Oh, another week at the office.
Let’s be honest. You’ve probably, at some point, dreamed of retiring early. You’ve imagined the thrill of walking into your boss’ office, confidently saying, “I’m outta here,” and heading towards the closest beach… or golf course… or wherever else your heart desires.
If you think this is just a dream, reality could be closer than you think. That is, if you’re planning properly.
Here are four ‘plans’ you should have in place if you want to retire early.
#1: Have a plan to pay off your debt
All types of debt can be a big drain on a retirement budget, particularly since you’ll be on a fixed income. Unfortunately, debt among retirees keeps growing: according to the Employee Benefit Research Institute, households with a head-of-household age 75 and older had $30,288 worth of debt in 2010. In 2016, that number climbed to $36,757.
As you look at your own situation and contemplate retiring early, look at your debts. Is your mortgage paid off? The car loan? How about your credit card debt? Ideally, you should put a plan in place to pay off those debts before you say goodbye to your job (and paycheck) for good.
#2: Have a plan for your healthcare
Medicare, the government’s healthcare program for those age 65 and older, only allows you to apply for benefits based on your age – not based on the age at which you retire. So, if you’re planning on retiring early, you need to think about how you’ll cover the gap until age 65.
Your options including asking your HR department at work if you’re still eligible for benefits even if you retire, joining your spouse’s plan through his or her employer, buying private insurance, or buying a policy through the Affordable Care Act’s marketplace.
#3: Have a plan for all your newfound time
Think about your week as it is right now. Most of your time is probably spent at work, right? This begs the question: What are you going to do with the extra 40+ hours a week you’ll have on your hands during retirement?
A hobby, a volunteer opportunity, or part-time employment can help you ease into life out of the workforce. If you can, take a week or two off at some point before you officially retire to give your routine a test run. If you’re excruciatingly bored, you’ll know it’s time to rethink your plan.
#4: Have a financial plan
No discussion about retirement is complete without mentioning the cold hard data. That is, will your savings, investments, budget, tax situation, cash flow (and other variables) all come together to make it possible for you to live the way you want?
The best way to know this is by working with a trusted financial advisor, such as a CERTIFIED FINANCIAL PLANNER™ or Chartered Financial Consultant®, and getting a personalized financial plan. He or she can look at all the components of your financial life and determine if you’re on track to meet your goals.
While we believe everyone on the verge of retiring should have a financial plan, it’s even more crucial if you’re hoping to retire early. After all, you’re going to be ‘unemployed’ for longer than the average retiree. Making sure your finances are ready to weather various scenarios and ‘what ifs’ is imperative.
The Simply Money Point
Actually having the ability to retire early comes down to one word: discipline. At Simply Money Advisors, the clients who we’ve seen be the most successful at doing so had plans in place for all aspects of retirement… and stuck with them.
To learn more about retirement planning, including how to manage a forced retirement, visit our Retirement Resources library.