If you are planning on retiring early, there are several things you need to consider before you collect your last paycheck. Retirement should be spent relatively stress-free from the financial burdens of debt and medical care. You should plan to have enough income coming in to pay all of your monthly expenses as well as any new debts or unexpected emergencies that should arise. If you are planning on retiring early, or before the age of 65, you can’t depend on social security income to help support your family. If you pay off your debt and invest well, you should be able to manage a secure lifestyle well through your golden years.
In order to retire early, it is important to count on a steady, residual income coming in month after month. If your employer has offered you a buy-out or early pension payments, you need to decide if that will be enough to support yourself comfortably. You should take into consideration your retirement savings, if your home and automobile is paid off and if you will be receiving medical insurance after your retirement. Speaking to a qualified financial adviser will help determine if you will be able to withdrawal funds or collect benefits without falling into a specialized tax bracket that could eat a chunk of your savings as well as the pension payments. Make sure to have all of your savings and investments protected before you start collecting your pension benefits, or you could wind up owing a lot of money when tax time rolls around.
The savings or 401k that you have been investing in over the years is about to be put to use. Make sure you have enough to pay your month-to-month bills and replenish at least half with your retirement income if needed. Mutual funds are often one way of holding on to your money and securing them until they need to be used. If you will be relying greatly off of your savings, you should consider a balance of investments or combination to get the most out of your money. This includes stocks, bonds and capital preservation investments that ensure long-term capital as well as current cash availability without huge penalties.
It is important to look at your medical insurance before taking an early retirement package. Maybe you will have access to the same medical insurance you currently have with your employer, or maybe you will have to acquire COBRA insurance. Coverage may be different, so it is important to shop around for an insurance policy that gives you and your family the peace of mind you need.
It is important to have one or more emergency funds set up before you consider early retirement. These funds are set aside for a sudden emergency or the need for quick cash should something out of the ordinary arise. If there are penalties or fees involved, always keep that in mind before removing money from the account. Maybe you have savings accounts, certificates of deposit, money market funds and treasury bills as part of your financial asset pool. These accounts should be interest bearing but also make it easy for you to access funds immediately in case of an emergency. Consider being able to replenish emergency funds within six months of the last withdrawal, so your assets remain strong and in place. There is a lot to think about before choosing early retirement. Insurance and access to your money is at the top of the list. Evaluate your income now and when you will retire. Come up with a plan that is feasible for you and your lifestyle. Visit IRED.com for more information regarding your insurance and retirement needs.