When you have been working hard to prepare yourself for early retirement by the age of 37 there will come a time when you feel strong enough to actually do it. You will come to this realization for different reasons. You may have a huge pile of assets saved up. Or you may think that you have enough money to retire comfortably. Other than that, you may be emotionally comfortable with the decision to retire. You may think that the time has come to leave behind your day job. While the thought may have crossed your mind that you are ready to retire early, it is important to think through this monumental decision carefully before you take action.
What Are the Signs That You Are Ready?
There are several factors to consider carefully before you make the decision to retire. These are some of the most important signs that you are ready to retire early and to move forward with your plan to quit your day job.
You Are Comfortable With Your Retirement Budget
If your goal is to retire early by the age of 37, you likely prepared a retirement budget years ago. You might have also been tweaking it periodically to ensure it is perfect. This may be a budget that you feel confident is accurate, but have you tried it on for size?
A smart idea is to live as though you are retired for a few months without actually giving up your day job.
Here is what you do. Set your work income aside in a separate account, and only live on your retirement income sources as an exercise. Adjust your spending habits as much as possible so that they are in line with your retirement budget. Consider how comfortable your lifestyle is and if you can continue on like this indefinitely. For some, this exercise will tell you that you are indeed ready to retire early. For others, it will be a wake-up call that you need to continue to work for a few more years.
You Have Health Insurance Lined Up
One thing that many people who are preparing to retire early overlook is health insurance. If you currently work for an employer, you may obtain health insurance coverage through your workplace. When you retire, you will be responsible for paying for your own coverage. Be careful. Medicare coverage may not be available for many years.
If you are ready to retire early, you may have already reviewed individual coverage options for you and your family. You may have also already incorporated the new cost of coverage into your budget. Therefore, you can ensure that it is affordable for you.
Keep in mind that your new coverage should meet all of your needs. The plan should make it more affordable for you to obtain prescription drugs and to meet your ongoing healthcare needs. If you have not yet reviewed coverage options available for retirees, remember this. You may be able to obtain COBRA coverage from your workplace for up to 18 months after you retire. However, COBRA coverage can be expensive. Therefore, you may find it more affordable to purchase an individual plan directly through an insurance company.
You Have Thought About Child-Related Expenses
If you are in your mid to late thirties, you may have children of almost any age in the home. At the same time, you may have not yet started your family. A child can cost a modest fortune to raise. The cost will multiply for each additional child you have.
The costs often do not disappear when the children reach adulthood. In other words, you may still want to pay for their college education and their wedding. It is important to understand how these costs will impact your budget as well as your income-producing assets and retirement assets. Some people may review this aspect of their lives and decide that they are not yet ready to retire early. They may need to work a few additional years to ensure that all of their child-related expenses can easily be paid for in the years to come.
You Are Mostly or Completely Debt-Free
Debts are an important factor to analyze before you decide that you are ready to retire early. The most important thing is that your budget is manageable for you in your retired years. Some people have enough passive income being generated that they can afford a car payment, a mortgage payment and other debts in retirement.
However, most people who are preparing to retire early have these and other debts mostly or completely paid off. Keep in mind that your ability to pay off debts and to live debt-free for a long period of time is a sign of your financial security. If you find that you still regularly use credit cards as a necessity rather than to simply accrue rewards points, you may want to re-think your financial management strategies before you retire. The last thing that you want is to retire early only to find that you are drowning in debt a few years from now.
You Know How You Will Spend Your Free Time
Another equally important aspect to think about before you retire is how you will spend your free time. Ask yourself this question. Are you emotionally ready to leave behind a day job? Some people may think that they are more than ready to sleep in each morning, skip the commute and enjoy leisurely days on their own terms.
However, most of us quickly realize we do not have a plan for how we will spend our free time beyond that. The reality is that you can easily grow bored with that experience after only a few days. Boredom can later lead to depression.
Various individuals link their identity to their careers and find it difficult to give up their career. Everyone needs to have something to look forward to each day and a reason to get out of bed. Consider hobbies and special interests that you can pursue in your new free time after you retire.
Think about volunteering at a local charitable organization. The more ways you can fill your hours constructively each day, the happier you will be. Many people who retire early also need to make new friends who have free time to spend with them during the day. After all, when you retire at the young age of 37, chances are that most of your current friends may be at work all day long.
Here are some more questions you can ask yourself about early retirement.
While you may have been planning to retire by the age of 37 for years, actually pulling the trigger and leaving behind your day job for the leisurely life of a retiree is not a matter to take lightly. You must carefully think through each of these important points. If you have explored all of these signs that you are ready to retire early and feel confident with your decision, it may now be time to move on with a new chapter in your life. If you have experience with this process or have comments about the signs that you are ready to retire early, you can use the space below to share a message with me and fellow readers.