5 Signs That You Are Ready to Retire Early

5 Signs That You Are Ready to Retire Early
So you think you’re ready for retirement even though you haven’t reached the age of 65 yet? If so, then congratulations on a lifetime of hard work. However, you should be absolutely certain that you’re ready to retire early before you do so.

Here are 5 signs that you’re ready to retire early.

1. You Can Follow a Retirement Budget

Remember, when you retire, you’re likely going to be on a fixed income that’s less than what you make right now. Can you live on that kind of income?

If you think so, prove it. Live on your retirement budget for six months. Once you’ve managed to complete that without task cheating, then you’re in good shape for early retirement.

Also, keep in mind, when you were saving for retirement, you established certain guidelines about your annual draw on your retirement savings from your retirement accounts. Make sure you stick to that figure, but also factor in any Social Security income as well.

2. You Have Great Health Insurance

Whatever you think about the Affordable Care Act, the simple fact of the matter is that universal coverage with a single-payer healthcare model is simply not the case here in the United States. That’s why you need excellent health insurance, especially after you retire.

Medicare won’t give you any benefits until you reach the age 65. Even so, you might find that your doctor doesn’t accept it. Keep that in mind as you think about healthcare during early retirement.

3. Your Children Are Financially Independent

If you’ve still got children who rely on you for their basic necessities, including tuition costs, then you might not be ready for retirement. On the other hand, if you’re an empty nester whose kids are out of the house and earning their own paychecks, you might be a great candidate for early retirement.

The problem with retiring before your kids are on their own is that there are many (and, sometimes, expensive) variable costs associated with raising children. As a result, it’s tougher to live on a retirement income and still support them. If you find yourself supporting dependents, consider putting off retirement until they’ve been through college, landed a job, and are financially stable.

4. You Have Almost No Debt

If you’re browsing around for your retirement home by the beach or contemplating the best time of year to retire, then you should also have almost no debt.

It’s okay to have some debt when you retire, especially if that debt is minimal and is part of your primary residence. However, if you’re saddled with too much debt, then you’re expenses (in the form of interest payments) are too high for retirement right now. Get out debt first and then think about retirement.

5. Your Portfolio Can Take a Hit

There’s no denying that, as of this writing, the stock market has done well over the past several years. However, it’s not always going to be that way.

What happens if the stock market drops 20 percent the day after you retire? What happens if there’s a bear market for the next several years? Run your portfolio through some “what if” scenarios using your favorite spreadsheet to be sure that you’re ready to retire early in the event that the market tanks.

It’s great that you’ve saved for retirement. However, be certain that you’re ready for it before you sever ties with a company that’s providing you with a steady income.

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