Consider these 5 factors first
Early retirement is a dream for many, but figuring out if that dream is an actual possibility can be a bit more complicated. When you consider retiring early, you need to ensure that your retirement budget and your investments will carry you through the rest of your life. If retiring early is something that interests you, you’ll want to consider these factors before you take the leap.
You Can Live off of your Retirement Budget
To figure out whether or not you can retire, experts suggest trying to live off of your retirement budget for six months. Sit down and figure out how much money you’ll have coming in, and how you plan to divide it. Take the budget for a test run for six months, and see how you do. Experts suggest if you can get through the six month period without feeling strapped for cash and you don’t need to use credit cards to get through each “pay” period, you are in good shape to retire. If you can’t get through the trial run without turning to cards and other advances, you need to reconsider your retirement plans and budget.
Your Debt is Paid Off
If you are still paying off your mortgage, or have a lot of outstanding debt, experts suggest that retiring early isn't a great idea. If however, you are relatively debt free and don’t currently have a mortgage to worry about, early retirement might just be within your reach. Remember, in your retirement years, the goal is to cut costs, not add to them. Because of this, individuals with a high amount of debt are bad candidates for early retirement. If you have outstanding debt, experts suggest consolidating it and plan to pay it down faster, so you can retire sooner.
Your Children are Financially Independent
Kids are expensive, and they will be costly for many years, even long after they have flown the nest in some cases. Early retirement might be in your grasps if your children have graduated from college and are completely financially independent from you. That is to say, they won’t need a check written monthly to get through their day-to-day lives. Kids in college can continue to be expensive long after you drop them off at freshman orientation, so make sure to consider this when you think about early retirement.
You Have Healthcare Covered
Healthcare should be a big consideration in your early retirement plans. Because you cannot use government funded healthcare until you are 65 years of age, those planning for an early retirement should have a healthcare plan in place. Experts suggest early retirees have healthcare through a former employer to comfortably retire.
Your Assets are Diversified
In order to retire early, experts suggest ensuring that your portfolio is diverse and can withstand downturns in the market. It is also important that you don’t rely solely on your portfolio during an early retirement. To ensure your investments are safe and diverse enough to carry you through, it is a good idea to sit down with a financial advisor.
If you’ve answered yes to all of these questions, then retiring early is likely an option for you. If you’ve answered no to some or all of these questions, you may want to sit down and revise your retirement plans. Before making any major decisions about the rest of your working career or your retirement, it is important to sit down with an advisor.
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