Retiring early is an exciting prospect for many people—it may mean more time for things like hobbies, leisure, family, or volunteering. As with any major career and financial decision, it’s important to consider this choice from all angles. While everyone will have their own unique concerns related to early retirement, here are a few things that everyone should consider before taking the leap:
Do you have emergency savings?
You probably already have a strong retirement savings plan if you’re considering early retirement. But emergencies, such as sudden home repairs or medical costs, can make a significant dent in your savings. An emergency fund can help. People with permanent life insurance also know they can borrow against the cash value of their whole life insurance or universal life insurance policy for additional cashflow, but remember that this can reduce the policy’s death benefit until the loan is paid back in full.
How will you spend your time?
While financial preparation for retirement is crucial, mental, and social preparation are important, too. Having lots of free time can be liberating for some people, but for others it could quickly lead to boredom and isolation. Think of how you want to spend your days—you may want to travel, try a new sport, learn new languages, have more time with kids or grandkids, or spend time at home cooking and gardening. Remember that friends and neighbors your age may still be working, so you may need to extend your social circle and find new people to spend weekdays with. Whatever you want to do or learn, having a vision for your early retirement can help you plan your days better.
Where will you live?
Many couples (and singles) want a change in their living situation after retirement. Some seek a quieter, slower life away from the city; others simply want to downsize to a more compact and manageable home. No matter what you have in mind, it can be a good idea to try and get your retirement home ready while you’re still working. This enables you to make any necessary repairs or complete renovations while you still have a stable income, as it can be tougher to manage these less predictable expenses when you’re relying mostly on your retirement savings.
Have you found the right health insurance?
Most Americans get health insurance coverage through their employer, so if you’re considering early retirement finding suitable health insurance should be at the top of your to-do list. The Affordable Care Act (ACA) enables early retirees and other Americans to secure health insurance via the Health Insurance Marketplace. That said, you may need to shop around before you find an insurance plan that works for you.
The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.