5 Key Considerations for Early Retirement

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If you’re considering retirement before the age of 60, there are a few key things you must consider to ensure you’re financially prepared.

You need to have an understanding of how your age will affect your social security payout, how you plan to pay for health insurance, what penalties you may incur for withdrawing early from an IRA, and what the ups and downs of both inflation and the stock market mean for your retirement.

In this episode, I cover how social security, Medicare, IRAs, inflation, and the stock market can impact your decision to retire early.

1. Social Security: Social security looks at the highest 35 years of earning. If you're retiring in your fifties, there's a potential that your earlier years of working had a lower income and it could affect your overall estimate.
2. Medicare: Medicare will kick in at the age of 65 if you're eligible. If you’re retiring early and leaving your employer, then you may have to pay for your medical insurance on your own. This can be extraordinarily expensive because the insurance companies know that when you turn 65, you are going to go onto Medicare.
3. IRA: If you’re less than 59 and a half years old and pull money from your IRA, you’ll receive a 10% early withdrawal penalty. The 10% penalty is on the amount that's taken out. If you’re 50 and you need to access money from your IRA to fund your early retirement, then consider using a 72 T distribution, which you will definitely need help with to do the calculations.
4. Longevity and Inflation: If you’re planning to retire before the age of 60, you must consider the impact inflation can have if you live a long life. Inflation can rapidly increase the cost of living and impact your overall expenses so it’s important to be able to adjust if necessary.
5. Ebb and flow of the Stock Market: Pay attention to the jobs numbers, or the number of people working. You also want to watch the number of hours per week people are working and if that number is increasing, that means consumers are receiving more money so they can spend more money.

Remember to talk with your financial planner to help with early retirement decisions.

In this episode, you’ll also hear:

• How retiring early might impact your social security estimate
• Funding your own insurance and IRA withdrawal penalties
• Considering inflation for early retirement and investments

Must-listen moments:

[00:06:03] You could have a different time frame in your mind, but any time we're talking about under the age of 60, I would consider that early retirement.

[00:11:24] Keep in mind for early retirement that accessing money from accounts like IRAs is going to be a little bit of a challenge.

[00:12:57] When Social Security was enacted they set the retirement age at the age of 65, and our life expectancy at the time was 67. So, when social security was enacted, the government didn't expect that they would be paying out for years and years.

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This podcast is for informational purposes only. The situations used herein do not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted for your specific situation. Neither Commonwealth Financial Network nor your representative provides tax advice.