How can I retire early? Four questions to consider
Retiring early might seem like a distant dream, but with some careful planning and saving, it may be more achievable than you think. A recent study by the Employee Benefit Research Institute reveals that nearly half of those retired did so earlier than they intended.
Not only is it possible to retire early as part of your retirement plan, but it is also important to prepare an early retirement plan in case of layoffs, injury or illness that forces you out of work earlier than you planned.
If you are considering retiring early or want to make sure you are prepared in case you are forced to retire early under specific circumstances, you need to ask yourself the four following questions.
1. What are my expenses now?
Review your current expenses and how much of your budget they take up. This includes any monthly and daily expenses, such as housing, utilities, medical bills, food, transportation and day-to-day activities.
Knowing your current expenses can help you identify how much you may need to have saved up to continue living the same lifestyle, and it can help you identify areas you may want to reduce your spending in.
2. What will my expenses be like in retirement?
Do you envision having higher or lower expenses in retirement? Estimate what you expect your expenses will look like in retirement using the same factors as you did when reviewing your current expenses. Additionally, you will want to factor in major purchases or events you may eventually need to cover, such as buying a new vehicle, repairing your house, covering medical and long-term care expenses, or paying for a child’s wedding.
3. What is my estimated retirement income?
Sum up the total of earnings you expect to earn from your retirement savings plans, Social Security and any other sources of retirement income you expect to have. Use a retirement calculator to help simplify things and also get an idea of what you may expect to owe in taxes.
4. Is my portfolio diverse and balanced?
A balanced portfolio includes a blend of short-term and long-term investments. Exactly how your portfolio is balanced depends on individual preferences, such as the goals you want to reach and your level of risk tolerance.
Take a look at your portfolio and assess if it is balanced for potential short-term growth and long-term gains. Determine how much you are willing to risk losing should a short-term strategy underperform, and place the amount you are not willing to risk into a safer, long-term investment.
Talk to a ProVise CFP® professional about your retirement strategy
Whether you want to retire early or want to have a plan just in case you need to, it is important to be as thorough as possible. Planning for early retirement can be a difficult challenge, but with the right professionals by your side, you can develop a strategy that works for you.
At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about your early retirement strategy? Contact ProVise today to schedule a complimentary consultation.