Retiring early is a dream for many people who want to enjoy their lives without the constraints of a full-time job.
If you’re considering early retirement, there are several signs that suggest you may be able to retire sooner than the traditional age of 65.
If you’re exhibiting these signs, you may be on track to retire earlier. However, it’s essential to consult with a financial advisor to develop a personalized retirement plan based on your unique circumstances to ensure a comfortable retirement.
Here are five signs to look out for:
You’ve built a significant retirement nest egg
One of the most critical factors for retiring early is having enough savings to support your lifestyle without relying on income from work. If you’ve been saving aggressively and have a sizeable retirement nest egg, you may be able to retire early.
Ideally, you should have enough savings to cover at least 25 to 30 years of retirement expenses, which should include a cushion for unexpected expenses.
A good rule of thumb is to aim for a retirement income of at least 70% of your pre-retirement income.
Assuming you can live on $50,000 per year and want to retire at age 55, you would need to have saved around $1.25 million to $1.5 million to support your retirement for 30 years, assuming a 4% withdrawal rate.
However, this is just an estimate and may vary depending on your individual circumstances.
You’ve paid off your debts
Being debt-free is a significant milestone that can help you achieve your early retirement goals.
Paying off your debt reduces your monthly expenses and frees up more of your income to save for retirement. If you’re debt-free, you may be able to retire earlier than someone who still has outstanding debt.
You have multiple streams of passive income
Having multiple sources of passive income can be a game-changer when it comes to early retirement.
Passive income streams, such as rental properties, dividends from stocks, or income from a business, can supplement your retirement savings and provide you with a steady income stream without having to work a full-time job.
You live below your means
If you’re living below your means, you’re already on the right track towards early retirement.
Living below your means means that you’re spending less than you earn and saving the difference. This lifestyle can help you accumulate more savings faster and reduce your reliance on a full-time job.
You have a plan for healthcare
Healthcare is a significant expense in retirement, and it’s crucial to have a plan in place to cover your healthcare costs.
If you’re retiring before you’re eligible for Medicare, you’ll need to find alternative options for health insurance.
If you’ve already researched and budgeted for your healthcare costs, you’re one step closer to retiring early.