How to Retire Early - And Should You?
Early retirement is possible and easy, but it requires extensive planning. The effort that you put towards retirement planning is worth it because, arguably, at retirement is when a fun, stress-free life can truly begin. Here is the guide on how to retire early.
What is Early Retirement?
Early retirement is when you stop working earlier than the statutory retirement age. 65 is considered the legal retirement age—that is when you are eligible for Medicare benefits. Social security benefits kick in at age 66, while zero penalty 401K withdrawal starts when you reach 59 ½ years.
What Are the Benefits of Early Retirement?
Early retirement gives you control over your life. Every day you get a remarkable feeling of happiness and time well spent. The promise of early retirement includes:
Health and wellness: During the COVID 19 pandemic, early retirement can allow you to safeguard your health and make positive lifestyle changes.
Family and relationships: By retiring early, you get the time to take care of an ailing loved one or be with family.
Hobbies and charity: You get to unplug from the system and focus on what you are genuinely passionate about. That may include trying a new sport, writing a book, or volunteering with a non-profit.
Travel and fitness: Working to a later age may limit your ability to move around in major ways. Retiring makes it possible to stay fitter, climb lofty mountains, and kayak across rivers while you still have the energy.
How Do I Know Early Retirement Will Work Well for Me?
Should I retire early? When does it make sense? When does it not make sense? Here is how to evaluate your readiness for retirement:
Savings: You are safe to retire if you are closer to achieving your savings goals. Experts recommend that you have savings that are at least 25 times larger than your budgeted yearly withdrawal before you head into retirement.
Post-retirement plan: What do you want to do after you retire? If your retirement planning involves opening a business or indulging in activities that generate passive income, early retirement makes even more sense. If your plan involves more travel and hobbies, you will need more savings.
The markets: If the economy appears to be healthier and you have been saving for a while, it might be safe for you to retire early. If the economy is on a downturn, it will be wise to delay retirement so your savings/investments can recover from low-interest shocks.
Health: If your health is weakening, it will make sense to retire early and focus on wellness. But if you are in excellent health, you might want to work a little longer and save some more for a life of comfort after you retire.
How to Retire Early
Create a retirement budget
Estimate the amount of money you will need to spend every month or year based on your post-retirement life goal. Multiply that by the number of years you have to get to your 100th birthday.
Benchmark your current savings versus what you need
Now that you have a retirement budget compare against what you currently have in your savings, investment, real estate, and cash. The difference is what you need to save to retire early.
Pay your debts
When servicing a loan, it can be challenging to save as much money as you need to meet your retirement goals.
Reduce your retirement budget
You can retire early with or without $1 000,000. The secret is budgeting. Remove non-essential items from your retirement budget to reach your savings goal faster.
Save more /invest more
Plan to save and invest more from your current monthly income. You can explore opportunities for a side hustle and passive income so you can put more towards early retirement.
What amount of money do I need to retire/retire early?
It all depends on how early you retire and what you plan to do after you retire. Let's say you want to withdraw $50,000 every year after you retire at age 50. The number of savings you need for that would be $2.5.
What Special Considerations Do I Need to Consider in Retiring Early?
Social security benefits: Retiring early may mean a 30 percent reduction on your monthly Social Security. Retiring later increases these benefits.
IRA and savings: Earlier 401K withdrawals attract a 10 % penalty, but you can avoid that through a Substantially Equal Periodic Payment plan.
Health insurance: You are eligible for Medicare at age 55. Before that, you can find options, including public exchanges or getting on your spouse's plan.
Alternatives to early retirement: How to retire early without losing income
Work from home for a carefree lifestyle: This is possible now given the remote working requirement during the COVID 19 pandemic.
Opt for part-time work or consultant roles: This will give you room to focus on your health, personal hobbies, or business.
Freelance: Enjoy being in control of your schedule while leveraging your skills for continuous income in freelance opportunities
Retire later: With the right retirement planning software, five or ten more years of work may be all it takes to double your current savings.
Use the Quick Retirement Planning Software for Success in Early Retirement.
Quicken is the best retirement planning software for both early and traditional retirement. Here is how you can use the solution to consider, plan for, and thrive during early retirement.
Gain visibility into your financials: The retirement income planning software integrates all your banking, credit card, and retirement accounts in a single place, making it possible to track your financial health and manage your portfolio for early retirement.
Budgetize with efficiency: The right budgeting can get you to retire earlier than expected. Even in retirement, you will have the ability to attain financial success by relying on Quicken's budgeting features.
Manage your bills: You can attain success in retirement planning with Quicken. It helps you see how every single cent in your expenditure and savings affects your chances or early retirement.
Let's help you manage your money
We believe that early retirement is possible, and it is an incredible opportunity to live a fulfilling life. Start planning for retirement now with the Quicken money management software. Check and compare pricing here.