1. Outliving Your Money
This may be the single biggest threat to early retirement planning. In recent decades, as life spans have increased, people retiring at 65 have had to deal with the prospect of providing for themselves for the next 20, 25, or even 30 years. If you plan to retire at 55 or 50, you’ll need to add an extra 10 to 15 years on top of all of those numbers. It is not inconceivable that you will need to provide for 40 years or more if you retire at age 50. That will be more years than you spend working to prepare for retirement.
What can you do to avoid outliving your money?
Plan to save even more money than you originally planned. Depending upon how early you plan to retire, what your expected longevity is, and how much you plan to rely on your retirement portfolio, you may need to save anywhere from 50% to 100% more than you would need had you delayed retirement until 65 or later.
Develop one or more passive income sources so that they’ll be available to supplement your investment income.
Have a backup career, just in case you run into a rough patch that drains more of your portfolio than you feel comfortable with.
Keep your most basic living expenses as low as possible. This will include housing, your car expense, and certainly any debts that you might carry. The better way of course is to be completely debt-free.
The great, big, giant “X” factor plaguing retirement plannin...
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...ged one, which is not an infrequent situation as you get older.
Be prepared to be flexible in all aspects of your early retirement – the timing, your standard of living, and the use of the time that you have available once you are retired. Though you may plan to early retirement of the beach, life may have other plans and you’ll need to be ready to adjust as needed.
It’s worth noting that early retirement can also help you to deal with a personal or family crisis. The fact that you will no longer be weighed down by maintaining a stressful career, can provide you with the time that you need to deal with the problems that you are facing.
None of this is to suggest that early retirement is not doable. It’s just that like everything else in life, there are usually hidden obstacles. If you are ready to deal with those obstacles, you can retire early, and do it in comfort.
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