Early retirement takes planning, commitment, and money.
If early retirement is your goal, you’ll need to develop a realistic plan for the lifestyle you want when you reach your target age. Then make a commitment to save and invest money with that goal in mind. In addition to setting goals and writing down a plan, here are some other steps you’ll want to take:
- Make sure you have emergency reserves to pay for major expenses that can crop up unexpectedly. Your retirement accounts aren’t the same as your rainy-day funds. If you hit a rough patch or need money to pay for a major, unforeseen event, don’t look to your retirement savings for a bailout. That will cost you in taxes, early withdrawal penalties, and lost growth. You should keep emergency reserves in a non-retirement account.
- If you plan to retire at age 50 or 55, you may have years to wait before you can tap into your retirement accounts longer still for Social Security. If you receive an early lump-sum retirement buyout, make sure it produces enough income until your Social Security or pension benefits begin.
- Once you leave employment, how will you pay for health insurance? Individual health insurance is expensive, so do some comparison shopping and understand levels of coverage to find a plan that suits your needs.
- To make sure early retirement is what you want it to be, review your plans with a registered representative of Western-Southern Life Assurance Company. Ask how you can boost your retirement savings with annuities or mutual funds.
Before You Take the Plunge:
- Try it on for size. Before you leave employment, spend a year living on the same amount of income that you expect to have after retirement. This trial run will give you a good idea about your financial readiness for retirement.
- Bow out gradually. Ask your employer if you can cut back on hours, working part-time or half-time. Part-time hours might keep your employer-paid health insurance intact, which can save you hundreds of dollars each month.
- Have a fall-back plan. Even the best-laid plans aren’t always successful, so do a risk assessment and have plans for recovery in the event you are hit with an economic hardship that impedes your retirement goals.
Products for this Life Stage:*
Mutual funds are are one popular way to save for an early retirement.
You’ll want to be sure to have sufficient life insurance to protect your loved ones in case something happens to you.
More Ideas for the Newly Independent:
Plan and analyze your situation with WSLife.com's Retirement Financial Tools. Build different scenarios to determine how much you need to save.
Use WSLife.com’s How to be a Millionaire Tool to predict if you can retire ahead of schedule.
IRAs allow your earnings to grow tax-free, and the withdrawal of contributions may also be tax-free.
Western & Southern Life does not provide tax or legal advice. Please contact your tax or legal advisor regarding your situation.
*Products suggested for this Life Stage are not a specific recommendation or solicitation to purchase. Mutual funds are offered through an affiliate of Western & Southern Life.