You may already know that planning to retire early can mean putting aside lots of money. According to Fidelity, if you plan to retire before 62, you should aim to save 33 times your expenses. If you’re 45 with annual expenses of $75,000, that amounts to $2.475 million.
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But it’s not just money and savings you need to consider if you want to retire in your 50s. Some financial experts shared with GOBankingRates a few ugly truths to consider now.
Retiring at 50 means planning for more years without a paycheck.
“That requires a deeply strategic investment approach, not just a big nest egg,” according to Christopher Stroup, founder and president of Silicon Beach Financial. “Inflation, health care costs and market downturns will all take their toll. Your money needs to outlive you, and that requires a plan that adjusts as life does.”
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If you retire before Medicare eligibility at 65, expect to shoulder thousands in annual premiums through the open market. Per Stroup, for self-employed professionals or those selling a business, early retiree coverage should be a line item in your exit plan.
According to Empower, a few health insurance options for early retirees are the health insurance marketplace, health share plans and private health insurance.
Stroup likes to remind clients that many accounts, such as traditional IRAs and 401(k)s, penalize early withdrawals before age 59 1/2. He said strategic tax planning, like leveraging Roth IRAs, 72(t) distributions or taxable brokerage accounts, can help bridge the gap.
According to Stroup, with the right mix of account types, you can retire early and avoid triggering unnecessary tax or penalty landmines.
Plenty of early retirees pivot to passion projects, consulting or part-time work. The key, per Stroup, is designing financial flexibility into your plan before you need it.
Whether you’re stepping back or stepping sideways, a proactive strategy ensures your money keeps pace with the life you want to live and not just the one you’re leaving.
It’s also important to factor in family members or other dependents when planning an early retirement.
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