As a Certified Financial Planner who has helped many individuals realize their retirement dreams, Joe Lyons gets asked this age-old question a lot: Do you think I’ve saved enough to retire early? That depends on a lot of things. Even if you are fortunate enough to have a substantial amount of savings socked away somewhere, or had a generous relative leave you a hefty sum, there are many other factors you must contemplate in the when and how of early retirement.
When you’re considering an early retirement it is important to remember that investment losses and early withdrawals are one of the fastest ways, as a retiree, to deplete the value of your portfolio, which jeopardizes your savings. And until you’re 65, you’ll also have to continue to purchase healthcare, which is a large monthly expense that must be factored in. Also, insurance premiums and rising healthcare costs can chew through your savings quickly if you’re not prepared.
Early retirement requires sound financial strategy and an understanding of your current financial position. Knowing what your monthly retirement expenses amount to and calculating how much you’ll need to save to cover them in retirement is a good start. This helps you establish your annual savings shortfall, or how much you’ll need to save to make your dreams a reality. Determining the amount you’ll need to sock away before you say goodbye to the 9-5 grind can give you some perspective on your plans, and an idea of the adjustments you’ll need to make along the way to achieve them.
Not ready to retire just yet? Now that you have a perspective of your current financial position, if you’re like most folks, you’re probably going to have to make some adjustments to your budget to reach your goals (i.e., earning more money and reducing spending). Considering that promotion? Ever thought of turning a hobby into a lucrative side business? Making a list of these and other “value-added” opportunities can help you strike gold. Conversely, you may want to think twice about your spending habits. Rather than eat out, you might, for example, consider cooking a nice meal and put the money you’ve saved toward your other expenses.
No matter where you are on the road to retirement, you can always get sound financial advice to help you live those years even better. Visit mooneylyons.com to learn more about investment and savings strategies that can help you realize your goals. Or call one of our investment advisors at 1.847.382.2600. We are here to help.