I get asked this question several times a year from clients. The answer is, it is possible, but not easy.. and it takes planning. The magic number people think of when they plan for retirement is 65. Many people are ready to explore other avenues by that age. Social Security and Medicare are also available at that time. While early retirement is not the norm, it is possible.
Here are some suggestions:
- You need to save more of your income. Many financial experts suggest saving 10-15% of your income, but most Americans save 4-5%. Obviously the more you can save, the better.
- Increase your income. If you can increase earnings in your current career, by taking a job on the side or looking for freelance opportunities, this gives you the ability to save more.
- Be aware of your spending. Often times we do not have a handle on where our money is spent. Dining out, memberships, phone & cable costs – all add up in a month but are costs you can control.
- Invest early. No matter what age you retire, and especially if you want to retire early.. you cannot do this without investing. Try to max out your employer’s retirement plan or start an Individual IRA. These investment accounts can be allocated to include stocks, bonds, mutual funds and other investment tools.
- Plan for spending. If you retire early, you can have more time to enjoy life. This entails having funds to do so. This is where you need a strategy for withdrawing funds from your accounts. There are penalties for early withdrawal from certain accounts, as well as tax implications that need to be considered. A big expense for early retirement is health coverage. You are not eligible for Medicare until 65, so the years from retirement to eligibility need to be planned for.
- What to do with your time. Exiting the work force may seem like a dream come true, but it is not without challenge. Are your plans in sync with your spouse or partner? Many people find it lonely because friends or their spouse may continue to work, which can lead to emptiness and anxiety. In your planning, always remember to retire to something.
Fortunately, if you find retirement does not bring the fulfillment you thought it would, you can always decide to get back into the work force in some capacity. Retirement is a stage of your life that you plan for and then execute that plan at the time you think is right for you.