MONEY Can You Afford to Retire Early?
Here’s how to figure out if you have the financial means to stop working before age 65. ::
BY GREG BROWN M
ost people think of 65 as the standard age of retirement. But it is tantalizing for many of
us in middle age to dream of ending our life of labor earlier, while still young, healthy, and active. If you find yourself asking if early
retirement is possible, the answer is, of course, you can — if you have the savings necessary to last into your old age. But how can you know with certainty that you have enough money before taking the plunge? There are a few simple approaches
from top financial advisers to calculate whether an early retirement dream can become a reality:
The “easy math” method. To get
an idea of whether your assets will support you into your golden years, take the “net” money you need to live now and multiply by 25, says Robert Margetic, author How to Survive the Coming Retirement Storm. “The ‘net’
money is your estimated living expense less Social Security, pensions, and other periodic income,” Margetic says. “For example, if you need $50,000 a year to live on and have Social Security of $20,000 and a pension of $20,000, you would
76 NEWSMAX MAXLIFE | MAY 2013 Break out a calculator. If ballpark
While not having to work sounds nice in theory, some people simply aren’t prepared for endless days without the structure of a job.
figures make you nervous, drill down into the numbers. Online calculators make this process a lot easier than it used to be, and you can find them all over the Web, often free. Look for retirement calculators at the websites of SmartMoney, CNNMoney, and AARP. If want more
detail, you could use a tool designed for financial
planners, such as the one built by Ilene Davis, a certified financial planner in Cocoa Beach, Fla. Her
CALCULATING RETIREMENT Early retirement requires careful planning.
need $250,000 in savings to meet the unfunded portion of your retirement.” The average American reaching
retirement has $125,000, Margetic notes, but this statistic is misleading, since nearly 70 percent quit work with less than $30,000 in personal savings. “Most will face a bleak retirement,” he warns.
calculator, which she uses for clients, is at
NJFRCalculator.com. Among other things, Davis’
calculator will adjust income sources over time and allow you to customize your expectation of inflation.
Ask yourself tough questions.
It’s easy to imagine lying on a beach, sipping a drink. It’s harder to make the choices necessary to achieve that ideal. Apart from finances, are you truly ready to stop working? While not having to work sounds
nice in theory, some people simply aren’t prepared for endless days without the structure of a job, points out Douglas Goldstein, a certified financial planner and author of The Expatriate’s Guide to Handling Money and Taxes. “I had a couple in their 80s come
into my office. The husband was still working. I asked why he didn’t retire, and before he could answer, his wife piped up, ‘I married him for better or for worse, but not for lunch!’” Goldstein says. “She knew that it was good for him to be out of the house, so he just never retired.”
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