The average retirement age is 62, but more and more Americans are finding themselves working until age 66, or even way beyond that. If you’re dreaming about an early retirement, it can be possible with proper planning. The key to a successful early retirement is being financially prepared, and the following are some signs that you may be there and ready to retire sooner, rather than later:
All of your debt is paid off
If you still have tons of debt from loans and credit cards, you may not be ready yet for early retirement. If you have debt to worry about when you’re no longer working and receiving a steady income, you could be setting yourself up for financial troubles. But if you’ve paid off all of your debt, including your home loan, you may be on your way towards an early retirement. With no debt to worry about, you’ll have fewer bills to deal with, making an early retirement a much more realistic goal.
You have guaranteed income streams
You won’t receive your Social Security payments until you reach retirement age, so if you hope to retire early, you’ll need other sources of guaranteed income. If you’re not working, your options may be rather limited. If you do have a guaranteed income source, or you can receive money from a pension or a 401(k) that doesn’t penalize for early withdrawals, you may be ready for early retirement.
Because your Medicare won’t kick in during early retirement, it’s important to make sure you have health insurance on your own. After all, you won’t be receiving health coverage from your job anymore if you quit. If you can receive coverage through your spouse, or you have plans to buy your own independent health plan, it will be one less thing to worry about by retiring early. But if you don’t have any other way to receive affordable healthcare after quitting your job, you may need to wait on retiring.
If you have liquid assets (access to money that can be spent right away), you may be able to retire early, depending on how much you have. Having at least three years’ worth of expenses saved up is ideal for early retirees, at a minimum.
Your children are financially independent
Financially dependent children, particularly those who are starting college, can be a significant expense. If your children are all grown up and financially independent, or you don’t have kids, this isn’t something that applies to you. Otherwise, you’ll need to carefully examine your current situation and determine if you’ll be able to offer your children the financial support they need, while also retiring early.
You effectively tried out a new budget
Once you feel completely confident that you’re ready to retire early, it’s time to test it out before making any final decisions. Restructure your budget and pretend that you’ve already quit your job and retired. Try to live off of that new budget for a few months and see how it goes. If it’s too financially demanding, you may want to put off retirement. But if you’re able to maintain a similar lifestyle comfortably, you may be ready for early retirement.
Do you need extra cash to take care of bills and expenses? Peachtree Financial Solutions may be able to help. If you’re receiving long-term annuity payments, you may have the option of selling all or a portion of those future payments and receiving your money sooner. Contact Peachtree Financial Solutions today to learn more about selling your annuity payments and receiving your cash in a lump sum payment. We can also provide you with a free, no-obligation quote.
Nothing above is meant to provide financial, legal, or tax advice. You should meet with appropriate professionals for such services.