How to Comfortably Retire at Age 60
NEW YORK, December 3, 2021 (Newswire.com) - iQuanti: While the typical retirement age in America is 65 years, it's an appealing goal to retire early as long as it's financially feasible. And getting prepared financially for an early retirement might be easier than you think if your goal is just to move up your retirement by five years. If you're considering a slightly early retirement, here are 5 steps that can help get you to retirement by 60.
1. Anticipate Your Expenses
Life is going to look different in retirement. And you'll need to figure out how that will change your monthly expenses. Create a list of your anticipated monthly spending in retirement, being sure to include things like:
- Housing
- Transportation (which may change after you're no longer going to an office each day)
- Medical benefits (especially if you'll switch to a plan that's not through your employer in the years until you're eligible for Medicare)
- Food
- Travel
- Hobbies
2. Determine Your Income
If you plan to retire at 60, you'll have a full two years before you're eligible to begin taking Social Security. Plus, the benefit may be significantly lower than if you worked until age 67.
Aside from Social Security, think about if you'll have regular income through other means, like rental properties, a pension, or annuity payments. If income is dramatically lower than your projected monthly expenses, it's time to look to investment accounts to help bridge the gap.
3. Account for Taxes in Your Financial Plan
Employer-sponsored retirement plans, like a 401(k), 457, or otherwise, are great options to sock away as much money as possible while you're working. And you may have also chosen to leverage other tools like an individual retirement account (IRA).
It's wise to look at each of your existing accounts to see at what age you can begin taking distributions, any tax implications, and mandatory required distributions. You may also have a whole life insurance policy that features tax advantages. Understanding how these financial tools will support you during retirement can give you a better grasp of what income will look like as you get older. It may also expose a glaring income gap in your mid-sixties that you'll need to find a way to cover or choose to continue working instead.
4. Make Sure You Have Cash for Emergencies
Many people who retire will live on a fixed income. But that doesn't mean that emergencies like a flat tire or injury won't happen. That's why it's important to have a cash cushion that you can use when life throws you a curveball. Recommendations range from three months up to two years' worth of expenses, depending on your income. A permanent life insurance policy with accumulated cash value can also provide a source of funds for unexpected expenses.
5. Live on Your Retirement Budget
Given the time, it's a smart move to try out a few months at your new retirement budget. That means when you get your paycheck, move money to savings that are above and beyond your retirement "income" as calculated above. Then, if you find that you're regularly overspending after a few months, it's time to go back to the drawing board to re-assess your needs.
The Bottom Line
A comfortable retirement at age 60 is possible, but it will take some planning to get there. Be sure to calculate your monthly expenses, determine your income, assess your tax-advantaged accounts, fill out your emergency fund, then do a trial run of your retirement budget. The more you think about what life will look like in retirement, the greater chance you'll have of getting there earlier than most.
The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.
Source: iQuanti, Inc.