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Many people countdown the days until retirement. It’s a chance to finally get away from the grind of the 9-to-5. While many people think of the age of 65 as the milestone when they can settle down and retire, sometimes retirement comes early, either by choice or otherwise. If you’re going to retire before other folks, you need to ensure that you’re financially and emotionally ready. Everyone will have their own retirement journey, and these tips can ensure you’re in a good place when that time arrives.

Benefits Considerations For Early Retirement

You may dream of retiring early, and if you do, you’ll want to get your financial ducks in a row (more on that in a bit). However, you may be in the other camp of folks forced into early retirement, either because of health issues, or they’re laid off, or their position disappears, and they believe they’re too old to find a new career.

Whatever the case, it’s essential to know what you can expect if you plan to apply for retirement funds prematurely. 

Retirement Benefits

Every several years, the retirement age increases, and as of this year, it’s at age 67 when you’ll get full benefits. The idea is that people are living longer, so the retirement money pool is shrinking. Because of that fact, you won’t get your full benefit if you retire early. 

The dollar amount you get annually will depend on the individual, but every year you retire early, you’ll be looking at a reduction of your benefits. If you retire at 66, there would be a 6.7% decrease in your funds. At 65, a 13.3% reduction, and so on. You’ll need to research and see how much you’ll be bringing in so you can look at your budget and make any necessary tweaks. You may have to consider a side gig or a change in your lifestyle.

Rule of 55

You can also look to legal loopholes that can benefit you, including the rule of 55. If you currently take advantage of a 401(k) or a similar tax-deferred plan, keep the money in that account until you’re 59.5 years old. Take it out earlier and you could get fined. The rule of 55 says that if you leave your job the year you turn 55 or older, then, although you’ll still have to pay taxes, you won’t be charged the early withdrawal penalty. It’s a nice little perk that can save you some cash for other essential costs during retirement.   

Although you may be counting on your retirement benefits or the funds in your 401(k), it’s important to know that the world can be unpredictable. You never know when the market could hit a snag, and your money could take a hit. If that happens, contact a retirement advisor and get your retirement plan back on track.

Making Money Before And During Retirement

If you’re intentionally looking to retire early and you want to maintain a lifestyle similar to what you have now, or you find yourself suddenly retired and you need to make some money, know that you have options.

One idea is to look into real estate investment opportunities that can produce income with minimal effort from yourself. You could invest in an apartment building and then collect rent from the tenants. You could also buy a building and allow a business to rent it out or buy a property and turn it into an Airbnb. Whatever you do, try to diversify your portfolio or properties so you take on less risk if something were to prevent you from making money from one of them. This is a great way to make passive income. 

Research online, and you’ll find many other passive income streams you can tap into to live comfortably during retirement. For instance, you could rent out some of your belongings, be it your RV, a sports car, the boat or jet skis you barely use, or sports gear that’s just gathering dust. 

Make it easy to save for retirement by automating deposits into your savings accounts, including your retirement accounts. With automation, an investment brokerage or other financial institution, such as a bank, automatically withdraws an amount you specify and invests it for you. This is a good way to build compound interest without having to think about investing each month.

Make Sure You’re Emotionally Ready

While money will typically be the central concern for most current or impending retirees, you must be emotionally ready for this monumental change in your life. You mustn’t just plop down in a recliner during your retirement; instead, get out and find a purpose. This is when you can hang out with friends you never see or even take a permanent vacation and retire in another country.  

There are many ways to find your purpose as a retiree. Some of which can lead you to other ways to achieve financial independence. Many retirees return to work on a temporary basis so they’re not sitting around the house all day. For instance, if you always wanted to work in healthcare, you could find a part-time job that gives you a taste of that profession, like working as a caregiver a few days per week. 

Your purpose may be to take up a hobby that interests you, like building crafts in your garage. See what you can create. Showcase your crafts online and turn it into a small business that earns you some cash, and you can do it on your own time.

The point is that even though you’re retired, it doesn’t mean you have to live on a strict income or can’t enjoy your golden years out of the house. Think about ways to find your financial independence, and you can make your retirement years the happiest of your life.