Do You Really Want To Retire Early? Ask Yourself These Questions

In recent years, especially since the pandemic, early retirement has become a growing trend. Many people don’t want to wait until the full retirement age to hang up their working hat.

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Younger generations, such as millennials, are particularly keen on early retirement and are commonly embracing techniques (like the FIRE method) to create ways to exit the workforce sooner rather than later.

But before you set your sights on early retirement, you should ask yourself the following expert-recommended questions to determine if that path is really right for you.

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What’s My Motivation for Retiring Early?

Jeff Rose, CFP, founder of Good Financial Cents, sees clients wanting to retire early for a number of reasons, and urges them to ask themselves, “What’s my motivation for retiring early?”

“It’s essential to have a clear purpose beyond just escaping a job you don’t like,” Rose told GOBankingRates. “It’s about finding something that gives your life meaning and joy post-retirement. Whether it’s pursuing a long-held passion, volunteering or spending more time with family, having a concrete plan for how you’ll spend your time is key to a fulfilling early retirement.”

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What Am I Doing in My Free Time Now? 

You may develop new hobbies in retirement, but you should not rely on that happening. Make sure you are already enjoying the ways in which you spend free time now — they may need to serve you completely in retirement.

“How you spend your free time now while you are still working is a good indication of how you’ll spend your free time in retirement,” said Ashley Rittershaus, founder and financial planner at Curious Crow Financial Planning.

“If how you spend your free time now does not align with your ideal life in retirement, work to change that,” Rittershaus said. “Begin incorporating more activities that you’d like to enjoy in retirement into your life now.”

Am I Prepared for Unexpected Expenses?

Early retirement isn’t a “get out of jail free card” when it comes to unexpected expenses. Emergencies will still happen and you’ll need to be as prepared as ever.

“Life can be unpredictable, and your finances should reflect that,” Rose said. “For instance, I had a client who faced unexpected home repairs that ran into the tens of thousands, and another who had to financially support a family member in crisis. These situations underscored the importance of having a contingency fund. It’s not just about the usual expenses; it’s about being prepared for anything that life might throw your way.”

How Will I Handle Healthcare Bills?

If you retire early you will probably not qualify for Medicare, which kicks in at age 65. The weight of healthcare costs could be a financial hardship — and possibly blow up your hard-earned savings.

“I’ve seen healthcare costs derail retirement plans,” Rose said. “It’s vital to have a solid strategy for covering medical expenses before Medicare kicks in. For example, one of my clients underestimated the cost of private health insurance post-retirement and had to adjust their lifestyle significantly to cover the premiums.”

What Does My Ideal Retirement Look Like?

“Take some time to develop a clear vision of what your ideal lifestyle looks like in retirement,” Rittershaus said. “How will you spend your time? What hobbies do you want to pursue? What activities will you do? What trips do you want to take?”

Taking the time to deeply reflect on what you want your retirement to be will help give you answers as to whether that’s achievable at an earlier-than-standard age.

Do I Actually Want To Retire Early, or Do I Just Need a Change?

Perhaps you’ve hit a roadblock in your career or feel that you just don’t belong in the hustle culture any longer. That doesn’t necessarily mean you should lunge toward an early retirement. There are other things you can do to improve your work life.

“Consider taking a sabbatical, changing jobs or careers, cutting down your hours or starting a business,” Rittershaus said. “The benefit of these options is that you can make changes to improve your life sooner, as you don’t need to save as much as compared to never working again.”

Is My Portfolio Invested Appropriately?

Early retirement will likely mean tapping into your retirement investments portfolio: be sure this portfolio considers time horizon, risk tolerance and goals.

“You will need to ensure your money is invested appropriately so it lasts your whole retirement (which is longer than average if you retire early) and allows you to support your lifestyle now,” said Rittershaus. “For early retirement, ensure your plan includes how you will access funds to live on. This might include building up assets in savings and taxable accounts, planning to withdraw Roth IRA contributions, completing Roth conversion ladders, or planning to pay early withdrawal penalties on retirement accounts.”

Will My Kids or Other Family Members Need My Help?

Melody Evans, a wealth management advisor at TIAA, notes that for many people retiring before age 65, their children are young adults who aren’t yet fully launched in their own careers and financial development.

“While you may have calculated your financial needs, have you considered whether you have enough to continue to help the children you’re helping now?” Evans said.

This is a very important consideration and question. Have an open discussion about your goals and intentions with all family members, especially those who may rely on you now — or later — for financial help.

Do I Have a Plan To Generate More Income?

Many retirees find it difficult to get by without Social Security benefits — and depending on when you retire, you may not even yet be eligible for them. Ask yourself if you have a way to build income in your early retirement years.

“Social Security does not need to be your only source of guaranteed lifetime income,” said Evan Potash, an executive wealth management advisor at TIAA. “You can convert some of your retirement dollars into a guaranteed source of monthly income for life, such as annuities. This ensures that no matter what happens in the financial markets, you have predictable, sustainable income.”

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This article originally appeared on GOBankingRates.com: Do You Really Want To Retire Early? Ask Yourself These Questions