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Want To Retire Early ? Start Planning Now .
The average American retires at about age 63 , according to data from the U . S . Census Bureau . If you enjoy your work , of course , you may want to go well beyond that age . But what if you don ’ t want to wait until 63 or so ? Can you afford to retire early ?
Possibly – if you follow these suggestions :
• Research the costs involved . What will you do during your retirement years ? Will you travel the world or stay close to home , pursuing your hobbies ? Will you downsize from your current home ? How will you pay for health care until you ’ re old enough for Medicare ? You will need to answer these and other questions to determine how much you will need to sustain a comfortable lifestyle as an early retiree .
• Invest more – and invest for growth . One big advantage in retiring at the usual age , or even later , is that it gives you more time to invest . But if you ’ re determined to retire early , you will almost certainly need to accelerate your investment rate – which , in practical terms , means you ’ ll likely have to contribute more each year to your IRA and 401 ( k ) or similar employer-sponsored retirement plan than if you were going to retire later on . Plus , you may have to “ ratchet up ” the growth potential of your investment portfolio . However , because growth-oriented investments typically are more volatile than other investments , you will be taking on more risk than you might otherwise . If you are truly uncomfortable with this risk level , you may need to re-evaluate your plans for retiring early .
• Cut down your debt load . It ’ s always a good idea to enter retirement with as few debts as possible – but if you want
to retire early , you may need to be even more diligent in controlling your debt load .
• Know the rules governing retirement plan withdrawals . If you want to retire before age 59½ and begin taking distributions from your IRA or 401 ( k ) plan , you will generally be subject to a 10 % early distribution penalty , plus normal income taxes . ( To withdraw your earnings from a Roth IRA tax and penalty free , you generally must have owned the account for at least five years and have reached age 59½ . You can withdraw your contributions at any time tax and penalty free .) However , you may be able to avoid the 10 % penalty if you take “ substantially equal periodic payments ,” which are calculated based upon your age and other factors . Once these distributions begin , they must continue for five years or until you reach age 59½ , whichever is longer . Other rules apply to these distributions , so before taking any , you will want to consult with your tax and financial professionals . And keep in mind that if your withdrawal rate is too high , you risk seriously depleting your retirement accounts , especially if your investments decline in value during the years you ’ re taking these payments .
Most importantly , do everything early : Plan early , invest early ( and don ’ t stop ), and lower your debt load early . Getting a jump on all these activities can go a long way toward turning your early retirement dreams into reality .
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor .
Matt Dudkowski , AAMS ® | Financial Advisor | 1007 Mt Royal Blvd . Pittsburgh , PA 15223 | 412.487.3300 matt . dudkowski @ edwardjones . com | www . edwardjones . com
Matt Dudkowski has been a financial advisor with Edward Jones since 2002 , serving individual investors in the Pittsburgh area from his Shaler Township office . In January of 2015 , Dudkowski accepted an invitation to become a limited partner with the firm .
Since joining Edward Jones , Dudkowski has obtained the professional designation of AAMS ®. Prior to Edward Jones , Dudkowski , as a CPA , worked at the H . J . Heinz Company , and at Ernst & Young LLP . He currently serves on the board of directors for Keystone Wellness Programs , a local nonprofit organization .
A native of Butler County and a graduate of the University of Notre Dame , Dudkowski resides in Gibsonia with his wife , two sons and daughter .
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