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Making Lasting Memories, Not Debt

The Basics

For many of us, early retirement sounds like a dream come true. After years of having a job, who wouldn’t want to leave the traditional workforce for the opportunity to live life on their own terms and a schedule designed by them? However, you should weigh the benefits against the risks, as well as ensure you have a solid financial plan in place to support your future desired lifestyle, before deciding.

The Pros and Cons of Retiring Early

Retiring early can offer more freedom, but it also requires careful financial planning. Weighing the benefits and potential challenges can help you decide whether early retirement fits your lifestyle and long-term goals.

The Pros

Things You Love – Have more time for hobbies, interests and passions.

Reduce Stress – Stepping away from work may provide more flexibility and a slower-paced lifestyle.

Travel and Activities – More free time can make it easier to travel, explore new interests and enjoy activities on your schedule.

Family and Friends – Spend more time with those who matter most.

The Cons

Outliving Your Savings – Your money may need to last longer.

Healthcare Expenses – You may need to cover healthcare before Medicare eligibility.

Potential Boredom – Finding purpose and routine may take some time.

Benefits and Withdrawals – Early retirement may affect benefits or access to retirement funds.

Things to Think About Before Deciding

Investing in Your Future

Workplace Retirement Plan

First, if your employer offers a retirement plan you should be actively contributing to it. And, if your employer matches it, you should be contributing at least the minimum amount your company is willing to match you.

Invest Early and Often

It’s never too early to begin saving. Just a little bit saved from each paycheck can make a big impact toward your retirement goals. Review our article about The Basics of Investing to learn more about different ways to save money.

Budgeting for Success

Pay Off and Avoid Debt

If you’re planning to retire early, then debt is not your friend. Each long-term loan that you have jeopardizes the money that could be used for retirement. That loan payment plus interest…well, it can negatively impact to your saving goals.

Estimate Your Future Spending

A general guide is to budget at least 70% (or more conservatively, 90%) of your pre retirement income as what you’ll need once you retire. Of course, it makes sense to see how you can reduce expenses now to save more. Try out this retirement calculator to estimate if you’re on track for early retirement.

Planning Ahead

Healthcare and Taxes

If you retire before 65, you’ll need some other form of health insurance until you’re eligible for Medicare. One option is to purchase insurance on the federal marketplace at Healthcare.gov. As for taxes, you’ll want to plan how and when you pull income from your investment accounts to keep taxes at a minimum.

Claiming Social Security

It’s a good idea to maximize your monthly retirement income by waiting to claim until full retirement age or even age 70. Use this Social Security calculator to estimate your benefits.

Timeline for Planning

10+ Years Before Retirement

Focus on maximizing savings, paying down debt, and developing a broad financial plan.

5-10 Years Before Retirement

Refine your retirement goals, get more specific with your budget, and review your investment strategy. Research healthcare options.

1-5 Years Before Retirement

Make concrete plans for housing, healthcare, and your desired lifestyle. Meet with a financial advisor to finalize your strategy.

Within 1 Year Before Retirement

Finalize paperwork, understand withdrawal rules for your accounts, and create a detailed budget for your first few years of retirement.

Additional Resources

High-Yield Savings

A high-yield savings account is great for anyone who wants their money to earn more without taking on risk.

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Wealth Management

Our Financial Advisors will work with you to create a strategy that fits your life and adapts to your goals.