If you are contemplating early retirement, you need to take a serious look at your finances and create a plan. It may sound ideal to retire before 60, but is it feasible? Would you be able to support your current lifestyle before having access to Social Security benefits and penalty free withdrawals from 401ks or IRAs? How long would you be able to live off savings? Although it is common to reduce the number of stocks in a portfolio when nearing retirement, no one wants to be forced to sell stocks out of desperation. To ensure you are financially ready for early retirement, do the following.
- Create a spreadsheet and list necessary monthly expenses like housing, utilities, food, healthcare, and transportation.
- List your typically nonessentials i.e., entertainment, dining out, gym memberships, golf, travel, etc.
- Make a column for outstanding debt including interest.
- Calculate a cost-of-living increase for all monthly expenses.
- Total the amount of money needed yearly to support your current lifestyle, then multiply by the number of years before you’ll reach age 59 ½ and age 67 ½.
A 57-year-old woman who spends $3500 per month to support her current lifestyle will need approximately $105,000 to continue living the way she wants until she turns 59 ½, when she’ll be able to take penalty free withdrawals from investment accounts and $441,000 to support her lifestyle until the age of 67 ½, when she’ll be able to receive social security benefits. The best way to ensure you are retiring at a time in your life when it makes personal and financial sense is to speak with a fiduciary financial planner. Call Alloy Wealth at 800-689-3935 to speak with one of our team members.