You want to retire early? Here's 4 things you need to know about

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You want to retire early? Here's 4 things you need to know about

You want to retire early? Here's 4 things you need to know about
No one would refuse to retire at 38, walk around the house in slippers, and occasionally check their investments in million-dollar accounts.

Not everyone can achieve that, and even if you retire at 55, you can still consider yourself an early retiree. What do you need to consider before you join this "club"?

What is early retirement?

"Early retirement" is a rather subjective concept, but let's use Medicare to come to a common standard. The government is telling us that any retirement before age 65 is already early retirement.

But early retirees have more to plan for than just getting by without benefits and insurance.

What they need to think about first

Let's look at a few things you definitely need to think about before you decide you're ready for early retirement. Note: this is certainly not the whole list, we'll talk about the essentials.

What will you do in retirement?

What do you see yourself doing in retirement? What do you want to do? Maybe you want to dedicate yourself to self-education, and reread your entire library? Maybe you want to travel and visit every corner of the world.

Those who retire early find that they simply have nothing to do. Even if they have good money and a steady interest from investments, not everyone can see themselves out of work.

If your job is already a hobby for you, then you're lucky enough to have it, and maybe you shouldn't be in such a hurry to leave it? 

Nevertheless, think about the things you'll be doing after you're done with your professional life. Perhaps volunteering could be your new hobby?

Regardless of what age you are now, you certainly don't want to think in retirement, "Oh my goodness, what am I going to do now?"

What budget do you need to live good?

The most common and reasonable question. Some sources say 65 percent of your annual income to live comfortably in retirement, and some will tell you you need 90. The truth here is the same. That percentage is different for everyone.

It's important that you know your own spending and be realistic about your options. Consider getting an app that keeps track of your monthly spending. Analyze what you might want to give up when you retire. If you regularly spend $8,000 a month, think about whether you could live on $6,000. If you can get your minimum right, it will help you a lot in the future.

Where does that 65-80 percent come from? It comes because you no longer have to pay into Social Security. Think about the fact that you also don't have to spend money on many other things that you had to buy when you went to work. Office clothes, gas for the commute, lunches at the cafeteria during work hours, and other things.

Have you paid off your mortgage yet? Are you sure you're doing great with your health? This is very important, because if you don't, you may need all your money.

Medical Insurance

What do I do with health insurance?

People can choose their own health insurance plans. That doesn't mean it's going to cost you any less. Analyze to choose the best Affordable Care Act (ACA) option.

Also: The Consolidated Omnibus Budget Reconciliation Act (COBRA) will give you health care for a period of time before you turn 65. For example, if you decide to retire at age 64, you can use this service before you turn 65 and get Medicare after that. However, think about the fact that it may not be cheap at all.

The amount to withdraw

There is some rule of thumb for investors: if you have a 50/50 portfolio with stocks and bonds, you can withdraw 4 percent from it and adjust for inflation at a later time.

For example, if you have $1 million in finances, you can withdraw about $40000 and adjust that amount for the rest of your life. That said, you should understand that your million dollars is unlikely to give you a large annual income.

If you can work longer, it will not only help you supplement your finances, but also help you defer your Social Security payments. They will increase depending on how late you retire. Each year of delay will give you an extra 8 percent increase in benefits.

Also, don't forget that you can't withdraw money from your retirement accounts until you reach age 59.5 without penalty.

Do you have all the details figured out?

Early retirement will make you think about many decisions you shouldn't forget. At different ages, you will have different decisions and what you face will also be very different. 

In addition to thinking and thinking, consider getting a financial advisor and once again accurately calculate all of your spending and finances.
Was this article helpful? Yes -0 No -0157 Posted by: 👨 Jonathon E. Perry
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