As you consider early retirement, ask yourself these five questions to make a more informed decision.
1. How will my Social Security benefits be affected?
You are eligible to begin your Social Security retirement benefits as early as age 62, but it may mean that your benefits will be reduced by up to 30 percent. Look at the numbers to determine whether it’s worth receiving benefits before you reach full retirement age, which can vary from age 65 to age 67, depending on when you were born.
2. Do I have a well-defined budget?
Sean Lee, Founder of Elevated Retirement Group, recommends calculating your monthly expenses instead of guessing. “Ask yourself, ‘Am I clear on the amount I need to live on?” he says. Understanding how much money you need can help determine whether your savings will last through a longer-than-expected retirement.
3. How does early retirement affect my pension?
Find out if you’ll receive significantly less money if you start receiving your pension early.
4. What sources of income will I have?
“If you work part time and are planning to take Social Security, you can only make a certain amount of money without losing some of your benefits,” says Lee. Also, if you have multiple retirement accounts, determine which ones to pull money from first to avoid tax penalties.
5. Will I still have health insurance?
Since Medicare kicks in at the typical retirement age, which is 65, find out if you can receive employer-sponsored health care during the interim or if you’ll need a private health insurance plan.
Knowing what to expect with early retirement will help you avoid surprises down the road and ensure financial security in the future.