3 Signs You May Be Ready for Early Retirement

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3 Signs You May Be Ready for Early Retirement

There can be a lot of uncertainty when it comes to retirement. Many Americans are worried that they will outlive their retirement savings, but how do you know if you are actually ready to retire early? Let’s take a look at a few key checkpoints along the path to early retirement.

You Are Debt Free

Large amounts of debt are a hindrance to many retirees. Big debt usually translates to big payments during retirement. That is why being debt free is such an amazing opportunity for those considering early retirement.

You Exceeded Your Savings Goals

The only thing better than not having any debt is having more money in your savings than you planned for. Excess savings is a great indicator for early retirement.

However, also bear in mind that retiring early may alter your original retirement plan. If your plan included working for 40 years and you have only been in the workforce for 35 years, then excess money in your savings account is unlikely to outweigh the money you could continue to make in the next 5 years.

No Early Withdrawal Penalty

Depending on your particular retirement plan, you may or may not be subject to a withdrawal penalty upon early retirement. According to the IRS, the following 6 types of distributions are free from such a withdrawal penalty:

  1. Distributions made to your beneficiary or estate on or after your death.
  2. Distributions made because you’re totally and permanently disabled.
  3. Distributions made as part of a series of substantially equal periodic payments over your life expectancy or the life expectancies of you and your designated beneficiary. If these distributions are from a qualified plan other than an IRA, you must separate from service with this employer before the payments begin for this exception to apply.
  4. Distributions to the extent you have deductible medical expenses that exceed 7.5% of your adjusted gross income whether or not you itemize your deductions for the year. For more information on medical expenses, refer to Topic No. 502.
  5. Distributions made due to an IRS levy of the plan under section 6331.
  6. Distributions that are qualified reservist distributions. Generally, these are distributions made to individuals called to active duty for at least 180 days after September 11, 2001.

Your Healthcare Costs Are Covered

Surprise healthcare costs are the biggest reason for financial worry during retirement. In our previous article, Health Care Costs to Consider as You Prepare for Retirement, we broke down the average healthcare costs that retirees face and found it to equal roughly $275,000. If you can retire early while remaining covered under your spouse’s or former employer’s health care plan, then you can avoid any unexpected expenses during your retirement.

Early Retirement With CKS

When it comes to retiring early, there are many things you should consider before taking the plunge. Fortunately, the financial advisors at CKS Summit Group are here for you.

Our experts will take the time to get to know you and your retirement income savings plan. To schedule your personal strategy session with a CKS retirement savings professional, please give us a call anytime at 586-286-5820 or click here to schedule your session online.

Thank you, and we look forward to making the most of your retirement savings soon!