Can you afford to retire early?
A lot of people dream of retiring early so that they can start living their lives the way they always wanted. Are you one of them? If you are, how do you know if you are ready for an early retirement? Here are some telltale signs that can help you determine if you are ready to quit working at an earlier age.
How to Tell if You Are Ready for Early Retirement
You have reached your retirement goals. You can tell that you are ready to quit working if your investments exceed your retirement goals. Having a portfolio that is large enough to withstand losses in a bad market can help you sustain your preferred lifestyle during your retirement years.
You have paid off all your debts (or most of it). If you still owe large amounts of money to creditors, then you should not think about retiring any time soon. Keep in mind that paying off your debts from your retirement income can seriously affect your retirement lifestyle. However, if you have paid off your mortgage and you do not have any outstanding loans or large credit card balances, then you have earned the right to consider early retirement.
You have reliable health insurance coverage. With the ever increasing cost of healthcare and the fact that Medicare coverage doesn’t start until age 65, you really need to have adequate health insurance in place before you retire. If you can continue getting coverage through your employer or you are covered by your spouse’s plan, then it can be another sign that you can afford to retire early.
You can live on your retirement budget. Before taking the plunge, try drafting a retirement budget and see if you can stick to it for about six months. Keep in mind that you would be receiving a lower monthly income than when you were employed so you need to know if you can live with a limited income. If you find yourself using your credit cards or withdrawing your savings just to get by, then you are not yet ready to quit working.
Your children are financially independent. Sending your children to college can be very expensive so if your children are still financially dependent on you, it may be difficult to plan for your retirement.
You are emotionally ready to quit working. Having a concrete plan on what you would like to do during your retirement can be an indication that you are ready for it.