Can I afford to retire early?
Is early retirement possible?
Well, it depends. The fact that you’re even asking this question is a good sign. It means you’re probably at least several years away from retirement—maybe even more.
Congratulations! You’re among the minority of folks who like to think ahead about their retirement goals, who heed the “if you fail to plan, then you plan to fail” warning we mentioned earlier.
One of the saddest things I hear on a regular basis in my job is, “I wish I had started saving for retirement sooner.” I truly wish they had, too. When it comes to creating your nest egg strategy and spending plan for a secure and stress-free retirement, you would be amazed by the advantages you can gain to your total savings with an early start.
A few years ago, a woman in her late fifties approached us about handling her retirement planning. She was no stranger to the world of finance management— she was a successful professional and had started working with a financial advisor when she was in her early thirties. Yet, as she got closer to retirement, she wondered if she could do better. She knew she didn’t want to wait until sixty-five to retire but wasn’t quite sure just how early she might be able to.
Which brought her to us. The good news is, we were able to help her retire at age sixty-one. This was no easy task—navigating health insurance before and after age sixty-five, Social Security, smart withdrawal strategies, tax mitigation, estate planning matters, the list goes on.
The bad news is that—had she come to us just a few years sooner—she may very well have been able to retire that much earlier. I specialize in helping people get to a work-optional lifestyle, often before age sixty-five. In this case, she probably could have retired at fifty-eight.
As much as time seems to fly faster the older we get, three years is still a long time to be working when you could’ve been traveling, hanging out with the grandkids, or just relaxing instead. Here are the factors you should look at to determine how much sooner you can retire.
Budget vs. Desired Spendable Income
One of the first things many financial advisors will “advise” you to do is create a budget. I hate that word. Most of my clients hate that word. “I’ve been budgeting for forty years,” they say. “You’re telling me retirement is just more of the same?”
I prefer a different approach: rather than look at your financial situation and tell you what your budget is, I like to find out everything I can about you first, as part of what I call the Total Client Discovery. The Total Client Discovery has seven key areas: your values, current advisors, assets, relationships that are important to you, processes you like to follow, goals, and interests.
Notice only one category has to do with money, while the rest are about you. If you start and end a conversation with a financial advisor about investments, the advice will start and end there as well. A truly complete financial plan is about a lot more than money - it's about retirement readiness:
When do you want to begin your work optional lifestyle?
What are your current spending level and desired spendable income in retirement (monthly income)?
Who are the important people or causes in your life?
What are your top personal and professional accomplishments?
Who are the professional advisors already on your team?
How often would you like to review the progress of your plan?
I ask over 60 questions in every Total Client Discovery meeting. Anything less would be a disservice.
By working with an advisor who takes this approach, you will have great confidence knowing that your financial life is singing from the same sheet of music as your personal life, and that we have removed as many of the question marks, unnecessary risks, unnecessary taxes, and unnecessary fees as possible with your plan. Remember: at the end of the day, it doesn’t matter how many dollars you have; it’s how many dollars you’re able to spend. It’s what you have left after you pay all your bills and Uncle Sam gets his cut.
Sure, some of your goals may be just plain unrealistic. If that’s the case, I’ll explain why. Often, though, my clients are thrilled to discover that they were setting the bar too low, not dreaming big enough. My job is to lift the heavy weight of solving complex financial matters off your shoulders, giving you permission to live the life that you want.
Looking back and realizing you could have done more is sometimes more painful than thinking about the things you couldn’t do.
Analysis Paralysis and Ben Franklin's T-Chart
Sometimes it can all seem to be too much. It can make your head spin. Setting goals for your retirement is a crucial step toward creating a plan to meet those goals.
But where to even start?
Too often, as is human nature, we use the intimidation and fear of doing it wrong as an excuse to just not do it. We don’t know where to start, so we don’t.
We call that analysis paralysis. It’s more common than you might think.
Not long ago, a couple close to retirement came to my office, struggling with what they should do about their home. It was the home they had raised their kids in, but—now that their children were grown up, with kids and homes of their own—it was just much more space than they needed.
Should they sell it and buy something smaller? Should they move into a condo? But what if one of the children—heaven forbid—lost their home and needed a place to stay? And what about all the precious memories, the old treehouse in the backyard, the dated pencil marks on the kitchen doorframe commemorating the growth of each child through the years?
So they asked me, “What’s the smartest thing to do financially?”
I had to tell them they were asking the wrong question.
Before asking yourself what to do financially, ask yourself “What’s the best thing to do personally?” By this I mean you shouldn’t put numbers on paper ahead of your own well-being. Just because something seems to make more sense from a financial perspective doesn’t necessarily mean it’s the right thing to do. You should always keep in mind that your happiness needs to be your top priority.
When I struggle with difficult decisions, I use a helpful tool first made famous by wise old Ben Franklin: the T-chart. You’ve seen these. You may have used one yourself.
The T-chart looks just like what you think: it’s simply a piece of paper with one line drawn down the middle and another line drawn across the top to create two columns labeled Advantages or Positives or Pros and Disadvantages or Negatives or Cons. Then you just brainstorm. Think of all the benefits of, in this case, keeping the house, again, not from merely a financial standpoint. Think of your happiness! Write them down in the Positives column. Then repeat the exercise for the Negatives column. Don’t be shy. Don’t leave something out just because you think it might not be “important.” With big decisions, it’s all important. Be honest.
Be fearless.
Of course, your financial advisor (or, preferably, your Certified Financial Planner™) can provide you with the expertise and experience to help make sure your T-chart is as complete as it can be. He or she can show you positives (and negatives) you haven’t thought of. They can help you figure out just how much of a spendable income is possible. They can help you set realistic goals.
And they can help you answer the question, “Can I afford to retire early?”
The more your advisor knows about the pieces of your totally unique puzzle, the better they can show you where they go.
And the better they’ll be able to remove “It depends” from the equation.
So can I retire comfortably?
To learn more about when and how you can retire comfortably contact our team to help you with a comprehensive financial planning session to help you reach your financial goals. We help retirees centralize their wealth by focusing on goal-based planning and investing, tax strategies and planning, wealth strategy, and financial security. Schedule a strategy session with our office today to learn more!
About the Author
Jason Glisczynski, CPWA®, CFP®, CAS®
CERTIFIED FINANCIAL PLANNER™ Professional
Jason specializes in helping individuals with planning for retirement and has nearly 20 years of advisory experience, is a Certified Private Wealth Advisor® professional, CERTIFIED FINANCIAL PLANNER™ professional, an Investment & Wealth Institute® member, and author of the International Best Selling Book Planning with Purpose: Solving Your Unique Retirement Puzzle.
The author will make recommendations for solutions for you to explore that are not his own. Any recommendation is always based on the author’s research and experience.
The information contained herein is accurate to the best of the publisher’s and author’s knowledge; however, the publisher and author can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof.