A survey in 2014 revealed that 50 percent of retirees are compelled to retire early due to their pressing health needs. The Employee Benefit Research Institute conducted a survey in 2014 and found that:
- Thirty three percent of US employees want to retire when they’re 66 years old
- Only sixteen percent of US employees work after 65 years
- Around 9 percent of employees plan to retire before 60 years
- The average age for retirement is 62 years now
- Around 49 percent of employees quit job early due to health related problems
- Approximately 61 percent of US employees retire early to look after a family member
- Eighteen percent of employees retire early due to downsizing
- Twenty-two percent employees resign due to work related issues
- Seven percent of employees retire early as their skills are not enough for the job
- Twenty-six percent of employees retire early happily
- Nineteen percent chose to retire early due to financial windfall
Who wants to retire early?
Attitude towards early retirement has changed in the last few years. People are eager to say goodbye to the rat race before they hit 60 nowadays. But it isn’t that everyone is excited to leave job and retire early. Some people are complete workaholic and they would love to do a 9-5 hour job till the last breath of their life. Whereas, others would do anything to quit job and start enjoying the pleasures of life.
Who are these people who desire to retire early? Here are the 4 types of people who can’t wait to leave full-time work. Find out if you’re one of them.
- Those who don’t have job satisfaction: Getting a perfect job in this economy is a dream. And most people are forced to be content with mediocre work. They have to accept whatever is in their platter since right job isn’t available.
But are these people ready to do a boring job without any great career prospect every day? A big no. Given a chance, these people would love to retire today itself. Since life’s necessities don’t allow them to resign today, so they wait for the day when they can retire; and hope that the day comes soon in their life.
- A low or average performer: An average performer is never satisfied - both in terms of work, salary and lifestyle. If his work is not good enough to satisfy employer, then his salary would never be good. And this would affect his lifestyle too. This kind of person would like to quit job and retire quickly.
- Those who want to enjoy life: When the average lifespan is 80 years, a retired man only has 15 years to live life in luxury. If this person loves fun, laughter, and family, then he would try to prolong this period even more. This means he would like to be financially strong and retire early.
- Those who want instant gratification: Gen Y believes in instant gratification. This generation is confident and smart. People belonging to this generation simply doesn’t have the patience to slog for several years before qualifying for a pension. They want to be their own boss as soon as possible. As such, they’re likely to quit job early.
4 Crucial steps you need to take to retire early
People work hard day in and day out and try to save up enough just to retire at 60s. However, most of the time, all attempts fall short even after struggling for so many years. Setting retirement by 55 or even earlier is definitely a lofty goal but not at all impossible. Do you too hope to retire soon just like those 1% youngsters? Here are four steps to you should consider:
- Determine your ideal age to retire: Like everyone else, your ideal age to retire is different. Some people want to do something great in life and for that they go to any possible extent. For some other, it’s like dropping it all and retire right now if they could. If you really want to retire early, do the calculations now. Know your expenses - both now and in the coming years. Then decide how much you need to save; what number you need to invest and the return you'll get. Of course this will be an approximate figure but you’ll at least get some idea about the age you will be able to retire.
- Save vehemently: You might not love or entertain this but in order to retire early this is the most important thing you could do. This doesn’t mean you have to live a beggar’s life, but have to prioritize your spending and keep saving on top of the list. Most Americans spend lavishly on the stuffs they don’t need at all. You needn’t do sacrifices, but just cut back on unnecessary purchases. However, if you are willing to do some sacrifices now, perhaps you’ll be able to live comfortably after retirement.
- Start investing early: The earlier you start saving and investing (of course with caution), the higher the chances are of success. You might ask ‘Why?’. Just because the power of time and compound interest will be with you. And these will bring more return than any other earthly investment tool. However, you need to avoid investment plans that have too much risk as a single wrong investment can shatter all your retirement hopes.
- Build an emergency fund: Life is unpredictable. You never know what lies ahead. An unexpected life event can appear at anytime. So it’s always wise to plan ahead and remain prepared. While you save for your retirement, you should also keep aside some fund for these surprising life events. You wouldn’t like to put off your retirement due of lack of funds. So keep aside some fund for medical, family, or financial emergencies. Without an emergency fund, your dreams of early retirement are really vulnerable.
Read more - Retirement days are fast approaching: Tips to get ready if you are not
Which one is the most important factor for early retirement?
Your total income will determine if your life after retirement will be blissful or traumatic. Your income will depend upon the following factors:
- Pension scheme
- Part-time job
Read more - Retirement income: 7 popular sources you can earn your bread
Before you say ‘bye’ to your job, here are the few steps you must never forget to take:
- Compare the available pension plans and determine which one would suit you the best.
- Calculate how much you’ve saved and how much you need to save more.
- Calculate your monthly income from your investments.
- Research on the types of part-time jobs you may get and calculate your net income.
- Calculate your net expenses. Deduct the company benefits you’re getting now.
Example of company benefits
- Traveling allowance
- Lunch at subsidized rates
- Health insurance
What about the health care expenses?
Medical expenses are primary reasons behind bankruptcy filings in this country. So, when you’re calculating your expenses after retirement, make sure you include this cost too. As per the Bureau of Labor statistics report, an average retiree spends $5118 every year out of pocket for medical expenses. Besides, you may not qualify for Medicare due to early retirement. This equates to more expenses for private health insurance.
Fortunately, the Affordable Care Act offers new insurance options to early retirees. Still, most early retirees will feel that the unsubsidized world of individual insurance is really troublesome in terms of coping up with health care expenses.
It is best to save minimum $11,000 every year for health care expenses. If you really don’t need to spend this amount, then at least you can use it for other expenditures.
Do you need to have a talk with your family?
Individuals really need to have a discussion with family members before making a decision to retire. Life changes after retirement and it affects the family members too. So, you better have a discussion with family members regarding anticipations, fears, change in role and responsibilities. Find out how much are they willing to adjust. Secondly, have a talk with a financial counselor too. It won’t harm to check all the numbers once again.
Early retirement is possible if you plan beforehand and prioritize your retirement over your other financial goals. Do you have a retirement age in mind? How much are you willing to work and sacrifice today to enjoy tomorrow?