Americans are living longer these days, so retiring in your 60s may mean you won’t have to continue working for another 20 years or more. Still, some people may want to quit their jobs once they reach their 50s.
At that stage of your life, you may have more energy to travel or pursue different hobbies. And if you’ve saved enough throughout your career, it may seem possible to retire in your 50s.
However, retiring in your 50s can also pose some challenges. Here are some pitfalls you may encounter.
1. You may not be able to access your savings without penalty
money kept IRA or 401(k) plan Once you reach age 59 1/2, you can withdraw without penalty. But if you’re in your 50s and want to retire early, there’s generally a 10% penalty for taking an IRA or 401(k) prematurely.
If you are able to plan for early retirement in advance, you may be able to avoid this problem by keeping some of your savings in an unrestricted tax brokerage account. But if you decide you want to retire at age 52 and all your money is in an IRA or 401(k), there aren’t many good options.
2. You need to understand medical care
Medicare eligibility begins at age 65. If you’re retiring in your 50s, you’ll have a long way to go before you can enroll.
Living without health insurance at any age is not a wise choice. So you have to figure out your own health care, and paying for your own plan can be quite expensive.
If you retire in your 50s while your spouse is still working, you may have the option of signing up for health insurance with your spouse’s employer. That way, the problem may be resolved successfully. Otherwise, calculate your health insurance costs before retiring early to avoid throwing your finances into disarray.
3. You have to wait a long time to receive Social Security benefits
Earliest age to register social security And you won’t receive your full monthly benefit based on your earnings history until you reach full retirement age. For people born after 1960, the age is 67 years.
If you’ve saved enough for retirement, you may not factor Social Security into your household budget. But what happens if you retire at his age of 54 and the market crashes a few years later? At that point, you may not want to tap into your savings if you end up taking a loss. However, you will no longer be able to receive social security benefits that you can rely on.
A smart move for retirees of all ages is to keep one to two years’ worth of expenses in the bank in cash. That way, if market conditions are unfavorable, you can leave your portfolio alone for a while and ride out the situation. But still, be sure to understand the consequences of not having access to Social Security benefits for a significant period of time.
Some people dream of retiring in their 50s. And if you’re really good at saving, that’s a goal worth achieving. Before you end your career at a relatively young age, be aware of these pitfalls and their possible avoidance.
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