Publications

Is retiring early right for you?

Posted on November 21, 2023

Retiring early isn’t something everyone longs for, but it might be worth considering if you haven’t thought about it already. As with all big decisions that leave us standing at the crossroads, deciding to retire early isn’t something you can take lightly. It’s not as easy as deciding on a dessert at a buffet, but it’s probably not as hard as picking a winning lottery ticket either. And before you ask – winning the lottery isn’t part of a serious early retirement plan.

Instead, ask yourself this: Would you retire early if you knew it was possible to live in retirement close to the way you live in your working years? In some cases (depending on your plan and system), you could qualify for an early retirement with little or no reduction to your benefit if you meet a minimum number of service years.

Whether you decide to retire early or not, think about when you hope to retire and ask yourself if you’ve saved enough. With more savings comes the opportunity to retire well.

How much money in retirement is enough?

It depends on your lifestyle and income. A good place to start is by assuming you’ll need about 75% of your current salary each year in retirement to live the same lifestyle as you have today. Then think about you and your family’s medical history and longevity to estimate your potential life expectancy. You can use the Social Security Administration’s (SSA) longevity calculator to get a rough estimate.

Retiring early also means managing healthcare costs for the long haul. Remember, if you retire before age 65, you may need to have more saved to cover medical expenses in the years before you can apply for Medicare. You’ll need to pay for healthcare coverage during that time and beyond.

What you can do now

If your employer offers the Deferred Compensation Program (DCP), and you’re 50 or older, increase your account with a feature called “Catch-up options.”
Be as healthy as possible. If you don’t exercise regularly or eat healthy food, start now. This can potentially lower your medical bills in retirement.
If you tend to spend a lot, are you willing to curb some of that spending and create a budget you can live with in retirement? The sooner you can learn to live within a budget, the sooner you’ll be able to save more for retirement.
When you’re young, you can take advantage of compounding interest by saving early and consistently. If you are a little late to planning for retirement, you will need to save more of your paycheck to catch-up during your remaining working years.
No matter your age, you can also consider working with a financial professional. They can help you develop a savings strategy, prepare for unforeseen expenses and create a plan to achieve your retirement goals.

After you retire

Here are some things you can do at and after you retire early that can help you down the line.

Delay taking your Social Security check. It might be tempting to include your Social Security benefit in your early retirement plan budget. The SSA allows you to begin receiving a benefit at age 62, but remember that your benefit will be reduced if you start taking payments this soon. The SSA has established full retirement age at 66 if you were born between 1943 and 1954, or age 67 if you were born in 1960 or later. And if you can delay taking payments until age 70, your benefit amount may increase by quite a bit. See all the age requirements on the SSA’s website, along with information about your benefit estimate based on age.

Purchase an annuity. At the time of retirement, you can purchase a DRS annuity and take advantage of a guaranteed lifetime income stream.

You can return to work. Many of us have the idea that retirees return to work as Wal-Mart greeters. You can do that, sure. But did you know there are early retirement rules that allow some retirees to work up to 1,040 hours for a DRS-covered employer and continue receiving benefits? See the rules for your plan and system.

Go early or play the long game. Either way, if you plan well and save wisely, your years in retirement might make you feel like a million bucks.

Check out these additional DRS resources to see if early retirement is right for you: