Can you retire early?

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Retiring “early” for many means leaving the workforce before age 65. Is early retirement for you? Here are the things you need to consider and plan for to help make it happen.

Weigh your options
Weigh the advantages of stepping away early versus the benefits of working until 65 or beyond. Will you be leaving money on the table in terms of generating a bigger pension payment from your employer? Could working a few more years let you build up a greater nest egg and help you cover unforeseen expenses?

Account for healthcare expenses
If you’re retiring before age 65, be sure to account for the cost of continued coverage through your employer or private health insurance. Medicare is generally unavailable for those younger than 65, unless you’re a widow and/or disabled.
Opt for the best coverage you can afford as this will give you more options when seeking care.

Evaluate income needs
Look at your expenses, and look at what your income needs are going to be. Your expenses may fall, especially if you’re downsizing your housing and suddenly don’t have the costs of commuting. If you plan on traveling extensively in retirement or spending more money to enjoy your other hobbies, your overall spending may increase.

Add up your prospective income sources. These could include:
  •  Pensions
  •  IRAs
  • Social Security retirement benefits
  • Annuities
 
Ditch your debt
Paying off debt, especially high-interest consumer debt, is an important part of retirement planning. Even if you have adequate income to achieve your early retirement goals, those funds can quickly disappear if you’re still paying off debt. If working another year or two will allow you to eliminate debt, it might be a good idea to put off retirement.

Adjust your expenses
If your income isn’t quite what you’d like it to be, examine how your spending can be adjusted. If you can cut back spending on non-essential nice-to-haves, you might find that might help you achieve early retirement.

Re-allocate your assets
You should always pay close attention to your asset allocation - your mix of stocks, bonds, money market accounts, real estate and others - especially as you near retirement. The right asset allocation is necessary to help make sure you meet your retirement income needs. Each asset class has its own levels of risk and return.1

Investigate long-term care options
If you’re entertaining long-term care insurance, you’ll need to decide if you’re going to pay for it out-of-pocket or purchase long-term care insurance. This type of policy will assist or, sometimes, fully cover eligible costs related to extended hospital, rehabilitation or other care facility stays.

Test-drive retirement
Leaving work permanently before age 65 could mean spending 25 years or more in retirement. Are you ready with activities to fill those years? Retirement is a big adjustment, both financially and psychologically. Look for opportunities to “try on” retirement before you actually commit to it. Working part-time hours or taking an extended break or sabbatical from work can give you the experience of leaving daily full-time work. You may find that you miss working and go back to it.

Seek advice
Wondering if early retirement is within your reach? Don’t figure it out alone. A TIAA advisor can help you run the numbers to help you determine if stepping away from work is the right move for you.

You should consult with your tax advisor regarding retirement planning strategies, including when to take Social Security benefits.
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1 It is important to keep in mind that there is no guarantee that asset allocation reduces risk or increases returns.

Advisory services provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser.
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