manage many of them. You may have considered downsizing your home, reducing the number of vehicles you own, or moving somewhere with convenient and affordable public transportation. 

Eliminating a landline and premium cable packages (or canceling cable altogether) may help reduce expenses. Selling unwanted items or donating them to eligible charitable organizations can help you declutter. Depending on the circumstances, selling items may generate extra cash, while qualifying charitable donations may provide a tax deduction. 

How Are You Preparing for Retirement? 

This may be the most important question of all. If you feel you need to do more to prepare for the future or revisit your existing financial plan, contact your Patriot advisor.  

With thoughtful planning, you can better understand your financial options and work toward a retirement that supports both your financial needs and the lifestyle you envision. 

 

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.