If you are anything like me, in one hand you have excitement and in the other nervous hesitation about Pulling the Early Retirement Trigger. It doesn’t matter that we paid off all non-mortgage debt years ago. Paid off the mortgage or have a manageable low house payment. Embraced smart frugal living and became super retirement savers. We have a plan and spent years, even decades working and doing everything necessary. Just to have this particular early retirement opportunity and with it the apprehension to reach for the brass ring.
First off if you are feeling these things then congratulations are in order. You did it. You have done something that most people don’t even attempt to strive for let alone make it to the finish line. Early retirement is a huge accomplishment.
Second, having cold feet and hesitation about Pulling the Early Retirement Trigger is normal. I think it must be similar to what you hear sky-divers think early on. It goes against our survival instincts to jump out of a perfectly fine airplane. We hesitate leaving a long career and job. Even when we don’t like it much. All because it goes against our lifelong beliefs about keeping a job for our financial safety.
Maybe you are thinking you should work a year or more just to be safe. Perhaps you have already done this early retirement delay a time or two. But the hesitation is still as strong as ever.
Confidently Pulling the Early Retirement Trigger
There are some very legitimate concerns that cause us to hesitate Pulling the Early Retirement Trigger. Even though all of our financial independence goals and objectives are met, for many of us it’s not financial issues that are the real reason for our apprehension.
One thing is for certain, there is a lot of uncertainty about taking the leap. From how long your money needs to last to what will happen if the investment markets crash again. Maybe as bad as it did in 2007– 2009.
However there are some actions we can take to assure ourselves that this is the perfect time for Pulling the Early Retirement Trigger. That it is finally time to start the life of freedom we planned, worked, and saved for.
Building your confidence about pulling the early retirement trigger
Confidence through Others Early Retirement Success–
There is an abundance of financial industry and personal finance blog web sites to freely research and read just like this one. There are also many books that give deep technical aspects that you can apply to your situation. You can also get the opinion of your financial planner or find one if you are a lone-wolf investor to receive some peace of mind.
Just remember that some advice may be biased. A financial planner may be thinking more on the lines that they make more money if they keep you working and adding to you portfolio instead of pulling from it in early retirement. Just keep you r eyes open and search unbiased information where the source isn’t looking for anything from you.
Run the Numbers Again-
You have obviously been tracking your budget and running your portfolio numbers against retirement calculators for a long tome but its time for one thorough go-through. This time you will create a check-list and cover all the bases to give you the confidence for pulling the early retirement trigger.
Know your retirement lifestyle cost-
Hopefully you have a solid handle on how much you need each year to fund your desired retirement lifestyle. Sit down and get a good figure to use by removing any job related costs, retirement savings, etc. and adding in any increases due to extra travel, medical insurance changes, etc.
Get your Social Security estimate-
For those in the U.S. there is the Social Security retirement benefit that is paid into. Other countries may have something similar. Even if you are a “Debbie Downer” about Social Security you should still get your estimate to use in your long-term retirement funding plan.
It may be years away and their estimate assumes that you will work until age 62 at your last salary. Knock some off of the estimate and just assume you will start at your full retirement age. Have that figure in mind along with the age 62 early collection amount adjusted slightly downward.
Assess your investment allocation-
Is your portfolio stock to bond ratio properly set for someone your age who is retiring? It may have been set to reflect your risk tolerance but now retiring early changes things a bit. There is the conservative rule of taking 100 and subtracting your age to get your ratio (100-55=45, 55% in bonds and 45% in stocks) or what some who say retiring early needs to ratchet up the stock holding percentage for a longer retirement and use 110 or 115 minus your age to come up with your ratio.
Do you know how long you will be retired-
Nobody knows how long they will live. You have to make your best guess based on your family history and your current health. Whatever you realistically think your longevity is you should probably round up 5 years or so to it. Longevity is an unknown that can cause early retirement hesitation so perhaps having a longevity annuity like a QLAC may be considered.
Do you have an early retirement funding strategy?
If you retire before age 59 ½ do you have enough money outside of your retirement accounts or a pension to fund your retirement? Perhaps you are going to use methods that allow for penalty free early withdrawal from your retirement accounts. Knowing this will definitely add to your confidence.
Run the numbers through a good retirement calculator-
You should actually run them through various retirement calculators. I was surprised at how many online retirement calculators are nothing but junk. Many provided by big names in the financial industry. They ask how much you have, how much you want, your expected rate of return, when you want to retire and for how long. There is no mention of your portfolio allocations, future changes like starting Social Security, selling a house, paying off a house or having an annuity or pension start up. There is no inclusion of possible market changes and risks based on past investment cycle history.
That is why I recommend the FIRECalc retirement calculator (not an affiliate, a true recommendation). It allows you to enter:
- How much you have or plan to have when you retire.
- How long you see you and your retirement lasting.
- Your desired yearly retirement funding amount.
- When you plan on Social Security and how much you estimate receiving.
- Your investment allocation.
- Inflation adjustment decisions.
- Changes in income like a longevity annuity or home sell/payoff, your spending model.
It then runs it all against 113 or more investment cycles to see your chances of having enough money to successfully retire early and not run out of money.
You can then make changes. For example- moving your Social Security start date up or later and the received amount to see how your chances change.
Find and run your numbers against other retirement calculators that allow for adding in detailed info like FIRECalc does.
If you can run the numbers and get positive results then money shouldn’t be causing your hesitation for pulling the early retirement trigger. However there is still another aspect to check off.
Non-Financial planning for your early retirement lifestyle
There are many issues you should have clear in your plans for how you plan to spend your early retirement time. Of course you will plan to do some traveling, gardening, exercising, finish some projects and hang out with family and friends. But it needs to go beyond that.
It’s all about what you are retiring to. Do you have hobbies you want to continue or new ones you plan to explore? If so hopefully you included any hobby cost to your retirement budget. Having hobbies is important to spend quality retirement time doing.
Make a list of what you believe your retirement day-to-day life will look like. Perhaps doing a test-drive by taking a staycation before retirement and put it to a test. This might help if you have concerns about not having enough to do in retirement that is causing you apprehension to pulling the early retirement trigger. I know I am busy all day long doing what I want to do and can’t get to it all.
Would you consider the greatest contingency plan?
If all else fails would you consider returning to work? If the markets make a liar of all the retirement calculators then pulling a unretirement by rejoining the workforce even at a part-time job makes a huge difference. It should help you get over any “what if” caused early retirement anxiety.
I always planned on retiring early and often where I would always be open to pursuing opportunities aligned with my interest and passions. Doing so allowed me to pay off my mortgage after early retirement number one and triple my non-retirement savings. I am in early retirement number two and even though I have nothing on my jobs bucket list to pursue I am indeed open to whatever it is that one day does come my way.
The Bottom Line
I had cold feet and hesitated Pulling the Early Retirement Trigger causing a one year delay. After running through the above checklist and checking things twice I finally retired early from my long-time telecommunications career as an engineer in December of 2009. It wasn’t the best economy but everything supported my decision.
Did I do so worry-free without any concerns or doubts? Not at all. It is impossible to know everything that may happen over a 30-plus year retirement. We check the facts with what is known and make the best decision we can.
What was the confidence tipping-point for me was that I knew there was more to life than what I was living/working. I knew that if I was to work doing what was aligned with my interests and passions that I would be fine no matter what happens. Life is too short and we need to constantly chase after it to make or keep it more fulfilling. The alternative is just staying in the rut.