Thinking of Early Retirement? Here’s a Checklist
Some people dream of retiring early, while others love their job and could keep working for their whole lives. For people born after 1959, the normal retirement age is 67, but that doesn’t stop many Americans from dreaming of retiring early. You can begin receiving Social Security benefits as early as 62, or as late as 70. There are many benefits to waiting until you are older to retire because it gives you more time to save money and pay off debt before your income is reduced. What you hear about less often is the fact that there are plenty of good reasons to retire early as well. Here are five reasons you may be able to retire early.
1. You have the money
This is the most obvious reason to retire early. If you have enough money to retire now and you hate your job, or simply want more free time, then you should go ahead and do it. The general rule of thumb is that you will need roughly 80 percent of your pre-retirement income for retirement, but that number changes depending on your own circumstances. If you have enough money to retire comfortably for the rest of your life without even looking at the bank, great for you, but if you are wondering if you have enough money, try CNN Money’s Retirement Calculator. If you are on the fence about whether or not you can afford to retire early, try setting a retirement budget and living on it for a few months.
2. You have good health insurance you can afford
Lacking quality and affordable health coverage is one of the most common reasons people don’t retire early. If you’re married and your spouse has family health insurance (or can get it), then you can consider retiring early if your spouse plans to keep working. If you do not have access to healthcare through a spouse, you could apply for private healthcare coverage, but that can be very costly. If you are self-employed, then you may already have private health insurance and not need to change your plan. Medicare won’t start until you are 65; however, if you are retiring just a few months early, you could consider COBRA insurance, but it can be very expensive as well.
3. You’re debt-free
We would all love to be debt-free, and for many of us, we have a set goal of reaching this point by a certain age. If you are currently debt-free, you may be able to retire early. You will be in a particularly good spot if your mortgage is paid off. Since so much of your income is freed up when you are debt-free, this will affect your retirement budget positively because you will need less money each month for set bills. The median debt of seniors in 2011 was $26,000, and about 40 percent of seniors owed money, so if you are debt-free, consider yourself in a good place to consider retirement if your savings is on track as well.
4. You don’t have any dependents
If you still have young children or even grandchildren who you are supporting, it can be difficult to retire early. Raising children is expensive, and even if you have grown children who are in college, you may still face a hefty bill each year. Have a discussion with your spouse (if applicable) and determine how long and to what extent you want to support your children: should you set aside money in case they have an emergency down the road, even if they are financially stable right now? Do you want to help with the education of your grandchildren? If your children are grown and you have set boundaries about how much you are going to help them in the future, then you may be set to retire. However, if your spouse or other family member has high medical bills and you support them, you will also need to factor that in.
5. You have another source of income
If your spouse works full-time and plans to keep working, then you may be at the age that your spouse’s income plus your retirement savings is enough for one of you to retire. You also might consider continuing to work part-time to supplement your income if you enjoy your job or want to retire but need just a little bit more money to do it. Also, if you received a settlement, or a large inheritance or other large cash gift that allows you to retire a few years early, then that might help you as well.
There are plenty of reasons to retire later, but if you really want to retire now, and you have the money and are in a situation to do so, then you may be much happier taking the next step and trying out retirement.