Early retirement is a dream come true for most hard-working people, especially those who have spent decades in their careers. If retiring early is your ultimate goal, you do not need to have been blessed with millions in your 20's, but you do need to be properly prepared.
Awareness of the advantages and disadvantages of your ultimate decision is a great defense against failure and unforeseen occurrences. Early retirement is certainly not for everyone, but with proper planning it may be within reach for you.
Avoid The All or Nothing Trap
If you are seeking to retire early, you may need to stop looking at retirement as an all or nothing scenario. This means taking on the view that retirement is the absence of needing to work, not necessarily a work-free period. Maintaining a part-time job or devoting yourself to a lucrative side business can help make retiring early an option for you when otherwise it would have been unobtainable. Additionally, prospective early retirees need to consider whether the disadvantages are worth it. You may need to downgrade your dreams of luxury and expensive vacations for this to work out for you.
Diversification Is Key
An early retirement doesn't only mean ample time to enjoy doing the things you love, it also means ample time for things to go wrong. Portfolio diversification is especially important for early retirees as there are more opportunities to survive market fluctuation. Enlisting the help of a financial advisor is beneficial in determining if you and your assets are sufficient to retire early based on your personal goals and applicable risks. Even if the ultimate determination is no, your advisor can assist you in forming a plan that can put you on the right track. The end goal should ideally be multiple options for supporting your retirement lifestyle as opposed to having all your eggs in one basket.
The rising cost of healthcare has always been an important issue to consider for every retiree, whether seeking to retire early or not. Those who choose to retire early typically need to pay for healthcare out of pocket until Medicare eligibility kicks in. Be aware of this additional cost, as it can be a major expense. The inability to receive your maximum pension or social security benefits is another disadvantage that accompanies early retirement and should be accounted for. Early withdrawal penalties and potential taxes on your distributions really do add up and can cut into your plans if not taken into consideration. This is another area a personal financial advisor can help you avoid overlooking some costly mistakes.
While the allure of retiring early is great, preparation is important or you could end up facing the difficult prospect of trying to reenter the workforce after a huge gap in employment. Proper planning should be undertaken as soon as possible, and ideally include an extra set of eyes to catch potential oversights you might miss. For guidance and assistance on your path to early retirement, contact our team at BD Financial Concepts.
We are a professional financial services firm located in Sanford, Central Florida.