The average American expects to retire at age 65, but what if you want to ditch the 9-to-5 grind sooner?
Retirement is an exciting chapter in your life—and maybe you just can't wait to enjoy all your big plans. But can you afford to leave the workforce early? Perhaps. Here are four things you can do to determine if you're in a position to clock out before you turn 65. Plus, what steps you might still need to take to get you there.
Estimate what will be going out.
"Ask yourself how much you will need to fund your lifestyle in retirement," says Steven P. Azoury, CLU, ChFC, owner of Azoury Financial in Troy, Mich. That includes the basics—such as housing, taxes, and food—as well as extras, like travel, hobbies, and leisure activities. And don't forget about medical expenses. This becomes especially important if your company doesn't provide coverage for retirees and you're too young to be eligible for Medicare.
Project what will be coming in.
That means calculating your income, including your pension if you have one, Social Security benefits, and personal investments, such as 401(k) and annuities. Then figure out how long that money will last. Azoury recommends meeting with a financial planner to help you get the most accurate calculations.
Shift strategies if you need to.
If those calculations come up short, now is the time to adjust your financial plan. That could mean cutting your current expenses by downsizing your home and putting that money toward savings, or looking into financial products that can guarantee a steady stream of income in retirement, like life insurance and annuities.
Do a trial run.
Living on what will be your retirement budget for a month or two can help you figure out if that budget is realistic. Azoury also suggests doing a trial run of your retirement lifestyle. If you can, take several weeks off of work and spend that time doing what you envision filling your days with in retirement. That might mean volunteering with your favorite charity, golfing with friends, spending time with your grandkids, or traveling. "Some people retire and discover they are bored doing what they thought they would love," says Azoury. If you're bored in your trial run, or simply not enjoying yourself, rethink how you'll spend your time in retirement. "Working part time first before completely quitting may help you in that transition, both mentally and financially," says Azoury.