What else can I do to increase my chances of retiring early successfully?
- Rebalance your portfolio. Returns from investments in stocks have generally hovered around the 8% or 9% mark. However, that number is simply an average that has held up over the long run. There have always been periods of significant decline – most recently the stock market crash that took place in 2002. Carefully evaluate how much you have in stocks versus bonds and whether any reallocating needs to be done. The easiest way to do this is use a target-date retirement fund. These are funds that are structured with a particular target date in mind. The fund is re-balanced as the target date approaches, typically moving from being more heavily weighted towards stock to being more heavily weighted in bonds.
- Contribute the maximum amount you can to your retirement accounts.
|Traditional & Roth IRA Contributions and Catch Up Provisions for 2014 and 2015|
|IRA Type||Standard Limit||Catch-up Limit, for age 50 and older|
2014 contribution deadline: April 15, 2015
2015 contribution deadline: April 15, 2016
|401(k) Contribution Limits for 2014 and 2015|
|Year||Standard Limit||Catch-up Limit, for age 50 and older|
- Take care of yourself. While you are employed, typically you and your employer both pay a portion of your monthly health insurance premium. After your employment ends, the Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that may let you keep the coverage (known as continuation coverage) you had under your employer’s health plan, typically for 18 months and in some cases 36 months. However, even if you have COBRA continuation coverage, you will be paying the full premium. Keep in mind that COBRA generally only applies to employers with 20 or more employees (although this may vary from state to state).
Subject to very limited exceptions, you are not eligible for Medicare until you are 65. Even once you are eligible, remember too that while Medicare is meant to make health insurance coverage more affordable it is not free. If you retire early, you may have a gap period between the expiration of your COBRA continuation coverage and Medicare. In that case you will need to get a health insurance policy to cover that period, which can be quite expensive if you have any medical conditions.
- Finally the most important test of all – try to live within your proposed annual budget for a period of at least three months. Actually trying to live within the budget is the best and most realistic way of testing whether it works. Keep track of all of your expenses during the test period, so that you may compare them to your estimated budget. At the end of your test period, see how you did. Were you able to stay within your proposed budget? If so, congratulations! If not, you need to revisit and revise the numbers in your budget. Review the expenses that you had within your test period and consider where you can cut back.
Article Courtesy of 50 PLUS REPORT Online Magazine.