Understanding the Concept of Early Retirement: Is It Right for You?

Early retirement is a concept that has gained popularity in recent years, with movements like FIRE (Financial Independence, Retire Early) advocating for a lifestyle that prioritizes financial independence over traditional career paths. However, early retirement isn’t for everyone. It requires careful planning, disciplined saving, and a willingness to live below your means, often for many years.

According to a study by the Transamerica Center for Retirement Studies, 55% of workers plan to retire before age 65, but only 11% actually do. This discrepancy highlights the gap between the dream of early retirement and the reality of achieving it. It’s crucial to understand what early retirement entails and whether it aligns with your personal and financial goals.

Early retirement also means a longer retirement period, which can have significant implications for your lifestyle, health care needs, and financial resources. It’s not just about having enough money to live on; it’s also about how you want to spend your time, where you want to live, and what kind of lifestyle you want to maintain.

Before deciding on early retirement, consider consulting with a financial advisor. At Perissos Private Wealth, we offer comprehensive retirement planning services that can help you assess your readiness for early retirement and develop a strategy to achieve your goals.

The Financial Implications of Retiring Early: What You Need to Know

Retiring early can have significant financial implications. For starters, you’ll need to save more money to fund a longer retirement period. According to the U.S. Department of Labor, the average American spends about 20 years in retirement. If you retire early, you could be looking at 30 years or more, which means you’ll need a larger nest egg.

Another financial consideration is health care. If you retire before age 65, you won’t be eligible for Medicare and will need to find other health insurance options. This can be a significant expense, especially if you have pre-existing conditions.

Early retirement can also impact your Social Security benefits. If you start taking benefits before your full retirement age, your monthly benefit will be reduced. On the other hand, if you delay taking benefits until after your full retirement age, your monthly benefit will increase.

Lastly, you’ll need to consider how you’ll generate income during retirement. This could involve drawing down your savings, investing in income-producing assets, or even working part-time. At Perissos Private Wealth, we can help you develop a sustainable income strategy for early retirement.

Lifestyle Changes and Adjustments: The Non-Financial Aspects of Early Retirement

Beyond the financial considerations, early retirement also involves significant lifestyle changes and adjustments. For many people, work provides a sense of purpose and structure. Without it, you may need to find new ways to stay engaged and fulfilled.

Early retirement also means more free time, which can be a blessing or a curse, depending on how you use it. It’s important to have a plan for how you’ll spend your time, whether that’s pursuing hobbies, volunteering, traveling, or spending time with family and friends.

Another consideration is your social life. Many people’s social networks are closely tied to their work. When you retire early, you may need to make an effort to maintain and build new social connections.

Finally, consider your physical health. Staying active and healthy is crucial in retirement, especially if you plan to retire early. Regular exercise, a healthy diet, and regular medical checkups can help ensure that you’re able to enjoy your retirement to the fullest.

Essential Steps to Prepare for Early Retirement: 5 Key Considerations

Preparing for early retirement involves careful planning and consideration. Here are five key steps to consider:

1. Assess your financial readiness: This involves calculating your retirement savings needs, considering your income sources in retirement, and planning for health care costs.

2. Develop a retirement budget: This includes estimating your living expenses in retirement and creating a budget that aligns with your retirement lifestyle goals.

3. Plan for lifestyle changes: Consider how you’ll spend your time in retirement, maintain your social connections, and stay healthy and active.

4. Consult with a financial advisor: A financial advisor can provide valuable guidance and help you develop a comprehensive retirement plan. At Perissos Private Wealth, we specialize in retirement planning and can help you navigate the complexities of early retirement.

5. Regularly review and adjust your plan: Retirement planning is not a one-time event. It’s important to regularly review and adjust your plan as your circumstances change.

In conclusion, early retirement is a significant decision that requires careful planning and consideration. By understanding the financial implications, planning for lifestyle changes, and taking the necessary steps to prepare, you can make early retirement a reality.

All my best,

Brandon VanLandingham, CFA, CMT, CFP

Perissos Private Wealth Management is a Registered Investment Adviser (“RIA”). Registration as an investment adviser does not imply a certain level of skill or training, and the content of this communication has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Perissos Private Wealth Management renders individualized investment advice to persons in a particular state only after complying with the state’s regulatory requirements, or pursuant to an applicable state exemption or exclusion. All investments carry risk, and no investment strategy can guarantee a profit or protect from loss of capital. Past performance is not indicative of future results.

The information contained in this blog is intended to provide general information about market themes. It is not intended to offer investment advice. Investment advice will only be given after a client engages our services by executing the appropriate investment services agreement. Information regarding investment products and services is given solely to provide education regarding our investment philosophy and our strategies. You should not rely on any information provided in making investment decisions.

Market data, articles and other content in this material are based on generally available information and are believed to be reliable. Perissos Private Wealth Management does not guarantee the accuracy of the information contained in this material.

Perissos Private Wealth Management will provide all prospective clients with a copy of our current Form ADV, Part 2A (Disclosure Brochure), Part 2B (Supplemental Brochures), and Part 3 (Client Relationship Summary) prior to commencing an advisory relationship. You can also view these documents at any time at adviserinfo.sec.gov or by contacting us requesting a copy.