CONNECTICUT MONEY: How to retire early, on your terms

Early retirement holds great appeal for many small-business owners and corporate executives in their 50s and early 60s. These generally are folks who have worked very hard and sacrificed many hours of personal time to accomplish their goals. They want to retire while they still are healthy enough to enjoy it.

If you are looking to retire early, it’s important to set yourself up for success by planning ahead. The first step is to define your vision of this next stage of your life. Are you looking for complete freedom to walk on the beach and play golf every day? Or do you envision setting up a small business or becoming a consultant in your field?

Successful retirement means you have the financial freedom to choose whether to stay busy or not. But you need to put in place a financial plan now that will finance those choices.

Here’s an example of thinking outside the retirement box: A couple who are clients of mine had a dream to travel to all 50 states. They had designed a product they wanted to sell after retirement, so they began delivering the product to customers as part of their journey, saving shipping costs and meeting customers in person.

Here are some further steps to help you prepare to retire early:

Match your finances to your vision. Once you have thought about the life you want to have as a retiree, think out the financial implications. Do you plan to relocate? Compare property taxes, heating bills and other expenses to figure out how much you’ll save, or spend, as a result of the move. Go through your credit card statements and checking account for the past year and note all expenses you expect to continue in retirement. Then consider hobbies: How much will you spend on things you plan to do? Don’t buy a boat without knowing the maintenance costs!

Maximize current income and investment. Live below your means so you can save more and invest more today. Increase your income with a side gig or other means. Max out your retirement accounts. Have a financial planner help you craft a tailored investment portfolio.

Take health insurance costs into account. You can’t enroll in Medicare until you’re 65, so you need a plan to pay your health insurance costs before then. You can enroll in your spouse’s employer-sponsored plan, buy coverage through the Affordable Care Act marketplace, join a cost-sharing plan, or take a part-time job that pays health benefits.

Avoid “rules of thumb.” For one example, take the idea that you need to replace 80 percent of your annual income in retirement. Many high earners will never spend that amount, and those with fewer resources may need more. They may face rising health care costs, rising taxes and inflation, and life changes such as adult children who need financial help.

Early retirement is feasible, but you have to get on top of things early. Consider hiring a financial planner who works with business owners and corporate executives. You typically only retire one time, so you want to get it right.

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