There are financial, emotional, and personal questions you should ask yourself before you retire early.
That way you have a road map to meet your goals.
Of course, complaining about work is common. After all, it’s work! While it’s natural to think about the negatives of working, there are a lot of positives. That’s why retirement has an emotional impact on people in ways they never imagined. These are the 10 questions you should ask yourself before retiring early.
Early retirement questions
A job offers financial stability, healthcare, a sense of accomplishment, self-worth, schedule and structure, and friendships. You lose much of this when you retire.
Retiring early is not only a financial choice, but a personal and emotional one too. Prepare by asking yourself these 10 questions.
- What’s my passion?
- What’s kind of lifestyle will I live?
- Where do I want to live?
- What do I want my financial legacy to be?
- Will I have a side gig?
- Do I have enough money saved for retirement?
- How long will my money last?
- How will I pay for healthcare?
- Have I done enough planning?
- Why am I retiring early?
What’s my passion?
Retirement is something every worker dreams about at some point in their life. It’s a very emotional decision and one some regret once the time arrives. You have to be ready for it financially and emotionally since your job is tied to your time and life.
So, before you retire, think about what you’re going to do with your life. What’s your passion? Do you want to pick up a fun job to make some extra income? Do you want to volunteer? Will you care for a family member who is ill or take care of grandchildren? Will you travel and work remotely? What puts a smile on your face?
Former Burns & McDonnell CEO, Greg Graves, chose a Hawaiin beach immediately after retirement. However, his long-term goal involves volunteering. He found it fulfilling while working and he told The Kansas City Star it was his “obligation” as a retiree.
While obligation may not be the right word for you, as a rank and file employee, it’s about finding your passion in life. In retirement, you finally have the time to do whatever your heart desires. Ask yourself what that is before you retire. It’ll help you emotionally and psychologically.
When you’re in the trenches working hard every day managing your job and family life, it’s hard to find time for personal passion projects and perhaps even hobbies depending on your industry and position. That’s why it’s common to have an identity crisis after you retire, no matter your age.
A recent MarketWatch article profiles a retired 34-year-old, who doubted his choice so much he stopped telling people. The carefree dreams of life after work didn’t come true. He longed most for the connections with others that the workplace provides. Saying goodbye to 12 hour days meant a different kind of stress. He’s happy with his decision now, but it was a transition. The more you plan for that transition, by picking up new hobbies before you retire, the better off you’ll be.
The answer to this question – what’s my passion – will help you answer the next few questions, including your lifestyle and where you want to live.
Consider not only what you’re passionate about but also think about what life circumstances may find you. For example, most of us don’t anticipate caring for a loved one, but it’s a position many people increasingly find themselves in especially as people live longer and deal with chronic diseases for extended periods of time. Plan ahead if you may financially care for an aging parent.
Plan ahead, thinking about your life goals five, ten, and even twenty years later.
What’s my lifestyle going to be like?
Retirement means something different to everyone. Some people are happy living in the same home they’ve lived in for decades. Retirement is just simpler and more stress-free. Other retirees like to vacation often. Some want to learn new skills or volunteer.
Before you retire, you need to determine your lifestyle post-employment, so you know how much money you’ll need to support the life you want to live. For the first time, you’ll be free. Free from deadlines, free from the alarm clock, and free from demanding bosses.
How will you fill that time?
Where do I want to live?
That lifestyle may depend on where you live. If you’re living in the south, golf or tennis may fill your day.
If you’re living near grandchildren, perhaps you’ll be babysitting.
Deciding where you want to live, has an impact on your expenses, and it has tax implications too.
What do you want your financial legacy to be?
What do I want my financial legacy to be?
Fourth, consider what you want your financial legacy to be. For instance, do you want to leave money to your surviving children? If so, you need to plan for that.
This is one reason people are retiring early. They don’t want to repeat the missteps or lifestyle of previous generations, likely their parents who had little time left to enjoy life by the time they retired or not enough money to leave behind.
Talk with a certified financial planner to guide your financial decisions, especially if you’re retiring early. These are 10 reasons you should hire a financial expert.
Also, consider speaking with an estate attorney to ensure your leave behind a financial legacy whether you live ten or thirty years past retirement. If you’re moving to Kansas City, talk with a Missouri estate attorney. Laws vary from state to state, so make sure you talk with an expert in the state where you’ll live when you leave the workforce.
Will I have a retirement side gig?
Let’s face it; work is stressful. There are increased demands on employees like checking and responding to work emails at all hours of the day and night. It’s overwhelming at times, forcing you to dream about retirement.
Other times, retirement finds you through a buyout, merger or acquisition, or stress! That’s the sign it’s time to retire early.
Whether it was your choice to retire early or work circumstances made it reality, it’s easier than ever to leave your full-time job and work a side-gig. The possibilities are endless, especially if you want to be an entrepreneur.
It’s empowering to be your boss. You can work when you want and where you want, including that beach you envisioned yourself on during retirement.
Do I have enough money saved for retirement?
Knowing what you want your financial legacy to be will help you decide how much money you need to retire early. It’s one of the top questions retirees of all ages ask. How much money do I need in my nest egg?
All the financial gurus have different opinions. One million. Two million dollars. Even five million dollars, according to Suze Orman. It’s a moving target, depending on when you plan to retire, the lifestyle you want to live, and if you’ll have a side gig.
According to Bankrate, a million dollar nest egg can last more than 24 years in Missouri and Kansas. That’s on the high end, with it only lasting 12 years in some states. That’s based on the average expenses for a retiree aged 65.
If you’re retiring early in Missouri or Kansas, plan on saving even more money. If you plan to move to a new state, you may need to have an even more substantial nest egg.
Here’s a great exercise to get you thinking about retirement and whether you have enough money to survive. Six months before you retire, create a budget, and try living off your expected retirement income. You won’t have the same lifestyle since you’re still working and have less free time. However, it’ll help you establish benchmarks.
How long will my money last?
That’s perhaps one of the hardest questions to answer because there are so many unknowns that drive this. You can estimate based on the answers to the questions above like where you’ll live, which impacts the cost of living and taxes.
Second, your money won’t last as long if it’s your only source of income. Third, your investments and the annual rate of return impact this. The market can change quickly, but a certified financial planner can give you estimates based on historical rates of return.
Fourth, do you have children? If so, will you pay for college or a wedding? Think about things like student loans, and whether you’ll help cover that expense. These are big expenses, that will impact how long your money lasts.
The big unknown is your health. Even if you’re healthy when you retire, it can change quickly. With healthcare expenses continuing to rise, these expenses can impact how long your money lasts. That’s why planning is critical. Planning for the expected and unexpected.
How will I pay for healthcare?
When you’re working, you rarely worry about healthcare. Once you retire or go out on your own as an entrepreneur, you realize all the benefits of group medical insurance.
When you retire early, it’s too soon for Medicare. That coverage starts at age 65, and you’ll still have to pay out of pocket for some medical expenses. You may even need a supplemental policy to cover any coverage gaps.
For now, that leaves you with policies through the Affordable Care Act, COBRA, spouse coverage, group retiree coverage, traditional insurers, or a healthcare ministry. The ministries are not called insurance since they do not follow federal guidelines for things like pre-existing conditions. There are also different types of ministries, including cost-sharing plans and coverage that works like a traditional health plan with deductibles and co-pays.
If you’re buying insurance on the private market, talk to an insurance broker. You’ll pay the same price for coverage through a broker, as you would if you bought the policy privately.
Insurance brokers can help you find the best health insurance policy for your financial and personal medical needs. They can sell Affordable Care Act policies, short-term insurance through traditional carriers, or healthcare ministry coverage.
Policy coverage and prices vary by state, for Affordable Care Act policies. This insurance covers pre-existing conditions. Read your policy carefully, as there are limitations that may be new to you if you’re used to a group insurance plan with a wide-open network of providers. So, do a side by side comparison of policies and prices.
Many of the traditional insurance carriers like Blue Cross and Blue Shield of Kansas City also offer short-term insurance policies. They’re meant to be an “in-between” option, and they don’t meet all the ACA guidelines.
You may also keep your former employer’s health insurance through COBRA as well. The Consolidated Omnibus Budget Reconciliation Act gives you 18 months of coverage after you leave a job. However, you’ll pay a higher premium for the plan. Typically, it’s full price so the costs can be high.
You will keep the same benefits, though, including deductibles and coverage. Check with your human resources department for specific COBRA rules for your company, as companies with at least 20 employees typically offer this option for qualifying events.
Group retiree coverage is also an option, but it’s rare.
If your spouse isn’t retiring, you can also look into using their health insurance.
Insurance can change in an instant, with the government still debating policies and programs. So, it’s difficult to predict your healthcare costs. Plus, health conditions change rapidly and are impossible to predict.
This is perhaps one of the biggest variables in planning for retirement. Plan ahead and expect the unexpected.
Have I done enough planning?
You’ve asked yourself all these questions, but how much have you planned? Not just saving and investing, but actual planning? This includes long term care, estate planning and healthcare,
Check with your human resources department to see if they have a pre-retirement workshop to go through all the options. If you work for the federal government, they often have training programs, to help you with retirement planning, and managing your Thrift Savings Plan.
Consult the experts – a certified financial planner, estate attorney, and insurance broker. They work in their respective fields and are the experts on the latest options available on the market. They can tailor a plan to fit your personal needs, both short-term and long-term.
Ask about fees, so you know if it’s a one-time fee or you’ll pay for their services over time.
There are several ways financial planners get paid. They receive commissions, fees, or a combination of both. Fee-only financial planners are paid by the client, so they’re working for you. There are no incentives or commissions for selling a particular product, so there’s no conflict of interest.
Why am I retiring early?
Now that you’ve asked yourself all these questions, it’s time for the one question that drives all these answers. Why am I retiring early? Is it stress? Do you need to care for a loved one? Is it because you watched your parents work all their lives only to die right after retirement?
For better or worse, the “Financial Independence, Retire Early“, or F.I.R.E. movement is taking this country by storm. It’s become quite controversial, as many Millenials are making this a lifestyle, through aggressive savings plans. Some financial experts say it’s unattainable to live that frugally to retire at such an early age, often in their early 40s. It’s spread like wildfire, dubbing it the “new retirement plan.”
Make no mistake about it; retirees often hope not to repeat the mistakes of a previous generation. Whether it’s changing the financial legacy you want to leave behind for your loved ones or retiring early enough that you can still check things off your bucket list and enjoy life – there’s a reason you’re thinking about retirement.
Something is driving you toward the ultimate goal of retirement. Be honest with yourself. Then decide, is retirement the best option to achieve this goal or are there other things you can do to lower your stress or find more time in your work schedule to do the things you enjoy? If the answer is still retirement, you know you’re making the right choice.
What is your retirement question?