Is early retirement possible for the person that wants to travel around the world, pursue new hobbies and passionate fantasies or spend time with their family? The answer is in your finances, retirement planning, your lifestyle, objectives and other factors. For early retirement, you would have to factor in all the financial and emotional elements that go into this decision. To find out if you are ready, there are some important questions to ask. Let’s take a look.
How much do you need to retire and how much money is really enough to do so? There is no magic number of how much money you will need to save and invest for early retirement. However, with help from a financial advisor, you could come with up with a plan or technique to even start thinking about it. If all else fails, use the standby rule of 4 percent. What does this mean? It means that you would extract four percent from your retirement portfolio each year and put that aside for early retirement. However, you have to commit to this for up to thirty or forty years.
You could also consider choosing an adaptive withdrawal approach. What does this mean? This will allow you to consider taking flexible distributions from your retirement account. Once you take care of those essential needs that you have, your financial advisor could look at the remaining assets and adjust its distributions, adapting to things like your age or the performance of your investments. Those withdrawals will have to be sufficiently flexible to absorb any unanticipated circumstances that could occur in the investment market or in your life.
Access to Cash
If you are going to retire early, you must have easy access to cash. As a matter of fact, you should be able to access an entire year of cash to spend maintaining your lifestyle and paying for expenses. You should also have a year’s worth of finances to cover short term certificates and bonds in your investment portfolio. What it comes down to is the rate of distribution and income objectives. To come up with those estimates, you need to consult with your financial advisor and work out a plan that is best for you.
The Deciding Factors
To retire early, you must have a financial goal and sound planning, using the expertise and experience of a financial advisor who will help to incorporate your plan into the deciding factors so you can have enough funds for long term use.
The Retirement Years
You also want to think about how you will spend your retirement years. How much money will you need to carry out those desires? If you retire early, it means that you will likely be more active because you are going to be younger than the normal retiree. Bear in mind that if you were to do more at that age, it would require more spending to keep up with your active lifestyle. Therefore, speak to a financial advisor to determine if those figures match with your goals and expectations.