I like answering surveys. They’re kind of a professional curiosity for me, like a baker tasting chocolates. But lately, I’ve been stumped by one of the questions at the end of the survey. It’s the one that asks about employment status. The choices are: Employed full time, employed part time, unemployed, or retired. I hate to check “employed,” because it’s a point of pride for me that I work for myself. But I’m also not unemployed – I’m still working and getting paid for it. Technically I retired from corporate life when I was 55. But I expect to continue with my consulting practice until I “really” retire. Whenever that is. So, I guess you could say I took a kind of early retirement.
Taking early retirement and working for myself allows me to continue practicing my craft and stay relevant. I also get to choose when to work, how much, and most importantly – with whom. Throughout society, retirement is starting to take on a new meaning. For many people it’s a chance to have more control over their time, whether that means working, playing, or simply having better balance.
The end of the retirement cliche
The retirement cliché is golf and travel and afternoon cocktails on the veranda. Of course, nobody wants to be a cliché. Just as the world of work has changed in the last few decades, so has retirement. While some people (including the president) are working into their 80s, others are calling it quits as early as 50 or 55. But early retirement doesn’t mean a rocking chair on the porch. For some people it’s just a different kind of work or the freedom to start a dream business. For others, early retirement frees up time for a passion project or a completely footloose lifestyle. YOLO is real. You Only Live Once.
The key to retiring early is to have a plan. A major part of that plan will be financial, but you’ll want to build your plan around the vision you have for your future. Because the earlier you retire, the longer you have to plan for. Your own personal scenario will shape your plan. For example:
- If you hope to spend most of your retirement traveling and pursuing hobbies, you’ll want to make sure you have a secure and substantial nest egg.
- If you’re more of a homebody who’d prefer spending time surrounded by friends and books, some smart budgeting can help you make that happen.
- And if you’re ready to give up on the full-time grind but not the income and professional fulfillment, a financial plan can help you figure out the right balance.
Knowing what your retirement will look like helps you – and your financial planner – prepare for it.
Your early retirement plan
It’s important to give yourself plenty of time to plan for your retirement. Which means if you want to retire early, there are steps you should be taking in your 30s and 40s. Make conscious moves to maximize savings and minimize debt so you’re financially ready by your target date. You’ll want to understand where your retirement money is going to come from and what your expenses might look like.
This kind of financial planning and discipline will do more than prepare you for an early retirement. It also allows you to be prepared for unexpected changes in everyday life. Even if your retirement date is years away, careful planning can help you build a cushion in case of a layoff or a family situation that requires you to step back from full time work for a while. Things happen.
The “normal” retirement age is 65 (that’s when you’re eligible to start Medicare), but normal isn’t for everyone. Early retirement can feel scary. Take it from me, you don’t want to jump into it unprepared. Your financial plan will help you think about when to make the leap, how to prepare, and what changes you’ll need to make so your early retirement vision can be reality.
Questions to think about if you want to retire early:
- At what age do you see yourself retiring from your current job? If the idea of early retirement is new to you, give yourself some time to prepare.
- Do you have a plan for what you’ll do in retirement besides not working?
- If you find out that your current savings (plus social security) won’t support you in retirement, are you willing to cut expenses or get a job?
- Gather information on your investments, sources of income, debts, and expenditures for your financial planner to review before you solidify your early retirement plan.
- Begin tracking your expenditures so you know how much you’ll need for a comfortable lifestyle. Once you’ve built your retirement nest egg, you’ll know how much you can spend each year.
- Be sure to involve the people who depend on your income in your decision making. Consider the future needs of your spouse, kids, and parents.
The foregoing content reflects the opinions of Liz Behlke and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.