Thinking of an Early Retirement?
Thinking of an early retirement? Here’s what you need to know.
In recent years, more people have been considering stepping away from their full-time, high-stress careers earlier than planned. For some, this means transitioning to a part-time role with reduced pay and responsibilities. For others, it’s about embracing full early retirement and enjoying life sooner rather than later.
While the idea sounds appealing, early retirement requires careful planning. Here are four key considerations that often come up as we help plan for this scenario.
Access to non-qualified retirement accounts
If you plan to retire before age 59½, accessing funds from non-qualified accounts (those outside traditional IRAs) can be tricky. Early withdrawals often come with penalties, so understanding your options is crucial. Strategies like the Rule of 55 or setting up a 72(t) distribution plan may help, but these require professional guidance to avoid costly mistakes.
Access to and ability to budget for health insurance until age 65
Medicare eligibility begins at 65, so if you retire earlier, you’ll need to bridge the gap. Employer-sponsored coverage may end when you leave your job, leaving you to explore alternatives such as COBRA, private insurance, or marketplace plans. Factor these costs into your budget—they can be significant.
Adjust any budget needs for future planning
Early retirement means your savings must last longer. Review your spending habits and create a realistic budget that accounts for inflation, healthcare, and unexpected expenses. Consider whether you’ll need to downsize, relocate, or adjust lifestyle choices to maintain financial security.
Life Planning considerations – what will you do with your time?
Retirement isn’t just a financial decision—it’s a lifestyle shift. Think about how you’ll spend your days. Will you volunteer, travel, start a hobby, or even take on part-time work? Having a plan for your time can make retirement more fulfilling and give you a sense of purpose beyond your workday.
Early retirement can be a rewarding choice, but it’s not one to make lightly. Work with a financial advisor to evaluate your resources, plan for healthcare, and ensure your savings strategy aligns with your goals. With the right preparation, you can enjoy the freedom and flexibility that early retirement offers.