When you're in the middle of your daily commute, it's easy to dream about retiring early. In fact, our retirement investment advisors talk to clients about this topic every day!
For some, early retirement isn't simply a dream -- with a bit of strategic financial planning and effective investment guidance, retiring early is an attainable goal. While every individual investor's situation is unique, these signs may help you decide if early retirement is a realistic option for you.
Strategic Financial Planning: How's Your Financial Stability?
The key to retirement readiness lies in financial stability -- and that depends on a consistent cash flow. If you've already accumulated enough to exceed your retirement savings goals, that's an indication that you may be able to quit your job sooner than you thought.
However, it's essential to consider the ways in which your expenses might change in the future. Practice living on a retirement-level budget for at least a year before retiring to ensure that:
- Your cash flow is adequate
- You can live within your budget
You'll also want to work with a retirement plan advisor to ensure that any early withdrawals won't cost you big in penalties and fees.
Financial Strategies: Debt Free is Best
If you're carrying debt like mortgages, car loans, or large credit card balances, think twice about retiring early. Making payments in retirement -- or worrying about payments going up -- can add to your stress load and tie up savings that could otherwise be used to fund a comfortable retirement or act as an emergency cushion.
Are Your Children Financially Independent?
Are your dependents financially secure and independent? If they rely on you for financial support, you may not want to bid farewell to that steady paycheck just yet. Before you take the leap into retirement, you'll want to have a frank discussion with any family members that you're supporting, as they'll need to understand that the situation is going to change when your paychecks cease.
Healthcare Costs and Your Comprehensive Financial Plan
Healthcare is one of the largest costs facing retirees, as well as one of the hardest costs to predict, says the Washington Post. And since Medicare coverage doesn't kick in until age 65 -- and often doesn't cover some medical expenses -- having adequate health insurance coverage until then is essential.
If you're covered by your employer's health insurance, try to negotiate to keep that coverage after retiring. You may also find coverage on the government-run healthcare exchanges or through a spouse's policy.
Are You Emotionally Prepared for Retirement?
Finally, gauge your own emotional preparation for retirement. While this may be difficult to quantify, it's important to consider the implications of not working. Though the thought of long days stretching before you with very little to do may sound great when you're stuck in traffic in your morning commute or dealing with workday stress, the reality may be very different. Before you make your decision, carefully consider the realities of day-to-day retired life.