Sure you like your job. But if you had the chance to retire early, say at age 50, would you sniff at it?
"Pshaw. I love it here in my comfy Naugahyde chair." (Never mind the duct tape sticking to your pantyhose.) "I have a window!" (Facing a brick wall.) "My work is important." (So much so that you have to do it on an '89 Intel (NASDAQ:INTC) 386 that generates enough heat for a two-bedroom apartment?) "And look here in my top drawer -- a deluxe hole-puncher and all the paperclips I could ever use!" (No comment.)
For most people, a 30-year career is quite enough, thank you very much. But is early retirement realistic for you? We don't have all the answers -- but we do have many of the questions you'll have to ask yourself to make that decision. Let's take a look.
At age 50, the government says you've got about another 33 years to live. Good grief! That's longer than your entire working career. With life expectancy increasing by leaps and bounds, you may want to think in terms of a 40-year retirement.
Besides travel, golf, fishing, and classes in paperclip art, what else is on the agenda? How much will it cost? If you're at a loss, take a look at our retirement calculators and click on "What will my expense be after I retire?"
Will you have enough to do it all? How much has to come out of each paycheck now to raise that stash? Good question! You might want to take a look at the "Am I saving enough? What can I change" retirement calculator as well.
Have you thought about inflation? After all, $50,000 may look like a good annual income now, but it will certainly have to be larger to buy the same things years down the road. If inflation runs an average 3%, the purchasing power of a dollar gets halved every 24 years. So that 50 grand would really be worth just 25 grand. If inflation reaches 6% -- which would have seemed low in the 1970s and '80s -- the purchasing power of a dollar gets halved in just 12 years.
Where will you live? With luck, the mortgage will be paid off so all you have to worry about is property taxes. Maybe you'll even sell out and move into a smaller place in a sunnier clime. Sure beats having to shovel snow at age 70, even if it is farther away from kith and kin. Besides, the kids can always come down for a visit.
You should think about insurance, too. You're probably insured under group policies through work for disability, life, and health coverage right now. In fact, your employer probably kicks in some part of or maybe even the entire premium for that insurance. Retire, though, and you will most likely lose that coverage.
What happens to your spouse if you're inconsiderate enough to die early or (heaven forbid) become permanently disabled? If required to do so, how will you pay for a major illness or hospitalization and all of the attendant physician's bills?
About now you may be thinking, "Hmmm, perhaps I should have a few more children to support me in my old age." Don't worry, Fool. You needn't sire enough offspring for a soccer team. Our advice? Never leave your job.
We're just kidding, of course. We're confident you can retire at a reasonably young age without having to populate the Dakotas or remain shackled to your desk. The trick is careful, Foolish planning.
Such planning entails far more than just picking an age you'll retire and a beachfront property to retire upon. It requires a hard look at your lifestyle, your resources, and a whole host of factors that we tend to take for granted while we're working. Most, but not all, deal with money issues. As Fools, we face them head on.
For the next steps in planning your golden years, visit our Retirement Center. Plus, remember that you have just one month left to contribute to your 2003 IRA. Visit our IRA Center for details.
