Unless you have had an unexpected financial windfall that means you no longer have to work to earn money, you will probably have to plan far ahead for early retirement, especially if you hope to also leave assets to your heirs. Sitting down with a financial advisor well ahead of your desired retirement date will be essential to ensure that you have funds in the right places to make your goal possible. However, it is also important that you talk to your Estate Planning attorney about your plan to retire early if you hope to have money to leave to your children and grandchildren after taking early retirement.
What Does it Mean to Retire Early?
While you might have your own idea of what early retirement is, technically, it means retiring before you have reached the age of 65. Since you cannot begin collecting Social Security until you are 62, and you can’t take money out of your retirement accounts without penalty until you are 59-and-a-half, retiring in your 50s means you will need to have a lot of money set aside. Additionally, you will not be eligible for Medicare until you turn 65, so you will have to pay out of pocket for health insurance until you can get on Medicare. So, while early retirement might be the dream, you need to make sure your plans are rooted in reality.
Questions to Answer for Yourself Before You Cash Out
There are certainly advantages to retiring early—especially if you have planned in advance and are sure you can afford it. However, if you are driven mostly by a goal to get out of the daily grind of your job, you might not have considered some of the disadvantages of early retirement. As the first step in your retirement planning, answer these questions for yourself:
- What will you do in retirement? While many people fantasize about “doing nothing” in retirement, studies have shown that inactivity, isolation, and boredom can negatively impact your mental and physical health. If you have plans to open a business, travel, compete in a sport, become more active in your church, or some other time-consuming goal, retirement could actually improve your health and state of mind.
- Have you saved enough money? This is, of course, the big question. Having a healthy 401K or a generous pension does not necessarily mean you can quit working at 52 because those funds will not be accessible without penalty. If you wait until you are 62 and start drawing Social Security, your benefits will be smaller than if you wait until you are 70. However, if you have accessible savings that you are confident will last until you can access your retirement funds, you will be in good shape.
- How long will you live? Obviously, no one can answer that question, but it is important to consider. The earlier you quit working, the longer your savings and retirement funds will have to last. If you retire at 55, you will have to pay health insurance premiums for ten years. For people with big plans in retirement, expenses can be even higher than they were before they retired. These are important factors to consider.
Early retirement should never be a quick decision. The more professional advice you can gather, the better. And that includes a stop at your friendly neighborhood Estate Planning lawyer’s office.
What Do I Need to Consider If I Want to Leave a Legacy?
We’ve all seen the bumper stickers on the backs of fancy RVs about spending children’s inheritance. For some people, that is the goal. Live life and leave nothing behind. However, if that’s not your goal, and you do hope to enjoy retirement AND leave an inheritance for the next generations, an Estate Planning attorney can help you find ways to do that. It all depends on what assets you have, what your goals are, and how much you want to leave behind.
Are You Looking for an Estate Planning Attorney in Texarkana, TX?
If you are looking for Estate Planning advice, you need to speak with an experienced Estate Planning attorney as soon as possible. Contact us online or call our Texarkana office directly at 903.223.5653. We also have offices in Tyler, Paris, and Longview, as well as Magnolia, AR!
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