Are You on the Fast Track to Early Retirement?
Are You on the Fast Track to Early Retirement? Have you dreamed about retiring in your 50s or before you receive your AARP card? Are you ready to call the shots and choose how you will spend your days? Take this opportunity to envision what “retirement” means to you, what kind of lifestyle you would like in retirement and at what age would you like to achieve this dream.
Retiring ahead of your peers depends on your dedication, financial situation, lifestyle, and early implementation of our comprehensive road map. We can chart the path together and, with the stewardship of a seasoned fiduciary team, we can quickly steer clear of potential roadblocks to keep you on track to realizing your goals and dreams.
According to recent U.S Census Bureau data, the average retirement age in the United States is about 63 years old. Early retirement in terms of Social Security and Medicare, when you are first eligible to receive benefits are at age 62 and 65, respectively. Tax deferred retirement vehicles allow you to start taking penalty free withdrawals at age 59 ½. There are some pension plans that allow individuals penalty-free access to their retirement funds as early as age 50. While early retirement sounds appealing, each step needs to be meticulously planned so one is not penalized. Do you know the amount you will need to have saved to maintain your lifestyle in retirement while not out-living your nest egg? Retiring early can be challenging but it is a matter of discipline to following a set plan.
What compromises and sacrifices are you willing to take? Will it be enough? There is not much wiggle room in the percentage of income you must save during your working years. Are you willing to spend less on housing and sacrifice on other big-ticket items like cars and vacations? Perhaps, you are willing to join the FIRE movement (Financial Independence, Retire Early) by living a minimalist lifestyle and saving more than half of your income annually to achieve retirement in your mid-30s or early 40s. While the FIRE movement is extreme, it effectively sets the framework toward the benefits of paying yourself first and tracking where the remainder is spent. Our financial goals can be quickly derailed in today’s digital world, from Amazon’s easy one-click buying to costly automatic subscription renewals. Today’s conveniences can be used to our advantage, like automating the distribution of a paycheck. This means that a certain percentage can be directly deposited into a savings account or savings accounts that have set intentions and into your 401(k) before you are lured to spending these monies at your discretion. How much are you willing to pay yourself today and reclaim with substantial investment earnings in the future? We at Coral Gables Trust take a moderate approach and encourage our clients to save between 10 to 20 percent of their income annually. The exact percentage of the annual savings required is determined during our comprehensive planning process. During the process, we will make sure that you are taking advantage of your employer’s 401(k) matching program, which is free money that you cannot afford to pass on.
Have you effectively planned for the rising cost of health care? If you retire before age 65, you will not be eligible for Medicare, but there are still options that can be utilized. The Consolidated Omnibus Budget Reconciliation Act allows you to extend your employer’s insurance plan for 18 months after you leave your position. Continuing your current coverage is straightforward but can be very expensive since plan premiums can increase more than hundred percent. The Affordable Care Act is a cost-effective option that will allow you to purchase health insurance and depending on your income you may qualify for a reduction in your premium.
Many retirees view Social Security as a guaranteed source of income upon which they will be able to rely. Social Security benefits are starting to exceed the program’s cost and the program’s trust is set to deplete by 2035. Retirement savings can be quickly drawn down when attempting to replace income. Having a plan that factors in potential worst-case scenarios, your goals, the percentage of your portfolio you plan to withdraw each year, and the order of your spending is key to making the best long-term use of your assets.
Guidance from a team of seasoned professionals will allow you to swiftly adapt to changes in your financial situation and make sure the appropriate strategies and vehicles are optimized. As a CERTIFIED FINANCIAL PLANNER™ Professional, I enjoy assisting clients with simplifying all of life’s complexities. We at Coral Gables Trust look forward to leading you on the path to living your best financial life.