Today, to change a retirement plan often means postponing the date, not moving it up. After all, we’re living longer, and early retirement adds even more years to fund. But there are special circumstances when retiring earlier than planned becomes an option to consider.
When earlier is viable
You don’t need to win the lottery to retire earlier. Here you’ll find the more common reasons why some people are able to move up their retirement date.
Benefiting from an employer’s pension or incentive plan.
Many people with an employer-sponsored pension in the public or private sector have the option of retiring early with a reduced pension – sometimes retiring 10 years before the plan’s normal retirement age. Or an employer may offer an early retirement incentive to specific employees.
Receiving an inheritance.
If you receive a significant inheritance, you may be in a position to retire earlier. But any calculation needs to account for the future income you’d be giving up and recognize you’d be increasing the number of years retirement income is required.
Having no dependants.
A couple without children or other dependants has the opportunity to reach retirement sooner than a couple paying for braces, summer camp and post-secondary education. But an investment plan is still required to ensure the “extra” dollars are dedicated to retirement savings objectives.
Suffering an illness.
Individuals who suffer a serious illness a few years before their planned retirement might consider not returning to work, even if they’re able, especially if their condition is made worse by stress.
Capitalizing on business or investment success.
An owner of a profitable business may be in a position to sell the business before he or she would have normally retired. Or earlier retirement could be made possible through investment success, such as holding valuable investment property that can provide rental income throughout retirement years.
Making the decision
The first thing to know is whether you’ll have enough income to support your desired retirement lifestyle without outliving your nest egg. That’s a projection we can help you with, once we understand how you wish to spend retirement.
But other financial factors go into the decision, beyond retirement income. You’ll want to account for any unexpected expenses, such as long-term care or helping a child financially. You’ll need to determine what you want to set aside as an inheritance for your children or a charitable gift. Also, you should decide if you’ll preserve estate assets by covering tax payable by your estate, for example, by purchasing life insurance.
If you’re thinking about retiring early, ask for our assistance. Whatever you decide, you’ll know it’s the right decision for you financially.