Are You Ready for Early Retirement?

When it comes to early retirement, it’s about so much more than just understanding the financial aspect of retiring early. It’s important that you have the proper mindset and are committed to the process of making sure you and your family are successful in your retirement. Our advice? Be committed to the process. Build a team. 

If you’re married or have a partner, work as a team to prepare for retirement. Sure, it’s complicated if you don’t have buy-in from your partner, but it’s not impossible to develop a solid retirement plan. Having buy-in makes the process easier and smoother, though. With major decisions like retiring early and building a life off finances you’ve earned in the working world, we’ve got to be careful not to make the wrong decision. Another set of ears helps us gain reassurance that we’re on the right track with our finances.

Of course, early retirement isn’t just for married professionals. If you’re single, we still advise you to communicate with someone you trust. They don’t necessarily have to be knowledgeable in the strategies that help with retirement, but it’s important to have a trusted friend, mentor, or professional that you can talk to as you work your way through the process. 

And of course, beyond a spouse or trusted friend, we always recommend turning to a financial advisor that you can trust with your finances. Advisors are critical for even the most financially savvy professionals; If you're confused, unsure, or guessing on the retirement plan that’s best for you, bring a financial advisor aboard your team. In the market for one? Depend on your professional network for referrals, search online reviews, and make sure they’re a certified fiduciary. Once you’ve found your person, add them to your process. 

Even if you’ve begun the process alone, it’s not too late to build your trusted team.

So, you’ve got your trusted team, now what? 

The next step is to write down the monthly (or yearly) amount of income you need to generate to cover your expenses. Decide what you spend on expenses on a monthly basis. Write it down, and then subtract your largest expense. For most of us, that expense is our mortgage. 

Next, write the date that you want to live your best retired life. Be specific! In order to reach goals, you have to be crystal clear on what they are. Don’t be afraid to be bold in the number. Remember, you’ve worked hard, so you deserve to live your best life post-retirement. 

So, we have our desired date of retirement, and the amount needed for our best retired life. Let’s continue on with our plan. 

When factoring the number you need to live comfortably, know that it has nothing to do with the amount you don’t have in your retirement account. It’s part of the equation, yes, but that’s just a starting point. Many of us don’t yet have a retirement plan, even if we have sizable retirement accounts and feel like we’re on your way. A retirement account is not the same as a retirement plan. 

So, what can we factor into our plan using our retirement accounts? For a minute, let’s take Stocks & Bonds, Brokerage Accounts, IRAs, and move it on the shelf. What’s the meat of what’s necessary to set yourself up for success?

We have the asset side of the equation (real estate, property, land, checking account, savings, etc.). When we start planning our best life, we think of our assets, but assets aren’t the beginning; they’re actually the end. 

The biggest part of the equation is your liabilities--mortgage on your house, car debt, timeshare payments, credit cards. Typically, what holds us back and makes us fearful of retirement is our liabilities. You’re making payments, but you're paying interest to people you don’t know. You pay them every month out of your cash flow. They have a financial interest in you paying interest on the loan. Most people in our profession don’t exercise the right to explain to you the danger that your liabilities pose on your life. It impacts your peace of mind, quality of health, stress levels. In fact, 50% of marriages don’t work, and statistics show that money plays a major role in marriages ending. The problems are often around wealth, non-wealth, and conflicting conversations about how money should be handled. Again, this isn’t about the asset side, but rather the liability side. Disagreements about money in your household are rarely about assets. 

Many times, we’re conditioned to feel that using credit to buy things is a normal part of our lifestyle. There are endless benefits to building credit, of course, but you have the power to change that behavior, especially as you near early retirement. Develop a plan to eliminate your debt rather than increasing it due to limited cash flow. When you go into your retirement years with your date and amount in mind, it’s important to have a conversation about how to eliminate debts before you fully reach that retirement point. 

The goal is owing nothing at the time of your retirement. ZERO.

Lastly, develop an effective budget. This budget allows you to determine which debt you can eliminate. At A.W. Smith Financial Group, we have completed over 1,000 plans that equip 50-60 year-olds to get to retirement and THROUGH retirement. It’s not just about reaching your goal, but thriving once you’ve reached it and living your best retired life. 

Believe it or not, you can eliminate debt in seven years and get on the path to a fulfilling retirement. Commit to the process, make sure your partner is committed, and build your team of advisors. 

Let us help you start your journey to early retirement. Book a complimentary consultation today.