Retire at a Certain Age

By Temma Ehrenfeld

After you choose a retirement date, run the numbers--preferably with the help of a financial advisor. For example, if you plan to retire before age 65, you’ll need to factor in the cost of health insurance. And make an effort to cut costs before you stop working.

Whether you want to retire at 55 or 75 — or somewhere in between — you need to start planning now. With your target date in mind, you’ll want to run the numbers, estimating both your potential retirement income and likely costs. Working with a financial advisor can make the process easier.

The advisor can also help you to periodically re-evaluate your investments and asset allocation (how you spread your money across various classes of investments) based on your current age and years to retirement.
Even as you make plans to retire at a certain date, it’s important to remain flexible.
Factoring in health insurance
Your age at retirement is an important part of the equation. For example, if you’ll retire early (that is, before age 65, when you qualify for Medicare), you’ll need to buy health insurance unless you’re fortunate enough to be covered by a company early-retirement package.

To get an idea of the possible cost, you can compare individual policies on the website ehealthinsurance.com. Premiums will vary based on coverage as well as your age and where you live. In addition to premium costs, other factors to consider are copays, deductible and access to medical providers.

Additionally, as a result of the Affordable Care Act, you can now use the Health Insurance Marketplace to buy a plan that meets your needs. Depending on your income and family size, you may be able to get lower costs on your monthly premiums and out-of-pocket costs.

Of course, the premium numbers will change by the time you’re ready for retirement — especially if your target date is years away. But at least you’ll get a sense of what you’ll be paying.
Cutting costs
It’s important to cut costs and pay off debt in advance of your retirement date. For most people, housing is the single biggest expenditure. Consider making an extra month’s payment on your mortgage each year so you can pay off the whole thing sooner. Another idea is to sell the family home and move into a less-expensive condo.

Even as you make plans to retire at a certain date, it’s important to remain flexible. You may have to work a year or two longer than you thought. You may have to move, switch jobs, or even careers before you're ready to retire.
Early retirement checklist
People who retire early often have a government pension, significant inheritance, a high-earning spouse, a simple lifestyle, or some combination. Others have sold a successful business. Before you quit your job, try to make sure that:

  • You have other sources of income lined up (e.g., a part-time job)
  • Your children are financially independent or will be soon
  • You’re eligible and can afford health insurance to cover you until you qualify for Medicare
  • You will have at least $280,000 to pay for healthcare costs Medicare won’t cover1
  • You have considered your other insurance needs
  • You’ve paid off your debt, including mortgages
  • You’re willing to seriously cut back on your spending or already have done so
  • You’ve worked out the numbers with a financial advisor

Key Points:

  • Work with a financial advisor to plan for retirement at a certain date.
  • Try to curb spending before you retire.
  • If you want to retire early, be sure you’re financially prepared.

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