Although the average retirement age is 62, more working people are choosing to retire much later in life for financial reasons. On the other hand, some people choose to work towards an early retirement. It may sound like a dream, but by putting a plan in place and sticking to a budget, it’s certainly a possible reality. If you’re approaching what you’re hoping is your early retirement age, the following are some times that you might be ready:
You’ve paid off all your debt
Getting your debt paid off is key in order to have a comfortable and enjoyable retirement, but especially if you want to retire early. If you won’t be working anymore and receiving a steady income, the last thing you want on top of your other monthly expenses is to have a ton of debt. At a minimum, you’ll at least want to make sure that your credit card debt is paid off, but if your larger loans are paid off as well, even better. The fewer bills you have to pay each month, the better—otherwise, you could be setting yourself up for financial troubles.
You have a home paid off in full
As mentioned above, having a mortgage loan paid off can certainly make early retirement a much more realistic possibility. After all, monthly rent or mortgage loan payments tend to be most peoples’ largest monthly bills. If you don’t have to worry about paying rent or a mortgage loan, and you own the home you live in free and clear, you’re one huge step closer to an early retirement.
You have liquid assets
Access to money that can be spent immediately, or liquid assets, can put you closer to an early retirement—depending on how much you have. Ideally, you’ll want to have at least three years’ worth of expenses in liquid assets before retiring early, but this could vary depending on your post-retirement plans, other income streams, etc.
If you have children, they’re financially independent
Retiring early with children can be very difficult if they’re still financially dependent upon you. But if you don’t have children, or if your kids are all grown up and college is already done and paid for, they don’t live with you, and they’re financially independent, now might be a time to consider retiring. Otherwise, you might need to take a step back and reevaluate just how realistic an early retirement is. It’s definitely still possible, but you’ll need to have a lot more saved up since you will need to provide for them after you’re no longer working.
You have other sources of guaranteed income
Social Security checks don’t start coming in until you reach the official retirement age, so if you retire early, you’ll need another source of guaranteed income in the meantime. Some retirees find other ways to make some extra cash, whether it’s from starting their own small business, or getting a different part-time job that’s less demanding than their former full-time job. If you don’t have any plans to work after retirement, other possible sources of income might include 401(k) payments, money from a pension, or the steady income from a working spouse. The bottom line: if you know you’ll be set and receiving a steady flow of money that will cover your expenses, you might be ready for early retirement.