“Tempted to retire early? Consider two critical factors,” cautions Alison Shrager in Financial Advisor Magazine. Surveys indicate, Schrager admits, that as a result of pandemic-caused deprivation, many Americans are looking to leave the labor force earlier than planned.
With the stock market up almost 30% this calendar year, many think their account balance has reached “the magic number” they had envisioned as “enough”.
Your account balance notwithstanding, Shrager warns prospective early retirees, there are other factors to consider before pushing the launch button:
- Stock market risk: Precisely because a larger proportion of your assets is probably now represented by stock, the risk of a market decline is perhaps greater than it was a year ago.
- Health care costs: $200,000 and upwards will be needed just to pay health insurance costs through your retirement years.
- Interest rates: Real interest rates have fallen, leaving a very thin layer of protection against inflation.
For these and other reasons, proactivity is paramount in contemplating retirement, Shrager says, recommending:
- delaying Social Security income until you’re older, as a way of increasing future income without the risk of the stock market
- taking semi-retirement to retain some income as well as health benefits
Retirement plans are no one-and-done affairs, Julia Kagan and Marguerita Cheng point out in Investopedia. “Portfolios should be rebalanced and estate plans updated as needed.” As our attorneys at Geyer Law agree, “Having both a proper estate plan and life insurance coverage ensures that your assets are distributed in a manner of your choosing and that your loved ones will not experience financial hardship following your death.”
Beyond both financial resource planning and estate planning, there is another element to consider – emotional readiness, “You’re probably not ready to retire, psychologically speaking”, Jonathan Burton believes. Many investors, he explains, “may not be prepared to replace the psychological and social benefits that their careers and work environments provided.”
In retirement planning, the focus is on the creator of the plan. In estate planning, the focus is on both the creator of the plan and on other people and organizations. As the song says of love and marriage (they go together like a horse and carriage), early retirement planning and estate planning, well, you can’t have one without the other!
– by Ronnie of the Rebecca W. Geyer & Associates blog team