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Articles: Can you opt for early retirement?

Are you dreaming of the day when you can retire to a life of leisure? For some, that day is still a long way off. However, for others, it may be closer than it initially appeared.

Whether or not you will be able to “pull the plug” on working depends on several variables. To get a better handle on the situation, answer the following questions:

Q.  Can you afford to retire?

A.    Some people begin planning when they are young, intending to call it quits at age 55.  In that case, early retirement could be attainable. However, if you have not focused on retirement planning in your forties, you may not be financially prepared to stop working right now.

Q.  Will your money hold out?

A.  If you plan to retire at age 55, it’s very possible you may have to depend on a fixed income for the next 25-30 years or more.  Consequently, you will have to consider how much income you will need during that time period and where it’s going to come from. If you feel that you currently have enough money to live on, ask yourself how it will hold up over time.

With the help of an experienced financial advisor, you can develop an investment program that, at the very least, keeps pace with inflation.                                                           

On the other hand, if it seems likely that you may be forced to tap into your retirement plans and IRAs before age 59½, you may want to postpone the idea of retirement.  In general, assets in 401(k) plans and other employer-sponsored retirement plans should be allowed to grow without interruption for as long as possible.   Furthermore, tapping into a qualified plan or IRA before age 59½ generally results in a 10% penalty tax for early withdrawals (unless a special exception applies.

Q.      What   about   your  future?

A. Take time to imagine the kind of lifestyle  you  intend  to  live  as  an early retiree.  Will the loss of a regular paycheck force you to cut back on certain activities you have enjoyed, such as elaborate vacations?  Does it mean possibly having to relocate to an area where
the cost of living is less expensive?   Will retirement bring you relief or a sure ticket to boredom?  These issues deserve serious consideration when making plans for your retirement.

Final point:  If early retirement will lower your lifestyle expectations, it may not be worthwhile. You might keep working for a few extra years.  Discuss your situation with your financial advisor.


This newsletter/advertisement is produced for our clients, friends and associates through an arrangement with WPI Communications, Inc. for the representatives’ use. Although the editorial content is professionally researched, written and edited, neither our firm nor any of its agents, representatives or associates make any representations regarding the accuracy of the content or its applicability to your situation. The information in this communication is not intended as tax or legal advice. In accordance with IRS Circular 230, the information provided herein may not be relied on for purposes of avoiding any federal tax penalties. Any tax advice contained in the body of this material was not intended or written to be used, and cannot be used, by the recipient for the purpose of 1) avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, or 2) promoting, marketing or recommending to another party any transaction or matter addressed herein. You are encouraged to seek tax or legal advice from an independent advisor.

 

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