Question: G.B. in Colerain Township: I’m 53 and seriously considering retiring soon (I’m sick of working!). I have about $400,000 saved. Will this be enough?
A: It might be. Or it might not be. We’ve known clients over the years who have lived a very comfortable retirement on less… and we’ve known clients who’ve needed much, much more. Besides, your total savings isn’t the best indicator to know if you’re ‘retirement ready’ – there are other factors to consider, especially for someone like yourself who is thinking about retiring early.
For instance, you can’t claim Social Security until at least age 62 meaning you would have to live some amount of time in retirement without that income. Will your income stream and budget be able to handle that? Furthermore, you would also potentially be jeopardizing your future benefit since Social Security takes into account your 35 highest-paying years – a zero is used in the calculation for any year you don’t have an income, potentially lowering your benefit.
And let’s not forget about your retirement accounts. In most cases, you can’t tap those until age 59 ½ without penalty. So, until that time, where will your income stream come from? We already mentioned that Social Security is a no-go, so do you have a pension? Brokerage accounts?
Also, do you have a plan for healthcare? You can’t enroll in Medicare until age 65, but you can buy plans via the healthcare exchange at healthcare.gov. Or, maybe you can stay on your current employer’s plan. If you’re married, you might be able to be added to your spouse’s plan. Figuring this out is a must-do.
We get it. Sometimes, you’re just done with working. So, here’s the Simply Money Point: Before you officially call it quits, be sure you’re thinking through all the financial ramifications. (This is one of those times it can be really beneficial to talk with a fiduciary financial advisor.) Remember, retiring early means your savings and investments need to last longer than the average retiree’s.