Thinking about early retirement? Here are some things to consider.

Retire

A man and a woman studying a map outside of their car in the countryside

On a yacht sailing the Adriatic Sea with the wind in your hair and not a care in the world. Living right down the road from your grandchildren and watching them grow up in a small suburban town. Buying an RV, selling most of your possessions, and camping across the country. These are the kind of retirement plans we dream about. Who wouldn’t want to achieve these goals earlier rather than later? Some professionals say that “70 is the new 65” when it comes to retirement age, but what if you really just want to be retired at 60?

Here are some important things to consider if you’re thinking about early retirement:

Picture it

Retirement is a complicated goal for a few different reasons. First of all, your retirement probably looks very different than someone else’s. This is perfectly normal, but it makes it harder to plan for. Another factor to consider is that you and your spouse may have different plans for when you are retired. For these reasons, it’s important to clearly define the lifestyle you want in retirement before beginning to plan for it.

Future expenses

After determining your ideal retirement lifestyle, you will need to assess and evaluate what the costs of that lifestyle will be. Start by looking at your current expenses. Will you still have a mortgage come retirement? Will you move your primary residence, and possibly downsize or rent? Will you need a vehicle or use other methods of transportation? Consider that your costs of food and entertainment might rise because you will have more time on your hands to enjoy life instead of being in an office 40+ hours per week. Take your current expenses and adjust them based on these considerations in order to predict your future costs in retirement. Don’t forget to add additional funds for healthcare costs, which will most likely go up in retirement.

Current savings

Next, look at your current retirement savings and project if it will be enough to meet your estimated expenses. You may find out that early retirement isn’t possible at your current savings rate. The earlier you find this out, the sooner you can make an adjustment to the amount you’re contributing towards retirement and the less drastic the increase will have to be.

Possible side-effects

Retiring early is a great goal but be sure to consider some side-effects it may have on your finances. Social Security income, for example, may be reduced if you need to begin taking payments earlier. Also, your healthcare costs may not be covered by Medicare at first and could therefore require additional funds to ensure you’re covered in the interim.

Life changes

Keep in mind that once you have a retirement plan in place, it may need to be adjusted as different life changes occur while you are still working. This could be having children, caring for additional dependents, repairs on your property, or changes in health. Although these events create the need for your plan to be rethought and reworked, it doesn’t mean you can’t still achieve your retirement goals.

Retiring is not a decision to be made rashly; careful analysis, estimations and advanced planning are necessary if you want to ensure the retirement lifestyle you have in mind. If retiring early is a major goal for you, start by gaining a thorough understanding of your current situation and how much you’ll need to save for expenses in retirement. Create a plan for how you’ll actually save that amount and stick to it. Then, don’t forget to review and adjust your plan as needed. Early retirement can be attainable! If you’re struggling with where to start, consider consulting a professional who can take care of the analysis and planning for you.

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