With the changing financial landscape and business markets adapting accordingly, there’s a lot more uncertainty when it comes to the topic of retiring, or an early retirement. While it can be done, it’s important to have all of your financial ducks in a row, especially when going with a more complex option.
Keep in mind: early retirement is an interesting scenario to take on. It’s very personal and should be based on your own goals. Some individuals choose to retire and take a small hobby job to keep up their expenses and to have some extra spending money. The best of both worlds is when you truly enjoy the job you’re doing in this case.
A great prerequisite to an early retirement is to begin taking inventory of your life and coming up with a retirement budget. Take in account your bills, any debt you have, and how you’ll be spending your time. If you will be taking a passion position for work, factor that in as well.
Once you have these numbers in mind, living on this retirement budget for six months is a great start. That way, you’ll see if you can actually do it, and also see if you need to add any more budget or adjust. The worst thing you can do is push yourself and rush the process, which can put a lot of undue stress on you and your family.
A great exception to research further is termed substantially equal and periodic payments. We have a guide over here with example numbers and research. It’s a great plan if you’re set on an early retirement and would like to pull from your retirement account early, without paying the 10% early withdrawal fee.
Remember to factor in inflation for any financial planning you’re doing in preparation for your retirement. This is a big factor many individuals miss. Thankfully, the United States has kept a relatively low average, averaging at nearly 5% at its peak (this is generally a good number to use).