Generally, people are afraid of early retirement thinking that they might have to undergo both financial as well as psychosocial difficulties by not engaging in their usual ‘work’. However, there are instances where certain professions such as law enforcement, requires their workers to retire at an early age. At the same time, companies intending to downsize might also offer mandatory early retirement to some of its employees. Thus, it is wise to plan for an early retirement even though the actual retirement age falls late.
Decide on the expected retirement age
The best time to retire according to experts is the time when investment income and retirement benefits are enough to meet the monthly bills and other recurrent expenses. However, not having extra money after paying the bills may not be the ideal retirement, as one need to consider unexpected expenses such as the medical bills and the rising cost of living. Therefore, the age at which there would be enough returns at the end of the month to settle the bills as well as to save for the unexpected expenses, is the ideal age to plan for an early retirement.
Know the important retirement related ages
As cited in the forbes.com, there are several age limits, which are important in determining the investment returns in relation to the retirement. Thus, at the age of 50, it is possible to place additional funds in the IRAs and 401(k) plans. At the age of 55, money can be withdrawn from the 401(k), if the person is still with the employer until the age of 55. At the same time, by 59½ years, the person can withdraw from the IRAs without a penalty while at the age of 62, the person is eligible for early social security benefits. It is only by the age of 65 years when Medicare becomes available. Apart from these ages, there are several more age specific milestone that a person should keep in mind before making a decision for an early retirement.
Practice living below the means before retiring
Being able to manage the finances during the retirement life is an important aspect and in this regard, knowing how to live below the usual means could make retirement life easy and simple with less risk of debt. However, unless a person is familiar with such living, extravagant spending during retirement life may be unavoidable and therefore financial crisis could force a person back into the workforce without any other choice.
Get rid of debt
This is one important aspect of retiring early, as unless the debts are cleared by the time of retirement, there might be an additional burden for the retiree. Thus, planning to pay off the debt gradually towards a set retirement date could be the best way forward to a debt free retirement life.
Decide on the way to live the retirement life
Different people may have different retirement plans, which can sometimes be costlier than living a working life. Thus, hobbies such as collecting classical items, traveling around the world as well as partying with friends and family may be expensive lifestyles for a retiree. Thus, financial planning should take into consideration such expenses before making a decision to retire early.
Therefore, early retirement is not a decision to be taken haphazardly but a decision that requires careful planning and a positive mind.