Ask an Advisor: Can I Retire Early? I consider myself very fortunate to be where I am and think I have prepared pretty well but would like your advice on possible earlier retirement.

Can I Retire Early? I will start by saying that I consider myself very fortunate to be where I am at today in life and I think I have prepared pretty well but would like your advice on possible earlier retirement.

I had planned to retire at 62 in June of 2024, but I would like to move that date up to as soon as possible. I’m currently 60 years old. My home is paid for and I have no outstanding debts at this time. I have a 2017 vehicle in excellent condition that is paid for but does have a higher maintenance expense.

I am currently employed (which I would like to retire from now but they pay for health care 100%) making appx. 75K per year and maxing out and catching up on my employer 401k. In theory, I could only do that one more year, next year in 2024 as I had planned to retire in June of 2024.

I have the following in place: A $200K mutual fund. $30K in Roth IRA. $192K in 401(k). $616K in a variable annuity and a $203K cash value. $1.5M in long-term care ($20K per month for 6 years single payment in 2018 so this is already paid in full. $138K in TD Ameritrade stock. $50K in emergency cash on hand

These accounts total a little more than $1.4M today. And at age 62 my Social Security is estimated right around $1800 per month. I can see my biggest expense here will be funding my health insurance from age 60 to 65.

Is it really going to make that much difference if I pull the plug now vs. waiting another 16 months? Thank you! – David

Reader Question Answered by Jesse Carlucci, CFP, Ph.D.:

Congratulations on being debt free and staying focused enough with your investments to save $1.4 million toward retirement.

There are three main factors that you need to explore before making the decision to retire.

1. Bridge the Gap from Early Retirement to Medicare Age

The first is finding a way to “bridge the gap” from early retirement (60) to Medicare age (65). Your options here are to evaluate Affordable Care Act (ACA) plans from the marketplace, get a COBRA policy when you leave your job, go on your spouse’s life insurance plan, get a temporary plan, or explore options to convert your group plan to an individual plan if it is allowed.

None of these are ideal as ACA and COBRA policies can be expensive, and COBRA will only cover you for 18 months. Temporary plans have poor coverage and won’t last the full five years.

2. Evaluate Your Living Expenses

You also need to explore your living expenses (utilities, gas, food, memberships, fun money) and standard of living.

Combined with your social security later in your 60s and a 4% drawdown rate on your investment accounts you might have enough to fund your retirement, but it completely depends on your monthly expenses, how often you want to travel, make expensive purchases, or achieve other goals like purchasing property, relocating or paying for someone’s college.

3. Choose Social Security Timing Carefully

Finally, you need to consider the optimum age for taking Social Security. Taking it too early can really impact your ability to pay your living expenses over the long term, but you also need to consider your family history and life expectancy. Most people end up benefiting from waiting if they reach their late 70s in age.

So, the short answer to your retirement question is “it depends on your expenses and standard of living in retirement”.

I recommend consulting a CFP® professional that can complete an in-depth retirement review tailored to your specific situation.

Jesse Carlucci is a family financial planner and founder of Arrow Investment Management based in Oklahoma City. Jesse’s goal is to help everyday Americans reach their financial and lifestyle goals.

Get to know Jesse by visiting his profile page on Wealthtender or visiting his website at arrowinvestmentmanagement.com.

Please note that Wealthtender earns a nominal monthly fee from Jesse in exchange for providing access to the benefits described here, subject to these terms. This compensation creates a natural conflict of interest when we favor promotion of Jesse and other financial advisors in the Wealthtender community over advisors not featured on our platform. Wealthtender is not a client of these advisors or firms.

This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.

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