A Closer Look into Circumstances Where Taking Early Retirement Will be a Wise Decision
If you are planning an early retirement then first of all you will have to find answers for some important questions. Will it be right to quit the job and take an early retirement? How to be sure that I am ready (both financially and mentally) to retire early? What all I would need after retirement? These are few of the important questions we will try to find answers for in the next few sections.
Will it be a Wise Decision to Retire Early?
On one hand, by retiring early you will be relieved from the associated headaches that you have to bear when you are employed while on the other hand, early retirement will also mean that you will earn less money which would have otherwise helped to make your retired life more comfortable. Our main focus here will be on analyzing details which suggest that you are ready for an early retirement.
Positive Factor #1: All Debts Have Been Paid Off
In case, you have been able to pay off the mortgage and in addition to it, there are no credit lines, loans, huge credit card balances or similar other debts then there will not be any requirement to make large payment when you are retired.
Thus, you will have more funds available to have a peaceful retired life with fixed amount of retirement income available every month to spend on your necessities or on emergency needs.
Positive Factor #2: Higher Savings Than Retirement Goals
At the start of retirement planning you must have set retirement saving goals and with progressive investments you have been able to surpass those goals. This will also be a clear indication that you are ready for early retirement. However, before taking retirement you will have to perform re-calculation for savings you have by including the additional years of retirement you will have.
Ideally, you should have savings that are almost twenty-five times the annual expenditure you make. This way you will be able to earn annual returns that are sufficient to meet your annual expenditure when you retire.
Positive Factor #3: No Penalty for Early Withdrawal
You will be in a favorable position in case retirement savings would include a plan where there is no penalty for early withdrawals. This way, when you retire early and start withdrawing from the account, you will not have to face penalties for such early withdrawals.
Positive Factor #4: Retirement Budget is Enough for Your Present Expenditures
Generally you will have lower income in retirement in comparison to your earnings when you are working. In case, you have been able to survive on the same income budget that you will have when you would retire, and that too for several months at a stretch while you are working then it will indicate that you are ready to take an early retirement.
A Final Note
As we can see, early retirement is certainly a possibility and if there are these above mentioned positive factors then it will clearly indicate that you will be able to easily survive on your fixed income after retirement.