Are you at the point in your life when you’re asking yourself, “Should I retire early?”
Maybe you’re unhappy with your job or you want to spend more time with your family, or maybe you just want to get out of the rat race and start enjoying your life more.
Whatever the reason, there are some things you need to consider before making the decision to pull the plug. Check them out below!
Do I Have Enough Money?
Let’s face it, this is the one aspect of retiring early that everyone considers–you need to have enough money to live on.
There are a lot of online calculators and programs you can use to help you determine how much you need to have saved up before retirement. They can be very helpful for general planning, but the fact is they can only go so far.
The numbers that you input into these programs and the calculations that come out are all just estimates. Plus, the amount you will need is really just an arbitrary number unless you’ve taken a very realistic look at some important factors.
So let’s look at some more points you need to consider that will have a big impact on how much money you need to save before considering an early retirement.
What Lifestyle Do I Want To Have?
The lifestyle you want to lead is probably the biggest consideration you need to explore. What can be more important when figuring out what you need for the rest of your life than knowing how you want to live it?
Housing costs are a great example. Are you going to stay where you’re currently living or are you looking to downsize or relocate? And if your needs change in the future, have you planned for it?
But they had children that lived in the city about an hour away, and after a few years, the grandchildren started coming! They found themselves running to the city several times a week for activities and longed to be closer them.
So eventually they put their house on the market and moved. As happy as they were to be nearer their children, it was very stressful because housing costs were much, much higher in their new location.
Activities, such as travel, are another consideration for your lifestyle.
Are you looking to spend your winters in warmer climates?
Is your goal to see the great pyramids of Egypt or spend your summers white water rafting through the Grand Canyon?
Not only will you have to plan for the expense of these activities, but for other costs that you may not have considered. Will you have pets that would need to be cared for or will you have to hire someone to care for your home while you’re gone?
It’s wonderful to dream about all the great things you can do when you retire. But if you haven’t planned for the cost of those dreams, it could be very difficult to make them a reality!
How Long Do I Need To Plan For?
How long do you think you’ll live? If there’s another question that is as unanswerable as this, I don’t know what it is!
The only thing you can count on for sure is that the earlier you retire, the longer your money will need to last. But you can get a decent estimate by looking at a couple of factors.
~ Average Life Expectancy–If you live in the U.S., the average life expectancy is approximately 79 years according to the Center for Disease Control and Prevention.
~ Your Health and Family History–How old are your parents? How long did your grandparents live? Do you have health issues? Both of my grandmothers lived to 90, and my mother is going strong at 80–my retirement plan needed to include that longevity to be realistic.
Even though no one knows how long they’re going to live, planning for a retirement of at least 25 years is wise. But if you’re planning on retiring early, add those extra years on to your estimate so your plan will succeed!
What About Unforeseen Expenses?
Healthcare expenses are good examples of expenses that you may not expect. Do you have healthcare insurance that will adequately cover the inevitable doctor and/or hospital bills?
Does your early retirement plan include income from your spouse’s job? If they were to lose their job, would you be able to make adjustments to keep your plan viable?
Would you be able to make a major auto repair or replace the car or a large appliance when needed? How long is your roof going to last? Is your house going to need new windows or siding?
When you’re looking at a financial plan that may need to last 30+ years, you must include provisions for those types of purchases and repairs.
What Will I Do With My Time?
This question goes along with what you want your lifestyle to be, but it deals more with your every day activities and social life.
Many people think so much about the job they want to quit, they don’t really think about whether they have activities to fill their time afterward.
Do you have hobbies, such as woodworking or playing golf? You need to think about what will make you feel fulfilled. If not, boredom and depression can set in.
Many early retirees miss the social aspect that their job provided. For many, a lot of their close friendships stemmed from their workplace, and they feel isolated in retirement.
A good answer to that is to be involved in activities with others and to stay busy with hobbies they enjoy. But being able to participate in these may come at a cost.
So think about your daily life and evaluate whether you’ve considered the realistic costs of enjoying your days!
Do I Have Diversified Income Streams?
One of the best ways to ensure that you have enough money to retire early is to have more than one income stream. If one source should dry up, you have others to rely on.
Those who are retiring at 62 or after will have a combination of savings, social security, and maybe a pension or stocks and bond dividends. Many choose to stay active by getting a part-time job as well. Having several income streams provides some security if something should happen to one of them.
If you’re retiring early, but after age 59 1/2, social security won’t kick in yet, but you can take money out of retirement savings accounts.
Those who are retiring between ages 55 and 59 1/2 may be able to access the funds in retirement accounts, but there are rules that you’ll need to look at to be sure you won’t be paying an early withdrawal penalty.
Anyone who retires before 55 will pay the penalty for early withdrawals if they access their retirement funds. So they’ll have to rely on the money they have saved outside of those funds and income generated from other sources, such as stocks, a part-time job, a spouse’s income maybe, or other miscellaneous income stream.
So you can see how the earlier you retire, the fewer options you have to diversify with traditional income streams.
But that shouldn’t stop you from achieving your early retirement goal since there are ways to create additional income. The best one I’ve found is by creating a website and starting an online business.
You can check out the business that I use to create income for our retirement at Legitimate Online Work At Home For Retirees.
You CAN Achieve Your Goal And Retire Early
If you can create a plan that considers all the 6 questions listed above, you will be able to live your dream of retiring long before your full retirement age.
Have you made it a goal to retire early? Do you have a plan in place to achieve it? Are you looking for additional income streams to make your dream come true?
Let me know in the comments below along with any questions you may have!