Do you want to retire early? If so, financial planning is vital to achieve this exciting but daunting goal. And one of the most important parts of financial planning for an early retirement is filling the gaps it inherently creates. What gaps are these? Here are a few of the most important to think about.
1. The Energy Gap
By the time many people retire at a traditional age — or are forced to retire — they are starting to slow down. Many want to have a quieter, more homely life. Others are eager but may not have the good health to allow them to do everything. But early retirees retire at a prime time when they probably still want to and can do a lot. This gap between your assets in early retirement and what you want to pursue can cause financial pain.
To plan successfully for retiring with time on your side, you must consider how you plan to fill your days. If you want to travel the world, for instance, you'll need to set aside more money or build a higher income to manage it.
2. The Insurance Gap
A second important gap is that of your health insurance and health care. Most Americans get insurance through their employer, and it's often subsidized by that employer. But they cannot access Medicare coverage until 65. What will you do between early retirement and Medicare eligibility? Covering health insurance or self-insuring health care can be tremendously expensive, so you need a plan.
3. The Social Security Gap
Just like Medicare, Social Security has a set timeline that cannot — or should not — be altered. The minimum retirement age for most Americans is 62, which is often later than early retirees want to wait. In addition, full benefits don't come until between age 65 and 67 and could be delayed even more in years to come.
These timelines mean early retirees must consider how long they will need to make up the difference in retirement income between leaving work and claiming Social Security. It could be relatively easy for just a few years, or it could call for a long-term source of income.
Where to Start
Do you need help deciding how to address these three key early retirement financial gaps? If so, your best resource is a good financial planner. They will work with you to identify your age goals for early retirement, understand your options in each of these categories, and find solutions that fit your needs. Call today to make an appointment.
Contact a financial planning service like TFG Wealth Management to learn more.Share