FAQ: What Is Considered Early Retirement Age?

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Planning for retirement is a long process that many people prepare for in their careers. The age at which a person retires depends on several factors, such as their health and savings. Understanding your retirement options can help you make an informed decision that benefits you the best. In this article, we answer frequently asked questions such as what is considered the age for early retirement, how to prepare for early retirement, the benefits of early retirement, and the types of careers that it offers.

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The early retirement age is any age before the full retirement age (FRA), dictated by the federal government. The applicable FRA for each person depends on the year of their birth. For people born in 1960 or later, FRA is 67 years old. The FRA is also the age at which you become eligible for the full amount of benefits that some federal programs offer once you retire. Therefore, deciding to apply for retirement earlier could affect your ability to receive benefits immediately. The government also uses Medicare, a federal health coverage program, to determine eligibility for retirement.

However, it is possible to retire before your FRA. Inform your employer of your intention to retire early so that he has time to prepare a retirement plan. For example, an employee who just turned 55 might decide to retire in order to move to Montana to be closer to his grandchildren. His employer has a pension plan and he uses his federal benefits at age 67.

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How to prepare for early retirement

It is important to consider a variety of factors before deciding to retire early. Finances have a big influence on your ability to retire early because retirement removes the main source of income you receive from your job. Factors to consider when preparing for early retirement include:

1. Make a savings budget

Saving for retirement is a lifelong investment. Since you only receive full government benefits once you reach FRA, make sure you have enough money in your savings accounts to support you in the long run. It can be a good idea to calculate how much you need to save before deciding to retire in order to provide for the lifestyle you want in early retirement.

It is important to determine which of your regular expenses are still occurring after you retire. Make sure you calculate your monthly expenses and determine if you have enough savings to pay each bill. Some post-retirement expenses may include:

  • Lodging: Monthly or annual housing expenses can include a mortgage or rent payment, unscheduled maintenance, property taxes, or home insurance. These expenses tend to be large sums, so it’s important to calculate your expected housing costs.

  • To travel: With more free time, people on early retirement can travel more often, resulting in higher travel costs. This includes flights or the prices of gasoline, hotels, food, traveler’s insurance and other expenses included in a trip.

  • Monthly invoices: Some expenses accumulate monthly, such as electricity and water bills, food, groceries or transportation costs. It’s helpful to consider how much these expenses typically cost and work that out into your retirement budget.

  • Health care: Since this is likely insurance coverage provided by your employer, your costs may change when you retire. Health care costs include insurance, any medical care or supplies, and any recurring prescriptions you need.

  • Dining out: In retirement, people generally have more free time and can spend more time at dinner with friends and family. Usually, it costs more than buying groceries, so try to calculate a monthly allowance for this category.

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2. Determine your expected retirement age

When evaluating your finances, it is ideal to take into account the age at which you want to retire. This allows you to have a plan in place to use your money wisely throughout your retirement. The earlier you decide to plan for retirement, the more time you have to prepare for the future.

For example, imagine you decide at age 45 that you want to retire at age 50. This gives you, your family and your workplace enough time to make the necessary arrangements. You have time to build a health care plan, calculate your savings budget, and come to an agreement with your employer on your retirement plan.

3. Consider your partner’s or spouse’s retirement plan

If you have a partner or spouse, consider their retirement plan as well, as your retirement may impact them. Include them in the decision to make sure they know your retirement plans. Since retirement brings changes in your schedule, finances, and insurance coverage, it’s important to make sure you and your partner are prepared for the changes.

For example, talk to your partner before discussing retirement packages with your employer. You can work with your partner to make a decision on which package is best for both of you. It helps prepare your family to move forward together towards early retirement.

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4. Develop a health care plan

Taking early retirement affects your health care coverage. Many people receive health care from their employers. However, Medicare, the federal health care program for retirees, does not begin until age 65. If you retire before age 65, you are no longer covered by your employer, but you are too young to qualify for federal benefits. . It is important to develop an action plan to pay for health care between retirement and age 65.

For example, imagine you decide to retire at age 57. You could choose to purchase from a low cost insurance provider that covers basic health care costs for the years leading up to your 65th birthday. Once you receive Medicare, combine the services of both providers or choose one to use.

Related: A definitive guide to employee benefits

Potential benefits of early retirement

There are several important factors to consider when considering early retirement. It is important to decide what you want to prioritize when making this decision. Overall, early retirement has many potential benefits, including:

Sufficient savings

Working for many years or investing regularly in a retirement fund, such as a 401 (k), prepares you for the comfort of retirement. While there may be a fee for withdrawing these funds early, they help you retire at a younger age while still living comfortably. It is ideal to have a savings budget before you retire to ensure that you can afford the lifestyle you want to have in early retirement.

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Improved health

Choosing to retire early can help improve your overall health. Because you no longer need to meet the physical or emotional demands of your job, it can limit the amount of stress in your life and increase your level of happiness and satisfaction with life. Early retirement also frees up your schedule to enjoy healthier activities, such as biking or walking.

More free time

Many people have passions they want to pursue in retirement. Retiring early gives you more time for these activities. Because a full-time job takes up a large part of the day, retirement allows you to have several hours to enjoy what you love the most. For example, you can spend more time with your family or engage in a favorite hobby or activity.

What types of careers offer early retirement?

While you can choose to retire early regardless of your career, there are specific occupations that prepare employees for early retirement. Some companies or organizations may offer an annual pension, a competitive 401 (k), or a high salary that allows employees to save money quickly. Careers suitable for early retirement include:

  • Engineers
  • Primary school teachers
  • Computer programmers
  • Accountants
  • Scientists
  • Legal professionals
  • Public service professionals
  • Airplane pilots

Sometimes an employer can encourage early retirement. There are several reasons an employer may encourage you to accept an early retirement program, such as saving company resources or creating space for new hires. For example, suppose a company loses money and has to lay off some employees. The employer can offer early retirement for the benefit of the employee and the company.

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