“The best-laid plans of mice and men often go awry.” This famous saying, adapted from 18th-century Scottish poet Robert Burns, could apply to many aspects of life, including retirement.1 In 2016, 46% of retirees said they retired earlier than they had planned. This percentage has consistently been high over the past 25 years, ranging from 36% to 52%.2
Many early retirees reported reasons for retiring early that were beyond their control, such as health problems or disability, company downsizing or closure, changes in the skills required for their jobs, or having to care for a spouse or family member. However, some said they retired early by choice — because they could afford to or because they wanted to do something different.3
If you’re nearing the end of your working years, you probably have a retirement timetable in mind. It may be as specific as a particular date or as general as a range of years. Regardless of your timetable, circumstances could change, and retirement might come sooner than you think.
Considering some key issues now might ease your transition and give you more choices in how you retire.
Calculate Your Income Stream
Would you be able to maintain your desired standard of living if you had to retire early? It might be helpful to calculate your projected income based on two different retirement dates: the date you prefer and an earlier date.
Keep in mind that your Social Security benefits would be reduced if you claim them before reaching your “full retirement age” (currently 66 to 67, depending on year of birth). And the sooner you retire, the less time your investments have to pursue potential growth, so accelerating your savings now could make a big difference. Even if you retire on schedule, having a larger savings balance may give you more flexibility in your retirement lifestyle.
Reduce Your Debt
Lowering or eliminating outstanding credit-card balances as soon as possible could be a great step toward getting on track for retirement. Paying off auto loans would free up more income when you’re retired.
Owning your home free and clear would also be a big help in stretching your retirement income, but about 37% of homeowners age 65 and older are still paying off a mortgage.4 If you foresee your mortgage being an issue in your retirement years, you may want to examine options to pay it off early, reduce payments, or otherwise modify the terms.
Consider Your Health
Fifty-five percent of retirees who left the workforce earlier than planned cited health problems or disability as a reason for early retirement; 17% cited caring for a spouse or other family member.5
Is your retirement timetable realistic based on your current health status and the health of your spouse? Would you be prepared if your health changes? Have you factored the cost of health care into your retirement strategy? A married couple who retired at age 65 in 2016, with median expenses for prescription drugs, would need an estimated $265,000 to have a 90% chance of paying their health-care costs throughout retirement.6 Costs for future retirees may be higher.
Surprises can be fun in many situations, but not when it comes to retirement. Preparing now could help ease you into a more comfortable retirement lifestyle.