In this episode of Money Wisdom, we talk about those milestone ages and the challenges that come along with each stage of early retirement. Joel Johnson couldn’t make this episode but we’re excited to welcome our other partner onto the show today, Eric Hogarth, CFP®.

When we have this discussion with a client, the first benchmark is to determine whether they’re planning to retire before or after the age of 59.5. The reason that’s so important is that’s when you can begin pulling money out of your 401(k) and other retirement accounts without a penalty. If you want to retire before that age, there’s a lot more work to do because you won’t have all of those savings to help you with expenses.

Trying to build a budget and getting a grasp on income and expenses is a major challenge with retiring early so the next age to pay attention to is 62. This is the earliest you can start drawing Social Security, which means you need to think through your income options before those benefits begin. But you also want to be careful not to assume that taking Social Security as soon as possible is the best option for you. Work with your advisor to determine if waiting will put you in a stronger position.

The age of 65 is the next benchmark and the one that nearly everyone gets fixated on because that’s when Medicare joins the game and changes the health insurance conversation. Anyone that decides to retire before that age has to have a plan for how they will pay for healthcare. It’s often much more expensive than people anticipate so make sure that’s been covered before moving forward.

No matter what plan you have in mind, it’s best to talk about this with an advisor while you’re in control because that retirement date could change for a variety of reasons. You might decide to leave work earlier than anticipated or be forced into early retirement. Whatever happens, you want to be prepared.

As we have these conversations with pre-retirees, we can break down every person into two categories: those that have saved enough and those that haven’t. You need to know which category you fall into. If you are someone that’s met their needs financially for retirement but don’t plan to leave the workforce in the near term, make sure you assess your investing strategy. Don’t take on too much risk and give back money when you’ve already built enough for retirement.

Ultimately, the goal is to get yourself to a work-optional state of life. You want to have that control over your time and your career. Plus, don’t rely on getting another job in retirement because it’s not guaranteed to be an easy process.

If you’re considering early retirement, the best place to start is to get your complimentary Money Map review and let us look over your current financial portfolio and discuss the goals for you and your family.

Thanks for listening to this episode. We’ll be back again next week for another show.