It’s Never Too Early to Plan Your Retirement

Even when you’ve determined an exact date you want to retire, it’s hard to know how many years your retirement will last. So it stands to reason that planning for an early retirement could be a challenge.

However, there are ways. We can take a look at your current financial situation and figure out if there is a strategy to help you find how to retire early or semi-retire with a retirement income plan that you can have confidence in. In the meantime, here are a few ideas to bear in mind.

First of all, should you wish to retire at 55, you will likely be subject to the standard 10 percent early withdrawal penalty from your current employer’s retirement plan, including a defined contribution plan, on distributions made before age 59 ½. The penalty-free retirement age drops to 50 for people who work in public safety professions.

Why public safety officers? These generally are higher-risk jobs in which stress takes its toll, leading more people to retire earlier than from other careers. Examples include federal law enforcement officers, firefighters, border patrol officers and air-traffic controllers.

Note that this penalty exception does not apply to IRAs or any retirement plan you may have still with prior employers. This is important to remember if you’re thinking of rolling over your employer plan into an IRA. If you do that when you enter an early retirement, you may not be able to tap that money before age 59 ½ without triggering the penalty charge.

In the past, another concern with regard to retiring early was health insurance. However, due to health care reform, you can buy your own policy on the exchange to hold you over until you’re eligible to enroll in Medicare.

You may pay higher premiums due to your age, but you won’t be penalized for any pre-existing conditions, such as diabetes or heart disease. Remember, if you’re retiring at 55 and living on far less income, you could qualify for tax subsidies to help pay for your health insurance.

While some wealthy entrepreneurs retire early and live a life of luxury, many early retirees choose the trade-off of freedom from work in lieu of wealth. That could mean drastically cutting living expenses. To help you get to that point, reduce expenses while you’re still working and stash that extra cash into your retirement savings. Then when you retire early, it won’t seem like such a lifestyle downgrade.

And finally, one of the most important decisions you can make regarding early retirement is whether to start drawing Social Security benefits. Of all of your retirement assets, this may be the one you want to hold off on the longest.

Here’s a good rule of thumb to consider: If both of your parents lived past 90 years old, delay. If you have major health issues, draw sooner. At the end of the day, it’s all about effectively utilizing the retirement income sources available to you.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives, including coaching people on how to retire early.

The information contained in this material is provided by third parties and has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation. We are able to provide you with information but not guidance or advice related to federal benefits. Our firm is not affiliated with the U.S. government or any governmental agency. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and The Resource Center are not affiliated companies. AW12175556