How To Make Early Retirement A Reality For You

October 19, 2018

Retirement means different things to different people. For some, retirement means a second chapter of a “fill in the blank” opportunity. For others, it’s the choice to work or not to work.

In any case, retirement is a destination we all aspire to reach. The age we want to reach retirement varies though. The US Census Bureau calculates the current average age of retirement to be 63. But there are always the overachievers who want to retire by 55.

Early retirement is possible with the right plan

If this is your dream, it is possible. It just requires a lot of planning. Use the list below as a starting point to create a strategy to retire early:

Create AND test drive your retirement budget

Do a reality check on your savings by creating a retirement spending plan to account for all of the projected expenses and spending you may have in retirement. Be honest with yourself when doing this. If you can’t live below your means now, what makes you think you can do it once you retire? If your new budget includes big drops in expenses like eating out, clothing or entertainment, test-drive the changes now to see if you can stick with them into retirement.

Don’t forget to factor in travel

Thinking about travel? Great, first think of how often you want to travel. Next, use websites like Travelocity to estimate how much your dream destinations will cost annually, divide that number by 12, and use that amount in the vacation category of your spending plan.

Make a game plan for healthcare

First, make sure you understand your estimated health insurance costs until you qualify for Medicare. According to,the average cost of health insurance for an individual aged 55-64 years old is $790/month in 2018. This number can change dramatically depending on where you live. For some, it’s a pretty big financial gap to cover if you plan on retiring at 55.

Second, contact your HR department regarding retiree healthcare benefits and the rules to use them. The last thing you want is to retire at 54 only to later realize you could have gotten healthcare benefits if you’d waited to retire at 55. If you retire without healthcare benefits, consider working part-time. More employers are offering healthcare benefits for part-time workers.

Finally, consider maxing out your health savings account. Contributions are pre-tax and qualified medical withdrawals are tax-free. After age 65, you can withdraw from your HSA for any reason and avoid penalties, but you will pay taxes on non-qualified withdrawals.

Run and review your retirement estimates

Now that you have an idea of your expenses, run a retirement estimate to gauge how on track you are to replace your income when you retire. If there is a gap, consider bumping up your 401(k) plan contributions. Also review your investment mix to make sure your money is working as hard as you are. If you are married, review each other’s 401(k) plans.

If you have a pension, run an estimate to see the difference in the amount you’ll receive if you retire early, by 65, or later. The difference can be substantial depending on where you work. If you are married, find out how much of a pension your spouse gets at retirement and how much you are entitled to if they pass away.

Lower your expenses

If you have debt, consider using a debt calculator to come up with a debt payoff game plan prior to your retirement. In addition, make it your mantra to not take on any new debts or expenses within 5 years of retirement. This may sound obvious, but I’ve worked with so many employees that have actually increased their debts prior to retirement.

I spoke to one woman who treated herself to her “retirement car,” which was an expensive luxury car. She told me that she thought the purchase was a good idea since she planned on having the car paid off by the time she retires. First, I told her that she missed out on an opportunity to add an additional $45K to her retirement plan by making the car payments instead.

When I tacked on premium gas and the extra maintenance that came along with the car, I told her she could have knocked out the remaining balance on her mortgage. Additionally, she now has to factor in the additional cost of maintenance into her retirement plan.

If you find your expenses exceed your retirement income, consider moving to another state. States tax retiree income differently so look for retirement tax friendly states. If you are thinking of moving, compare the cost of living. Also factor in possible additional expenses like traveling to see the family and friends.

Map out your life game plan for the next 30 years

There are only so many golf games and naps you can take before you are bored out of your mind. Our careers are so entwined with our identities that you may find it harder than you think not having a career. Take some time and create a plan for life after retirement.

For example, now you can have the job you always wanted but could not do because it paid so little. Volunteer your time and talents to causes you care about. You have decades of talents most nonprofits cannot afford. Your experience is valuable and desperately needed.

Early retirement can be planned for. The name of the game is to stretch your income for as long as you can. Use the strategies above to not only get you to early retirement, but keep you retired.