3 Key Ingredients to a Successful Early Retirement

Do you have a dream of retiring early? You’re not alone. According to an HSBC study of more than 18,000 people worldwide age 45 and older, 65 percent of workers said they want to retire in the next five years.1

Of course, that dream may not be achievable for many workers. A recent analysis of the Federal Reserve’s 2013 Survey of Consumer Finances found that the median working-age couple has only $5,000 saved for retirement. Nearly 70 percent of households have less than $50,000 saved.

Obviously, retiring early requires a substantial amount of money. Depending on how early you stop working, you may have to fund a retirement that lasts 30 or even 40 years. You also may have to wait several years before you can start Social Security. If you retire before age 59 ½, you may have to wait to withdraw money from your 401(k) and IRA.

Significant savings across a broad range of account types and asset classes can help make your early-retirement dream a reality. But savings aren’t the only thing you need. Below are three other important ingredients for any successful early retirement. If you don’t have these items, you may not be ready to stop working just yet.



A budget is important for any household in any stage of life. Unfortunately, many Americans operate without one. According to a Gallup poll, two-thirds of American households don’t use a budget.3

If you fall into that group, now may be the time to make a change. A budget helps you see how much income you have available, where the income is coming from, what your expenses may be, and whether you have a gap between projected income and expenses. If you do have a gap, you can take steps to adjust your spending and stay within your income levels.

A budget is even more important in an early retirement because of the amount of time your savings will need to last. If you overspend in the early years of retirement, you could find your savings depleted in the later years, when you’re physically unable to go back to work or generate additional income. You don’t want to be in that situation. Develop your budget today.


Plan to Pay for Health Care

You may be under the assumption that Medicare will cover your health care expenses. That’s partially true after you reach the qualifying age, which for most people is 65. Even after you qualify, though, Medicare still doesn’t cover everything.

The extent of your Medicare coverage will depend on which Medicare package you choose. However, Fidelity recently found that the average 65-year-old couple will face $245,000 in health care costs above and beyond Medicare coverage.4 That figure includes expenses like premiums, deductibles, copays and more.

One way to manage these expenses is by funding your health savings account (HSA). You can make tax-deductible contributions to your HSA today, grow the money over time and then withdraw funds tax-free for qualified health care expenses in retirement.

You also may want to consider long-term care insurance to help cover those expenses. The U.S. Department of Health and Human Services estimates that 70 percent of people age 65 and older will need long-term care at some point in retirement.5


Growth Potential

Many retirees are attracted to investment vehicles and certain types of accounts that may offer little or no volatility. That feeling is understandable. A steep drop in the markets could impact not only your account balance but also your ability to generate income.

While risk management is important, so, too, is growth potential. Again, if you retire early, it’s possible that you could be retired for several decades. To make your assets last over that period, you will likely need some form of growth.

You also may need growth to keep up with inflation. Even a modest amount of inflation can have a significant impact on your cost of living if it compounds over a long period of time.

Look for opportunities to manage risk, but also give yourself the opportunity to pursue growth. While that may seem like a challenging balancing act, there are tools out there to help you achieve growth. A financial professional can help you develop an appropriate strategy.

Think you’re ready to retire early? Contact us at Lighthouse Financial & Tax, for more information. We can help you identify your needs and priorities, develop a strategy, and enjoy a long, comfortable retirement. Let’s meet and start the conversation today.








Global Financial Private Capital (GFPC) and GF Investment Services (GFIS) have no affiliation with the news agencies represented here and the views expressed do not necessarily reflect the views of GFPC or GFIS. GFPC and GFIS make no representations or warranties about the accuracy, reliability, completeness or timeliness of the content and do not recommend or endorse any specific information contained therein.

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov

15854 – 2016/6/27