For many individuals, a traditional approach to retirement – working until age 65 or beyond – is just not their cup of tea. They prefer enjoying the fruits of their labors much sooner than later. Hard work, sacrifice, careful planning, and prioritizing saving now, can make early retirement a successful reality.
Here are five early retirement basics that will help ensure that reality.
- Be crystal clear about why you want to retire early. Of these five tips, this is the most important. Simply being unhappy with your career or job doesn’t make the grade, because you will lose much more than your current frustration when you retire, including the following: 1) daily structure, 2) purpose, 3) your sense of place, 4) an important social network, and, of course, 5) significant income. Said differently, you may replace one form of dissatisfaction with another and find yourself adrift in the process. Far better reasons include maintaining optimal health, adding meaning to your life by nurturing important relationships with family and friends, chipping away at that travel bucket list, and pursuing other interests. Your reasons may be different and unique to your situation.
- Start the retirement planning process early…with emphases on robust savings, disciplined budgeting, and debt elimination. Adequate assets/income and minimal debt are retirement essentials at any age, and all the more so when retiring early. Work with a seasoned and professional planner, preferably a Certified Financial Planner, for better planning results.
- Plan for the long (very) haul. Even traditional (65) retirement demands a long view, given that many, if not most, of us will live well into our eighties or beyond. Most planners run depletion scenarios that anticipate living into our nineties. Early retirement can add decades to that, thus further increasing longevity risk. Imagine running out of money at 83 and living until 92! Your kids will love you.
- Pay extra attention to health care coverage. A wise person once famously said, “Hope for the best, but plan for the worst.” When it comes to health care and retirement, truer words were never spoken. Traditional retirees must contend with Medicare and "gap" coverages, whereas early retirees must contend with those and years of pre-Medicare coverage. Needless to say, this will be an early retiree’s most significant and unpredictable expense.
- Don’t overlook the importance of social connections. According to an AARP-backed study, sustained social isolation presents health risks similar to those associated with smoking fifteen cigarettes a day. That’s an important statistic, since most workers (nearly 60 percent) spend more time with colleagues than family. Early retirement may substantially shrink that social network due to friends still working and extended traveling.
Changes in medical care, societal norms, the nature of work, and technology increasingly make early retirement possible if…you carefully plan, define your goals, remain focused, and work hard. The decisions you make today will profoundly affect your retirement timeline.
Be guided by the five basics outlined above, and you will be well on your way to that early retirement. To discuss your options and walk through possible scenarios, please don't hesitate to give me a call at (608) 826-3568 or reach out via email.