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Creative Choices for Early Retirement
Have you thought about early retirement? How early? Would you like to retire by 60? 55? Younger?
While many people talk about retiring early, very few are actually able to do it. With 53 percent of retirees living on less than $15,000 per year (according to the Social Security Administration), it’s apparent that some may be wondering whether they can retire at all.
Early retirement doesn’t mean you have to be independently wealthy before you can consider it, but obviously it means you’ll have to provide an income for yourself for a longer period of time, so you may have to be a little creative in your approach.
Even Small Steps Can Move you Forward
When you hit 50, the AARP will come calling. Now before you get insulted and throw the membership packet in the garbage, you may want to consider some of the value their $12.50 annual membership fee provides. Remember that every little bit counts.
Here’s some of what this one organization offers that can help you reduce your monthly expenses.
- Discounts on auto insurance
- Travel discounts that include hotel, airline and car rental booking
- Low interest no annual fee credit card
- Auto, group health, home owners, long term care, and life insurance
- Eye health savings available nationwide
- Pharmacy services with convenient delivery to your mailbox
- Discounts on computers, online services, videos, gifts, home security
- Plus, AARP works with major retailers and merchants to negotiate discounts at such companies as Home Depot and Travelocity.
Other Ideas
Unless you’re rolling in cash, you’ll probably be looking for ways to make your dollars go as far as possible, while hopefully not cutting too many corners. Here are some unusual things people have done to get off the work treadmill as quickly as possible:
- Move to a cheaper “tax” state. Each state has it’s own overall “tax burden.” Some people have looked to relocate to a state that has a more favorable overall tax structure than the one they live in now.
- Live Overseas. Believe it or not, there are many retirees moving out of the country and living in locations where the cost of living is quite low and then using trips to the United States as their “vacations.” This is obviously not for the faint of heart, and there are many considerations, especially healthcare, among others that you have to review before you consider something similar.
- Downsize the house to a smaller one, then invest in an income-producing vacation property. Instead of just cashing out of the “big house” and living off that windfall, some people have reinvested that windfall into another income producing vacation property. This not only supplements their income, but also provides a pre-paid vacation getaway for themselves.
Needless to say, we’re not suggesting that you should pursue any of these ideas or that any of them are right for you. Each one certainly comes fraught with its own set of challenges and potential pitfalls. It’s interesting to note, however, that the reward of early retirement does drive people to pursue some really creative solutions.
The Anticipated Early Retirement
Whether your early retirement is planned or if it the result of a sudden windfall of money, don’t be hasty. Take some time to talk to your financial professional to make sure you’ve thought through the details. Early retirement can be very tempting in times of high interest rates when it looks like your nest egg will generate plenty of income for you; however, you need to make sure that nest egg will keep you afloat when interest rates head south.
The Unplanned Event
If you are taking an unplanned early retirement because of health reasons or a layoff you want to start economizing and revising your retirement planning strategies immediately.
The same basic strategy applies. Don’t make any hasty financial decisions. Look at your situation and evaluate your income and expense needs, your insurance coverage, investment mix, among others. Your financial professional can help you work through some of the financial decisions you’ll face.
Many early retirees still have major expenses that later retirees have moved past such as mortgage, college tuition, etc.,. Early retirees may wind up paying for employee benefits out of pocket as well.
With an unexpected early retirement, it is critical to have a budget and stick to it, to know exactly what is coming in and what is going out of your pocket.
Medicare
Early retirement means more years until you qualify for Medicare. Make sure that you have medical insurance no matter how tight your finances may be.
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