Many people dream of retiring early, and for you, that could mean leaving the workforce during your 50s. And there are plenty of good reasons to go this route. By retiring young, you’ll get a chance to travel or enjoy your newfound free time at a point when you’re likely to have a decent amount of energy and be in relatively good health.
But before you pull the trigger on retirement during your 50s, be sure to lock in your answers to these key questions.
1. Where will my income come from?
To retire comfortably, you’ll need a modest amount of income — but your choices are more limited when you leave the workforce in your 50s. That’s because you can’t begin collecting Social Security until age 62 at the earliest and you’ll incur costly early withdrawal penalties if you remove funds from a tax-advantaged retirement savings plan like an IRA or 401(k) prior to age 59 1/2.
If you have money in a traditional brokerage account, real estate investments, or another unrestricted source (meaning, one you can access at any age), then you should be all set. But be mindful of the income-related limitations you’ll face during your 50s.
2. What will I do with my time?
Filling your days meaningfully is important whether you retire in your 50s, 60s, or beyond. But when you retire in your 60s, you’re apt to know more people in a similar boat. On the other hand, if you retire in your 50s, you may find that you’re starved for company and hesitant to travel or pursue certain activities solo.
Of course, you may have a spouse or plenty of friends to spend your days with, coupled with a jam-packed itinerary for your first few years out of the workforce. If so, great. But if not, just make sure you have a plan for how you’ll keep yourself occupied.
3. What will I do about healthcare?
The great thing about working is (potentially) having access to an employer-sponsored health insurance plan. If you’re looking to retire in your 50s, you’ll need to figure out what you’ll do for health insurance, since you’ll be too young to sign up for Medicare, which begins at age 65. Most likely, that will mean buying a private plan and grappling with the premium costs that come with it. But footing the bill for health insurance could be costlier than anticipated, so make sure you can afford it before resigning from your job.
4. Do I have recourse if things don’t work out?
Retiring early — very early — is a move that could work out well for you. But what if it doesn’t? What if you find that you don’t have enough money to enjoy the lifestyle you want or you’re bored senseless most weeks and miss office life?
Before you retire in your 50s, figure out what your backup plan will be if you wind up regretting your decision. Maybe you’ll have the option to return to your former career and pick up where you left off. Or maybe you’ll start your own business, whether it relates to your previous field or is something completely different. There are plenty of options to play around with, but it helps to know what you’ll fall back on if things don’t go as planned.
The fact that you have the option to even contemplate retiring in your 50s means you’ve done a good job of saving and planning for your future. Just be sure to address these important points before making your decision to leave the workforce official.