We all desire the flexible lifestyle, to not work or work when we want. Wouldn’t it be great to spend more of our lives not working than working? There have been countless financial plans created with this target in mind, but it may not be a reality to stop one’s career before reaching the full retirement age Social Security has set for us.
Early retirement won’t be an option for many as most American’s haven’t saved enough for retirement-and may never. The median retirement savings balance for US adults aged 56 to 61 is $17,000 according to the Economic Policy Institute. That’s not even enough to cover a year’s worth of food and utilities in retirement! What could we be doing better to increase the possibility of more American’s having the ability to retire early? Saving!
You may be preparing to retire early or on time if you’ve been saving consistently and planning. If this is your situation, congratulations! To be sure your early retirement is a reality, consider these facts:
- Leaving the workforce before full retirement age (according to Social Security) stops 401(k) contributions, Social Security Accumulation, and employer health insurance benefits.
- Drawing pre-tax retirement savings before age 59 ½ results in an IRS penalty, further depleting your savings.
- Health Insurance will now become your responsibility to pay as you are not eligible for Medicare until full retirement age. Even when you’re able to use Medicare, it doesn’t cover everything, and you still need to pay for additional coverages like dental, vision, prescription, and a percentage of costs for all medical service. Medicare is not that great of coverage- ask a retiree!
The best way to meet your retirement goals for considering early retirement is to set a budget now for saving and spending-the save first, spend second philosophy. Secondly, plan for the unexpected-poor health, bad financial markets, job loss and overhead debt payments. Lastly, continue financial planning with financial advice to help make retirement a reality when you’re financially ready.