Considering Early Retirement? If So, What is Your Retirement Strategy?

Across the country, people are considering early retirement.

A recent Nationwide Retirement Institute survey of U.S. adults found "Americans have a pessimistic outlook on their financial futures – and they’re changing behaviors accordingly. These worries may be leading many older Americans to tap into their Social Security benefits early. In fact, one in four (26%) Boomers+ who are not currently receiving Social Security plan on filing for Social Security benefits early while continuing to work. Almost two in five (39%) Boomers+ who are not currently receiving Social Security plan on drawing their benefits before their full retirement age."¹  Read the study.

If you're considering early retirement, the next question is have you created your retirement strategy? Knowing if your finances will carry you through your retired years is critical before you turn on your social security benefits.

There was a time when you'd have a pension at the end of your working years.

Now, of course, pensions are not as common, therefore, it's even more important to create and regularly review your own retirement strategy.

A retirement strategy directly addresses the "when," "why," and "how" of retiring.

It can even address the "where." It breaks the whole process of getting ready for retirement into actionable steps.

Too many people retire with doubts, unsure if they have enough retirement money, and uncertain of what their tomorrows will look like. In contrast, you can save, invest, and act on your vision of retirement now to chart a path toward your goals and the future you want to create for yourself.

Some people dismiss having a long-range retirement strategy since no one can predict the future. Indeed, there are things about the future you cannot control: how the stock market will perform, how the economy might do, and so on. That said, you have partial or full control over other aspects: the way you save and invest, your spending and borrowing, the length and arc of your career, and your health. You also have the chance to be proactive and to prepare for the future.

A good retirement strategy has many elements.

It sets financial objectives. It addresses your retirement income: how much you may need, the sequence of account withdrawals, and the age at which you claim Social Security. It establishes (or refines) an investment approach. It examines tax implications and potential tax advantages. It takes possible health care costs into consideration and even the transfer of assets to heirs. 

A prudent retirement strategy also entertains different consequences.

Financial advisors often use multiple-probability simulations to try to assess the degree of financial risk to a retirement strategy in case of an unexpected outcome. These simulations can help to inform the advisor and the retiree or pre-retiree about the "what ifs" that may affect a strategy. They also consider sequence-of-returns risk, which refers to the uncertainty of the order of returns an investor may receive over an extended period.

Let a retirement strategy guide you.

If you haven't already done so, ask your financial professional to collaborate with you to create a retirement strategy, personalized for your goals and dreams. When you have this strategy, you will know what steps to take in pursuit of the future you want and whether or not early retirement is the right choice for you. If you don't currently work with a financial professional, you are welcome to call us to discuss your situation.

^{1. https://nationwidefinancial.com/nationwide-retirement-institute/social-security-planning/basics}