Mark Twain said, “Find a job you enjoy doing, and you will never have to work a day in your life.” Only some are so lucky.
And, if you are one of the lucky ones, even a job you enjoy doing can become tedious after many years. If you’re grinding through your days, thinking about a way out, what do you do? Launch a new career, or plan for early retirement? And what is early? Age 50? 55? 60?
According to SmartAsset’s analysis of U.S. Census Bureau data, the average retirement age[1] in the United States is 63 years old. When you look at the average by state, it varies from a high of 65 to a low of 62, with New Englanders having the oldest average retirement age. Based on this data, early could be anytime before 62 or 65, depending on where you live.
Read: Miserable in your 40s? Don’t panic, it’s perfectly normal[2]
One of the biggest challenges to early retirement[3] is figuring out how to pay for health care. Regarding health care coverage, “early” retirement would be before age 65, at which time most Americans become eligible for Medicare. Unless you’re lucky enough to have employer-covered retiree health insurance, you’ll pay hefty premiums until you become Medicare-eligible.
If you’re exiting the workforce before age 65, plan on budgeting $500 to $1,000 a month per person to purchase health insurance. Instead of shelling out $1,000 a month, some early retirees are opting for retirement jobs. Something part-time, low-stress and low-pay, but with benefits. This type of job can help bridge the gap from early retirement to Medicare age. Once on Medicare, you still pay premiums, but they’re more affordable, often less than half of what you were paying before going on Medicare.
To exit from the workforce, another item you must plan for is the number of years you’ll need to live off your acorns. A 60-year-old retiree needs their financial assets to have a 30-year shelf life. The 50-year-old needs theirs to last 40 years. To make your assets last an extra 10 years, you either need to save a lot more or plan on spending less. You can’t count on the market to make up the difference; it’s anyone’s guess as to whether your first decade of retirement will be a boom decade or a bust. You need your plan to work either way.
If you’re determined to retire early, there is a way. Some opt for a low-cost RV lifestyle and travel across the country from campground to campground. Others retire overseas where $2,000 a month can buy a comfortable lifestyle. And some decide to change lifestyles, sell the big house and buy a condo in a state that has a retiree-friendly tax code[4].
If you’re early in your career, decide now if you want to...