How We Help Clients Retire Early
By Simon Heslop
There are many elements to consider as you contemplate work plans and the possibility of an early retirement. Oftentimes this is expressed with a white sandy beach or images of endless leisure, but early retirement has different meanings for different people. Perhaps it is a time to pursue some nonprofit or charitable intentions, create time for those projects or hobbies, or spend time with family and grandchildren. Maybe it includes simply working less in order to create more time for plans outside of work.
Whatever your goals, there are both personal and financial implications of early retirement you must consider to confidently pursue a comfortable and financially stable future.
Early Planning Is Key
When it comes to early retirement planning, starting as soon as possible is the key to success. One of the most effective ways to do this is by maximizing your workplace savings. If your employer offers a 401(k) plan or other retirement savings account, make sure you’re contributing as much as you can afford. This not only helps you build a significant nest egg over time, but you may also be eligible for matching contributions from your employer, which can add up to thousands of dollars each year.
Another significant step to consider is eliminating any high-interest debt, such as credit card balances or personal loans. High-interest debt can eat away at your savings, preventing you from making progress toward your retirement goals. Paying off your debts as soon as possible puts you in a better position to save and invest for your future. This may require some lifestyle tradeoffs, such as cutting back on expenses or finding ways to earn extra income, but the long-term benefits often pay out in dividends.
Consider Your Quality of Life
While financial planning is a major aspect of preparing for early retirement, it’s also crucial to consider the impact that retiring early may have on your quality of life. Before making the decision to retire, ask yourself if you’re truly ready to leave your working life behind. Many people find fulfillment and purpose in their careers, and leaving that behind can be a difficult adjustment. Think about what your life would look like without work, and whether you have plans to fill your time and stay active and engaged.
Part-time work can be a good option for those who want to retire early but still want to remain productive and engaged in the workforce. Not only can it help bridge the gap between your retirement income and your expenses, but it can also provide a sense of purpose and fulfillment. Some people choose to work part-time in a field they’re passionate about, while others explore new opportunities and try out different careers. If you’re considering early retirement, think about whether part-time work could be a viable option for you, and how it might fit into your overall retirement plan.
Early retirement can have significant financial implications, and it’s important to have a sound and reasonable financial plan in place before making the decision to retire. One key consideration is budgeting; early retirement can provide a longer runway for spending, but it’s crucial to optimize your expenses in order to make your savings last. Look for ways to reduce your costs on necessities such as food, transportation, and housing, while still maintaining a comfortable standard of living. Additionally, consider the sources of income that can support your retirement, such as pensions, investments, and passive income streams.
Another essential factor to think through is how early retirement may impact your Social Security strategy. Depending on your age and how much you’ve contributed to Social Security, retiring early may affect the amount of benefits you’re eligible to receive. It’s critical to carefully consider your options and weigh the potential tradeoffs between retiring early and delaying your Social Security benefits. Additionally, it’s wise to manage your tax brackets and consider the order of withdrawals from your retirement accounts while being aware of any state taxes that may apply.
Healthcare is typically the biggest concern for those considering early retirement. Without access to employer-sponsored health insurance, retirees must navigate the complex and often costly world of healthcare on their own. It’s vital to research every option and find a plan that meets your needs and budget. One component to consider is the Affordable Care Act (ACA) and exchange options. These plans can provide comprehensive coverage at an affordable price, but carefully review the details so you understand the coverage and limitations of each.
Another factor to be aware of is potential out-of-pocket expenses. Many retirees choose to use health savings accounts (HSAs) as a way to manage healthcare costs in retirement. HSAs offer tax-free contributions, earnings, and withdrawals for qualified healthcare expenses, making them a powerful tool for managing healthcare costs. However, it’s important to plan carefully and verify you have enough saved to cover any potential out-of-pocket expenses.
Are You Ready to Retire Early?
At FSA Wealth Management, we view early retirement as a tradeoff; when you swap money for time, there needs to be a clear vision for how to extract the most value from that newfound time. If you’re ready to partner with someone who can help you create a plan where your values are upheld and your money is optimized, contact us today at 781-455-1020 or email firstname.lastname@example.org to schedule a free consultation.
Simon Heslop is Managing Partner at FSA Wealth Management, a Registered Investment Advisor firm offering fee-only services and known for its independence, objectivity, and results. With a passion for excellence and 20 years of financial services experience, Simon applies his results-driven approach to creating tailored investment and financial planning solutions for clients seeking to fulfill their vision of financial success. He has a history of developing targeted investment portfolios to help investors meet their long-term objectives, and truly enjoys the process of getting to know each FSA Wealth Management client.
Simon earned his undergraduate degree in engineering from Union College and an MBA from Northeastern University and holds the Chartered Financial Analyst® designation. Outside of work, Simon loves to hike with his family; (one day they’ll find it funny that Dad gets them lost at least half the time). He has a passion for woodworking and is perhaps one of the few people who idolize Norm Abrams and The New Yankee Workshop. He enjoys all types of bicycle riding and has a goal of riding across the country (despite the fact that he has barely ridden across New England). Simon is constantly striving to find a better and higher self, help others, and leave the world a better place. To learn more about Simon, connect with him on LinkedIn.
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FSA Wealth Management LLC (“FSA Wealth Management”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where FSA Wealth Management and its representatives are properly licensed or exempt from licensure.