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10 Questions to Help You Decide if You re Really Ready to Retire Early

More and more of us are thinking about retiring early. The key is making sure we're properly prepared. Here are 10 key questions to ask yourself. (opens in new tab) (opens in new tab) (opens in new tab) Newsletter sign up Newsletter (Image credit: Getty Images) By Stephen B. Dunbar III, JD, CLU published 5 November 2022 Thinking about retiring early? We've put together a list of key early-retirement questions to ask yourself to find out if you're ready.

50 Great Places for Early Retirement in the U.S. According to a report by the Federal Reserve Bank of New York (opens in new tab) last year, nearly half of Americans expect to retire before they turn 62, a two-point rise on prepandemic levels. And you can see why. Long walks. Even longer lunches. Time with the grandkids. Vacations. Golf. Retiring early can promise all kinds of opportunities and benefits. But it also carries some risks, as it means your nest egg will need to last longer and adjust to a wider variety of fluctuations in your own life and in the economy overall.

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Profit and prosper with the best of Kiplinger's expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail. Profit and prosper with the best of Kiplinger's expert advice - straight to your e-mail. Sign up It's therefore vital to ensure you're fully prepared, both financially and emotionally, which is exactly where the following 10-point checklist can help. But, warning! There are no C grades in early retirement. Unless you can answer "yes" to at least eight of these questions, you may want to consider holding off on writing that resignation letter just a little while longer.

1 Do You Have a Long-Term Care Plan

Whether it's due to illness or old age, there's a strong chance that one day you'll have to finance a period of medical support for you and/or a loved one. Which means you need a clear plan for how to pay for long-term care as part of your early-retirement fund.

2 Are You Debt-Free

From credit cards and car notes to mortgages and other bank loans, having to pay off significant debts, including any interest, is a drain on your nest egg. You should clear any significant fixed outgoings from your life before saying goodbye to your salary.

3 Are Your Dependents Independent

From kids going through college to elderly parents needing support with medical costs, you may have various people in your life who depend on you financially. It's best to wait until the majority of them are financially independent before you retire.

4 Do You Have a Stress-Tested Financial Plan

A written financial plan must clearly set out how your nest egg will cover your expected expenses in retirement. A qualified financial adviser can then run a Monte Carlo simulation, stress-testing that plan through different possible scenarios to reveal whether it's up to the job.

5 Do You Have a Trusted Sounding Board

Whether it's a professional, a colleague or a friend, find someone you can rely on for smart, objective financial advice, ideally from outside your network of dependents. The same person can also provide invaluable decision-making support if you're ever faced with being no longer of sound mind.

6 Are Your Legal Documents in Order

As well as a will and health care directives, you should get a power of attorney in place. This gives someone you trust the ability to make financial decisions on your behalf if you become temporarily or permanently incapable. Name a back-up, too, in case your first choice (for most of us, our partner) passes before you.

7 Do You Have a Passion Project

One of the biggest issues in retirement can be depression. Suddenly, you go from running 100 miles an hour to feeling like you're twiddling your thumbs. And no amount of golf, needlework or Netflix can fill the gap! Passion projects fire our engines as human beings, so ensure you have something to engage you mentally, emotionally and physically when work's no longer part of your life.

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8 Can You Replace Your Paycheck

Without a salary, you'll need to use your nest egg to create a regular income stream to cover your expenses. That's where fixed-income-oriented instruments, such as dividend-paying stocks and annuities, come in. Ideally, you should use these to reliably cover 70% to 85% of your former paycheck.

9 Have You Adjusted for Inflation

Inflation runs at an annual average of 3%, which means your cost of living will be much higher in the future than on the day you retire. Remember to adjust for this increase when assessing the value of your retirement fund. Or put another way, as well as replacing your paycheck, ensure you're able to give yourself a 3% raise every year, too!

10 Are You Investing for the Long Term

Most of us become more financially conservative as we approach the end of our working life. But as an early retiree, you need to know your investments will keep delivering returns for 30 years or more.

3 Strategies to Help You Plan a Successful Semi-Retirement Even when the markets are volatile and the temptation to be risk-averse is greatest, try to keep a 70/30 or even 60/40 split between safer, fixed-income investments and those with higher equity risk but higher potential long-term rewards. All being well, you'll need them! This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC (opens in new tab) or with FINRA (opens in new tab). Explore More Building Wealth Stephen B. Dunbar III, JD, CLUDirector of Diversity & Inclusion, Executive VP, Equitable Advisors Stephen Dunbar, Executive VP of Equitable, has built a thriving financial services practice where he empowers others to make informed decisions and take charge of their future. He and his team advise on over $3B in AUM and $1.5B in protection coverage. As a National Director of DEI for Equitable, Stephen acts as a change agent for the organization, creating a culture of diversity and inclusion. He earned a bachelor's in Finance from Rutgers and a J.D. from Stanford. Latest Worried About Inflation? You Can Help Protect Yourself From Its Impact Delaying major purchases can help shield present you, and future you could benefit from continuing to invest and contribute to your retirement plans. By Kelly LaVigne, J.D. • Published 13 November 22 What Is Lifetime Income Insurance Worth? A Guaranteed Lifetime Withdrawal Benefit (GLWB) could be just what you need when markets are down and you're worried about future income. By David Blanchett, PhD, CFA, CFP® • Published 12 November 22 You might also like Worried About Inflation? You Can Help Protect Yourself From Its Impact Delaying major purchases can help shield present you, and future you could benefit from continuing to invest and contribute to your retirement plans. By Kelly LaVigne, J.D. • Published 13 November 22 What Is Lifetime Income Insurance Worth? A Guaranteed Lifetime Withdrawal Benefit (GLWB) could be just what you need when markets are down and you're worried about future income. By David Blanchett, PhD, CFA, CFP® • Published 12 November 22 4 Ways You Can Take Advantage of a Down Market With markets down for the year, it may seem that all the news is bad. But now could be a good time to make some profitable moves. By Adam Grealish • Published 11 November 22 Finding Peace of Mind With Your Retirement Income Even in tough times, you can secure retirement income that lets you maintain your lifestyle, lasts a lifetime, adjusts for life events and leaves a legacy for the kids. By Jerry Golden, Investment Adviser Representative • Published 10 November 22 What to Do When an Unhappy Customer Threatens to Ruin Your Rep Some customers go too far when they feel they haven't been treated well, demanding unreasonable make-goods and even resorting to extortion. An attorney offers some advice. By H. Dennis Beaver, Esq. • Published 10 November 22 Rising Interest Rates Change the Math on Pensions for Some Would-Be Retirees Now is a good time to think about when and if to take a lump sum on your pension and what to do with it. Let's explore the pros and cons. By Michael Aloi, CFP® • Published 9 November 22 Counterattack: Tips for Thwarting a Will Contest From contentious relatives to scam artists, wills are not immune to the threat of a contest. If you have an inkling such a fight could be in your estate's future, here are some ways to limit the risk. By Linda Kotis, Esq. • Last updated 10 November 22 5 Steps to a Stronger Financial Plan It's impossible to be right all the time, but a strong plan and constantly assessing where you are can help you pivot when bad things inevitably happen. By Eric Roberge, Certified Financial Planner (CFP) and Investment Adviser • Published 8 November 22 View More ▸ kiplinger About Us (opens in new tab) Terms and Conditions (opens in new tab) Privacy Policy (opens in new tab) Cookie Policy (opens in new tab) Kiplinger is part of Future plc, an international media group and leading digital publisher. Visit our corporate site.
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