Mark Twain said, “Find a job you enjoy doing, and you will never have to work a day in your life.” Only some are so lucky.
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And, if you are one of the lucky ones, even a job you enjoy doing can become tedious after many years. If you’re grinding through your days, thinking about a way out, what do you do? Launch a new career, or plan for early retirement? And what is early? Age 50? 55? 60?
According to SmartAsset’s analysis of U.S. Census Bureau data, the average retirement age in the United States is 63 years old. When you look at the average by state, it varies from a high of 65 to a low of 62, with New Englanders having the oldest average retirement age. Based on this data, early could be anytime before 62 or 65, depending on where you live.
One of the biggest challenges to early retirement is figuring out how to pay for health care. Regarding health care coverage, “early” retirement would be before age 65, at which time most Americans become eligible for Medicare. Unless you’re lucky enough to have employer-covered retiree health insurance, you’ll pay hefty premiums until you become Medicare-eligible.
If you’re exiting the workforce before age 65, plan on budgeting $500 to $1,000 a month per person to purchase health insurance. Instead of shelling out $1,000 a month, some early retirees are opting for retirement jobs. Something part-time, low-stress and low-pay, but with benefits. This type of job can help bridge the gap from early retirement to Medicare age. Once on Medicare, you still pay premiums, but they’re more affordable, often less than half of what you were paying before going on Medicare.
To exit from the workforce, another item you must plan for is the number of years you’ll need to live off your acorns. A 60-year-old retiree needs their financial assets to have a 30-year shelf life. The 50-year-old needs theirs to last 40 years. To make your assets last an extra 10 years, you either need to save a lot more or plan on spending less. You can’t count on the market to make up the difference; it’s anyone’s guess as to whether your first decade of retirement will be a boom decade or a bust. You need your plan to work either way.
If you’re determined to retire early, there is a way. Some opt for a low-cost RV lifestyle and travel across the country from campground to campground. Others retire overseas where $2,000 a month can buy a comfortable lifestyle. And some decide to change lifestyles, sell the big house and buy a condo in a state that has a retiree-friendly tax code.
If you’re early in your career, decide now if you want to work overtime, spend little and pile money into savings so you can exit the workforce early. Use resources like Mr. Money Mustache and Early Retirement Extreme to see how others have accomplished this. And, keep in mind, there’s nothing wrong with opting for a lifelong career either. Early retirement isn’t for everyone.
What makes early retirement challenging for some is having too much time on their hands. Give thought to what you will do with your time. If you have hobbies, passions, family activities and volunteer work that you’ve always wanted to pursue, retirement may feel like a dream. But if your sense of self-satisfaction comes from contributions at work, retirement can feel empty.
If you’re part of a couple, you’ll need to make sure you’re on the same page. What if one of you pictures days of arts and crafts classes while the other dreams of traveling to third-world countries to volunteer? You’ll need to figure out how to negotiate a joint retirement dream or make a plan that allows you each to pursue your passions, but perhaps not both at the same time.
Early retirement is possible, but it takes planning, or luck, or both. You can opt for luck and buy a lottery ticket. Or, if you want to make sure it happens, you can start laying out your action plan right now.