Early RetirementQUESTION: What should I consider before early retirement?ANSWER:
When considering early retirement, it is important that you prepare financially and in other areas too. Only 27 percent of workers and 50 percent of retirees feel very confident they will have enough money to live comfortably throughout their retirement years. Money management is the key when considering one’s options for early retirement.
The ideal time to start planning and saving for early retirement is when people start working, which is usually in their teen years. But we all know that most young people are not thinking that far ahead. Those of us finding ourselves at least a decade or more away from retiring can consider the following and do further research on these topics.
- We can identify our needs, interests, and concerns of midlife and aging.
- We can think about issues that affect the aging like: Social Security, Medicare, and prescription drugs.
- We can stay informed about emerging social trends that affect aging like: increasing midlife divorce rates, evolving social attitudes, boomers’ civic involvement, and studying the impact that these changes make on our lives.
Once we have accepted the fact that our lives have reached the pinnacle of retirement, we can better prepare ourselves and our environment for such an event. The United States Department of Labor has published “The Top Ten Ways to Prepare for Retirement.” For those of you who live outside of the United States, research whether your country provides a similar list.
- Know your retirement needs if you decide to maintain the same standard of living. It will take 70 to 90 percent of your pre – retirement income.
- Find out about your Social Security benefits by calling the Social Security Administration or visiting their website.
- Learn about your employer’s pension or profit sharing plan, if they have one.
- Contribute to a tax-sheltered savings plan, such as a 401 (K).
- Ask your employer to start a plan. Simple plans can be set up by certain employers. You can order IRS Publication 590 by calling the IRS or visiting the IRS website. You can also request “Choosing a Retirement Plan for Your Small Business.”
- Put your money into an Individual Retirement account (IRA).
- Don’t touch your savings if at all possible.
- Start now, set goals and stick to them. Create a tight monthly budget and following it closely.
- Consider simple investment principles. Knowledge of your financial security and how your pension or savings is invested is important. Be sure to investigate the companies involved with your investments and stay atop of any fraudulent practices. You can always check with the Better Business Bureau or your state’s Attorney General Office.
- Always ask questions of your banker, employer, your union, or financial advisor if you need more information.
Other things to consider for early retirement are plentiful. To make your money last through your retirement, it will take some thought, research, and planning. Health is an unpredictable factor in our lives and the lives of our spouses. We can consider getting long-term care insurance.
Lifestyle choices of how and where you live will impact your retirement financial security. Could you be happy living elsewhere, or would you rather stay in your present home? Is it time for a smaller house? You may get a tax break if you sell your home.
When opting to sell and move elsewhere, consider these options:
- Cost of living in the area you wish to move.
- The amount of taxes in the state and city that you consider.
- Does the climate of the area suit you?
- Will you still have support of family and friends?
- Are opportunities for work available and close by?
People must consider cutting their spending. Budget in the items you must have, and keep those separate from the things you would like to own. Avoid using credit cards, especially if you have a tendency for impulsive buying. Avoid using ATM withdrawals to save on extra fees charged by banks and other financial institutions. Shop around for the things you want, and you will get the items for a more reasonable price. Work with your spouse to keep your spending within your budget and stick to it. Expect the unexpected, and leave room in your budget for emergency repairs of the furnace, car, house repairs, and major appliances.
Here is how one woman and her husband prepared for early retirement. “During the last few years prior to retiring, we started paying off all of our debt. Our home and new automobile were paid in full. We both retired on the same day at 61 years of age. We have enjoyed each day, doing what we both love: church work, writing, reading, family, and traveling.