Early Retirement: Are you Ready to Make the Move?

Retiring at any age requires a great deal of planning and effort, and this is even more true if you plan to start enjoying your retired years more quickly. In retirement, you no longer receive the benefit of a regular paycheck to live on, but you still have some living expenses to pay for. In addition, when you retire early, you may not even have access to your retirement funds or Social Security payments. Clearly, you need to cover all of your bases if you plan to start living the good life of a retiree before you reach retirement age. By considering these important points, you can more easily to determine if you are ready to make the move. 

Are Your Debts Paid Off?

Before you can retire, you need to review your current budget to ensure that you can pay for all of your living expenses without a paycheck. You can drastically reduce the amount of money you need to live on when you eliminate your debt. It is best to pay off all of your outstanding credit card balances, car loans, and other debts if possible. Many individuals often find it best to pay off their home mortgage before retiring early, even if this means that they must work an extra year or two in order to accomplish this goal. After all, think how much more comfortably you will be able to live without having to pay a large mortgage payment every month.

Do You Have a Source of Income?

In addition to eliminating your debts and reducing your monthly expenses as much as possible, it is important to consider how you will pay for your recurring expenses. After all, even after you pay off your debts, you will still have to pay for food, gas, insurance, utilities, and other recurring expenses. When you retire early, you will often not have access to typical sources of retirement income, such as IRA distributions or Social Security checks. Therefore, you need to think about ways that you can generate passive income, and this may include through real estate investments, dividends, annuities, and other sources of income. 

Are Your Accounts Funded?

The fact is you can prepare a great budget, and you can cover all of your expenses with passive income sources. However, you also need to ensure your accounts are fully funded before you retire. You may not be able to save as much money in retirement as you do in your working years, though you may still be counting on having a fully funded retirement account when you reach retirement age. You may also need access to an emergency savings account to draw from in urgent situations. Your financial health is important to consider before you retire. 

Have You Thoroughly Prepared for the Future?

It can be difficult to account for factors like changing health status, inflation, economic crises that impact your portfolio, and other factors. The last thing you may want is to head back to work a few years after you retire because you run out of money. You should consider how you can better prepare for events that likely will occur at some point. For example, inflation will inevitably be a factor, and there are inflation calculators and sites like Creditguard.org you can use to better plan for the future. You can also supplement your health insurance with long term care coverage. Finally, ensuring your income stream will increase over time, rather than remain stagnant can also be beneficial.

Preparing for retirement can be challenging, but you need to take extra steps if you plan to retire early. Consider each of these points carefully to ensure you make the best decision about your finances.