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Thinking About Retiring Early? Answer These 4 Questions

Thinking About Retiring Early? Answer These 4 Questions

April 24, 2024

Thinking about retiring early? If the idea of working until 70 or later doesn’t quite appeal to you, then you might already be considering an early retirement without even realizing it. When early retirement comes to mind, you might think of the FIRE movement (Financially Independent, Retire Early), which often involves extreme frugality to escape the workforce. However, in our conversations with clients, we often encounter a different question: Can I retire before 65 or 70? Perhaps not in your 30s or 40s, but what about in your 50s or 55s? So, when we discuss early retirement, we're referring to those who aim to leave the workforce at a slightly younger age than the norm while still enjoying a comfortable lifestyle.

Approaching retirement age can bring about uncertainty and anxiety, especially given the current economic and political landscape. You might be contemplating whether it's wise to retire earlier than initially planned. Before making any decisions, consider these four essential questions.

#1: Do I Have Enough Retirement Savings & Investments? 

This may be obvious to some, but the most important thing to consider is your retirement savings. Financially speaking - Are you in a good place to retire? This is especially important due to the fact that you’re losing extra years to save and now your savings will have to last for a longer period of time. The worst decision you could make would be to retire early without adequate savings. If your savings are not up to par, you could be forced to make sacrifices when it comes to the quality of your retirement or potentially be forced back into the workforce at a later age.  

Additionally, how do your current investments look? As you get close to retirement, you’ll likely need to adjust your assets to be more conservative. We often advise our clients to start looking at this around ten years before their ideal retirement age. If you’ve already made these adjustments in preparation for retirement, you’re likely in a great spot. If your investments are still aggressive, you may want to reconsider. 

#2: Can I Afford Health Insurance After I Retire?

If your plan is to retire before 65, there’s a chance you’ll need to pay for your health insurance before you’re covered by Medicare. As we all know, health insurance gets more expensive as we age and that cost seems to be increasing on a daily basis. This means you’ll need to factor health care coverage as an added expense to determine if you can retire early. Even if it's only a few years, you MUST have a plan for it. 

#3: When Should I Take My Social Security? 

You could start receiving your Social Security benefits as early as age 62, but is that the right decision? Don't be fooled. If you decide to collect your benefits before your full retirement age, determined by the year you were born, your benefits will be smaller.2 But, there is no hard and fast rule here. For some individuals and families, it's better to wait to begin receiving their benefits. Conversely, there are many people for whom it's better to start receiving as early as possible. 

If part of your early retirement plan includes collecting Social Security, when and how to take it is a very important question to answer and make no mistake about it, this decision is very specific to your own personal situation.  

#4: What Are Your Retirement Plans? 

Spend some time thinking about what retirement looks like to you and WHY you want to retire. Are you going to retire early solely because you’re overwhelmed or don't like the current state of affairs? Although this reason should not be minimized, it IS important to evaluate whether or not you’re ready to retire or if it is an emotional reaction to an external force.

Why do you want to retire? Do you have a plan for what you want to do with your retirement? Are you ready to get started on it? Are you ready to finalize your career? Is it possible you will quickly find yourself bored in your early retirement? 

What Perks Would I Receive Retiring Early?

If you’ve considered all of the above and still find yourself certain about early retirement, there are a few perks. It could reduce your stress and offer you more time to explore recreational hobbies. You can spend more time with your family, or spend more time traveling, or you can start a new business ahead of schedule. Ultimately, the possibilities are endless, and the choice is yours!

With everything going on in the world today, it may be tempting to throw in the towel and retire early if you’re nearing that age anyway. Unfortunately, there are more factors to consider than you may realize. Our advice is to openly and honestly reflect on your motivations for wanting to retire, this will help to make the most informed decision possible.


If you would like to discuss your current situation schedule a free 20-minute call with the link below.

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About the Author

James M. Comblo, CFF
is the President & CEO of FSC Wealth Advisors. His greatest passion in the financial services industry is helping clients live the life they want, not the life they are forced to. To learn more about him click here.