A Financial Checklist for Early Retirement
Thinking about retiring early can be overwhelming. Use this simple checklist to organize your thoughts and actions. Treat it as a step-by-step guide to making an informed and confident decision.
First, get a definitive answer on your Social Security benefits. Go to the SSA.gov website and create an account to see your personalized statement. Note the significant difference in your monthly benefit if you claim at 62, at your full retirement age, and at age 70. Discuss these numbers with your spouse to formulate a claiming strategy.
Second, you must get hard numbers for your healthcare costs. Contact your employer for the exact monthly COBRA premium. Then, visit the ACA Marketplace website and use its tools to get quotes for plans in your area based on your expected retirement income. Compare these costs directly.
Third, create a new, comprehensive retirement budget. Do not simply adapt your pre-retirement budget. Build a new one from scratch that includes line items for healthcare premiums, travel, hobbies, and a separate savings account for major home and auto repairs. Be brutally honest about your expected spending.
Fourth, calculate how long your savings will last. Use a reliable retirement calculator online or, better yet, work with a financial advisor to run projections. Stress-test your plan by assuming a lower rate of return on your investments and a longer lifespan than you expect. This will show you the weak points in your plan.
Finally, develop a tax-efficient withdrawal strategy. Understand how withdrawals from your different accounts (401(k), Roth IRA, brokerage) will be taxed. Plan your withdrawals to keep your income below the thresholds that trigger higher taxes on your Social Security benefits. This step alone can save you thousands of dollars each year.
