VOL. 132 | NO. 159 | Friday, August 11, 2017
Rays of Wisdom
Dana and Ray Brandon
Early Retirement – Can You Do It?
Ray and Dana Brandon
Ray’s Take: Many people dream of making an early exit from the work routine, but making that dream a reality has some challenges. By retiring at, say, age 55 instead of 65, you have 10 fewer years of saving and investing for building a nest egg that has to support you through an extra 10 years of retirement. That double-whammy of fewer working years to save and more retirement years to spend is what makes early retirement tough to pull off.
Where will your funds come from to cover expenses? Will you be making withdrawals from deferred retirement accounts? Many have an early withdrawal penalty of 10 percent if you begin drawing from them before age 59 1/2. If you want to make the early retirement dream happen, you’ll have to plan well so that you have funds you can use that aren’t affected by those penalties until you reach the age at which those penalties aren’t a worry. Withdrawing early and incurring the penalties will reduce the amount of funds you have available to pay for your extended retirement.
Health care is another big item to consider and plan for before deciding to retire early. Medicare doesn’t become available until age 65, and even then doesn’t cover everything. How will you pay for health care prior to age 65? You’ll have to buy health care coverage on your own. That can be a budget wrecker if you’re not prepared. And estimating how much you’ll pay for health care in the future is somewhat of a guessing game.
Think about your life after early retirement before you take that leap, not after. Making it happen is entirely possible, but it will take some serious, disciplined planning. The sooner you create a plan and put it into action, the better the chance your early retirement dream will become a reality.
Dana’s Take: Early retirement and a life of leisure may sound like the stuff of daydreams, but the reality can be a big letdown for people who are used to being busy – and important. Once the newness is gone, an ugly reality can raise its head.
Boredom, a feeling of isolation because your friends and family are still working, and loss of identity due to not having somewhere to be and something to do every day are potential realities.
Creating a social network, finding hobbies you love and being physically active prior to pulling the trigger on early retirement all combine to create a much more positive retirement life.
Ray Brandon, CEO of Brandon Financial Planning, and his wife, Dana, a licensed clinical social worker, can be reached at brandonplanning.com.