Is early retirement on your "wish list?" Do you envision a relaxing lifestyle in a warmer climate or the leisurely pursuit of a personal hobby? Unfortunately, retiring later than anticipated, rather than sooner, is becoming more and more commonplace. But, some people are still managing to retire early. You may be asking yourself, "How do they do it?"
The key is to be proactive in your retirement planning. Of course, the sooner you begin planning and saving, the better your chances are for early retirement. Keep in mind that a general rule of thumb is that you may need as much as 60% to 80% of your pre-retirement income to meet your expenses and maintain your desired lifestyle in retirement.
Redefining Retirement
There are many factors that are redefining how Americans approach retirement. Due to financial necessity, or sometimes too much leisure time, some retirees are reentering the workforce. Many retired executives start their own part-time consulting businesses; others trade in their hectic seventy-hour workweek for a pseudo-retirement, in which they work less and spend more time with their families. Part-time work during retirement can be an important income supplement, especially if you plan to retire early from your full-time career.
Longer life expectances are also changing the retirement landscape. Some people spend one-third of their lives in retirement, and your chances of a longer retirement are certainly greater if you retire early. Therefore, relying solely on retirement plans and Social Security may be more difficult, as these programs were not designed to provide perpetual income. Furthermore, as longevity has increased and the use of traditional pensions has decreased, the responsibility for retirement planning has gradually shifted from employers to employees. The task of acquiring adequate retirement savings has been placed directly in the hands of the workforce, who often must take initiative to contribute to their company-sponsored retirement plans. As a result of all these factors, your retirement assets, as well as your personal savings, may have to work harder to meet your objectives, no matter when you retire.
An often overlooked aspect of retirement planning is money management once retirement has begun. To help ensure adequate retirement assets, your money may have to continue working for you throughout your retirement years. Inflation—along with the amount of income withdrawn from your retirement plan—will have a direct effect on how long you can continue to meet your expenses. Thus, personal savings will continue to be an overall part of your financial plan.
Budgetary constraints can also determine your lifestyle choices in retirement. In order to determine whether you will be able to maintain your desired lifestyle if you retire early, it can be helpful to estimate your retirement income and expenses. Unfortunately, this process may be difficult, as you will need to consider everything from greens fees at the local golf course to health insurance costs. In addition, you must factor in inflation and how your financial needs may change over time.
Finally, for those who wish to retire early, it is important to realize that certain penalties may apply for early withdrawals from retirement plans. All options need to be examined and reviewed with a qualified financial professional.
It's Your Retirement: Be Involved!
Today, early retirement remains a possibility. By planning ahead and maximizing your personal savings, you may increase your chances of reaching your retirement goals. Remaining proactive and focused is particularly important if you are contemplating, or are forced into, early
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