Let me dispel a big myth right now: Early retirement is not for everyone.
Early retirement won’t magically fix everything we wish was different about us or our lives, and it comes with its own set of pitfalls and stresses. To some of us, those things are worth it, but we can only know that if we do some real introspection and planning. and not just financial planning, but also planning around personal fulfillment, health and self worth.
To help sort this out, we’ve put together a list: The ten questions you should be able to answer before you retire early.
No matter what stage you’re at in thinking about or planning for early retirement, take some time to think through these questions and their answers. If you struggle to answer any of them, then early retirement may not be right for you, or may not be right for you right now, and that’s okay! Not everyone has to share this vision for their future.
Particularly if you don’t have a clear vision of what you want to retire to, there’s nothing wrong with working a little longer, or even a lot longer. Not liking your job — being clear on what you’re retiring from — is not enough of a reason to retire early. The answer may be much, much simpler: find a different job, or a different career path.
If you’re committed to retiring early, but don’t have good answers for all of these questions, then let them kick start some additional thinking and planning that will pay off once you pull that ripcord and wave arrivederci to your career.
The Ten Questions to Answer Before You Retire Early
1. How will you support yourself or your family without a job? (And will that change over time?)
The answer could be any number of things — earning dividends from stocks you own, selling shares of index funds, collecting rent on an investment property or ten, doing part-time work, or some combination of the above. The answer can also change over time, focusing primarily on one strategy until you reach age 59 1/2, for example, and then shifting to live off your 401(k) or IRA after you reach the eligible age.
Our income plan over time:
Other pieces to consider: will you follow the 4 percent rule? Have you put together a realistic budget that will account for all potential expenses and things you want to do in retirement? Have you done multiple projections to ensure that you’re saving enough before retiring to provide enough income for the full period that you’ll need it, even if the markets don’t provide good returns every year? If you have kids, will you plan to pay for their college?
2. What is your backup plan for dealing with financial emergencies or hardship?
How will you make sure that your whole plan doesn’t get sunk, especially after you’ve given up a well paying job, by a natural or financial disaster? Will you budget for homeowners or renters insurance? Will you maintain an emergency fund, separate from your other investments? will you carry life insurance? Will you build in any other contingencies like the ability to downsize a home or move somewhere cheaper? How will you ride out bad periods for the stock markets, including possibly extended recessions? How much of a cash cushion will you maintain? Could you trim back your early retirement budget if you had less to spend some years?
3. How will you get health care?
It’s no secret that health care costs bankrupt people all the time. How will you ensure that that never happens to you? Will you buy health insurance through the federal exchange (or your state’s, if they have one) until you reach age 65 and qualify for Medicare? Have you done the calculations for the income you plan to have, and ensured that your retirement budget can cover the full cost of premiums and copays (as well as the possibility of needing to go up to the out-of-pocket maximum)? Will you plan to live abroad and avoid buying insurance in the U.S.? (Or are you a lucky Canadian, who doesn’t have to worry about such things?)
Our health care plan over time:
4. How will you keep your body and mind healthy?
What is your plan for eating healthily, exercising and stimulating your mind in early retirement? Does that plan look a lot like what you already do now, or does it involve some drastic changes? As Maggie would say, early retired you is still you, so ask yourself if drastic changes are really realistic, or if you need to start making incremental changes now to make sure staying healthy is doable once you’re retired. On the mental front, will you embrace new technology and other societal changes as you age? Will you befriend younger people? Will you engage in activities or hobbies that expand your thinking, and force you to form new neural pathways?
5. What are you retiring to?
This question is perhaps the most important of all. Nothing is worse than saving for years to retire early, burning bridges in your career, and then discovering that you’re bored. Consider well before that happens what you will do with your new-found time in early retirement. What will excite you about getting out of bed every day? How often will you check things off of your bucket list? What do you want your contribution to the world to be?
6. What will your living situation be?
Do you plan to stay put where you are for retirement? Do you plan to move into a smaller home that’s easier to maintain and which frees up some capital? Do you plan to relocate? Do you plan to pay off your mortgage, or budget rent or mortgage payments into your retirement spending plan? Do you plan to go nomadic and live the RV lifestyle? For aspiring RVers, do you have a plan for if or when you decide you ultimately want to put down roots, and now need to pay rent or buy a home? Have you budgeted adequately for miscellaneous housing expenses like property tax, rent increases and utilities?
7. What do you want a day in retirement to look like?
What will an average day in your new retired life look like? What activities will you do every day? How will you spend most of your time? Will you spend a lot of your time surfing the web and watching TV? When you look at your vision for each day, does it sound both realistic and fulfilling to you?
8. What will your social circles and interactions be like?
Who will be your primary friends once you retire? Will you be able to see them more often, or will their work schedules prevent them from spending time with you during your new free time? How will you make new friends? If you have a partner, do the two of you plan to spend most of your time together, or apart? Will you have your own hobbies, or share most of your hobbies with your partner?
9. How will you and your partner, if you have one, stay on the same page about money and life goals?
Are you both equally committed to retiring early, and do you share the same vision of what’s worth sacrificing to reach your goals? Have you mapped out your big goals for your lives together? Do you both feel comfortable with your retirement budget and projections, or does one of you feel they are too aggressive or risky? Are you both committed to the discipline and frugality needed to ensure you don’t outlive your retirement savings? Do you regularly check in with each other to make sure you’re still on the same page about money and life goals? If you’re currently single, does your vision allow for flexibility if you one day get in a serious relationship?
10. How will you define yourself and derive self worth post-career?
Once the job title is gone, how will you see yourself? What will you do to ensure that you see yourself as a worthy person making contributions in the world? How will you find fulfillment without a job? How will you give back? What will you want to have accomplished, looking back on your life at age 80 or 90?
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Great questions! It’s funny but I’ve never thought of “retiring” as “not working” to me it’s just “not working for someone else!” Three years ago my job ended (I was one of the last six employees in a wind-down operation). I haven’t had an earned income since but I’m definitely not retired!
I’ve spent the last three years working to build my own business. It’s a long hard slog but so worthwhile. Truthfully, it doesn’t pay my personal bills yet but it does pay for itself and it funds new ideas as I’m trying to find my “thing that works.”
Because I saved hard during my working years and paid off my mortgage, my expenses are relatively low so I’m able to live off my emergency fund. If the universe smiles on me, I’ll be able to replace my old earned income with my business.
If someone who plans to “retire” early isn’t committed to using their time in a productive way, I think you would get bored pretty quickly. There’s so much to learn and do but as you suggest, you need to figure out what it is that interests you…what you want to build…how you want to give back.
Here’s wishing you great happiness and fulfillment when you set out on your early retirement journey!
Hi Ree — Thanks for commenting! I think when we say we don’t plan to work, it’s really saying we don’t plan to rely on an income. We are not the types to sit still, so retirement is a chance to work on our creative projects and do lots of mountain climbing expeditions, travel the continent and world, etc. We’re starting to rethink the work question a little bit, but the major point is that we don’t want to HAVE to earn money, so we can do what brings us joy instead of worrying if it will sell. But I love that you’re focusing on building your own business, and I hope that you find lots of success with it very soon! :-)
Not everyone has a socially stimulating job or one that screams identity. I worked in a fun to me job that I do miss sometimes. The company provided me with a phone to answer tech questions for six years after I retired at age 52. That helped me ease away from what I did. Money has been a non issue as we live on a budget like did when working. We are soon to start year eight of not working for a living and very happy we made the plans and were able to jump. I do have friends who were important and they retired at 65 to 75 and have returned to work or started another job to keep busy or assist income needs. From my viewpoint a person needs to know if they can handle not having a job or job title. They also need to not be in debt, that includes a mortgage and they need at least 3 months of income in a easy access saving account. Healthcare is essential to have I have little to no motivation and sitting in my man cave or walking on the beach equally make me happy. Our life is mostly hikes, walks, and other cheap activities, but we travel quite a bit also. Enjoyed this article
Great point that you should know whether you can handle not having a title or “important” job. Though I’d also argue that learning not to have those things is a skill you can build, not an either/or.
So much you say is right on. I’ll be retiring in a couple more years and it’s not that I won’t be productive anymore. It’s just that I won’t have to work the Monday through Friday routine for somebody else. I’ll be able to do what I want which is going to be a whole lot of things. I have no doubt that my day will be full and productive. For me. And along the way, I’ll find a way to earn some income to supplement my retirement income to make more things possible.
How exciting that you’re just a few years away! I’m sure it will be completely wonderful to have control over your own time — that is what we’re looking forward to most of all. ;-)
Hello, I want to devote my time to my passion so I am building my portfolio in real estate from last 5 years. Rental property, Business and providing Loan to people.
Average Return is 15% to 20% per annum. I am 34 and I live in Canada. I want to retire at the age of 40.
For me retirement is not running for money, instead your money comes to you.
Sounds like you have a very diversified portfolio — well done!
I chose 40 as well! I’m in Northern California, saving 65% of my income for the next few years until that day. It is nice to see that goal in front of you and I agree, it is just a shift from that feeling of running. For me, I just want the opportunity to know I can pause and breath if I need to. I am proud of your progress; good job!
Nice work saving at that high a rate in NorCal! Big high five for that. :-)
If you can send me a dollar maybe I can retire. https://helpretiretoday.com/
It doesn’t come without fears. My firmed shut its doors last June, I saw it coming, and was totally financially prepared for it and ‘retirement.’ It is a cliche, but living the social interaction, the sense of self as a professional, to say nothing of income and benefits — though fully anticipated — hit hard. I’m still reeling even though I’ve stayed active in my industry, taken on post that allows me to work from home, not fully full time, and pays some bills. But daily I ask, ‘now what?’ Classes? Yes. Travel. Yes. For me, leaving the job allows me to be the student again to feel the excitement, and yes fear, of starting something new. Maybe being such a student will stave off some of the aging process. I emphasis it is a process and the loss of a job, status and benefits that go with it, is not easy no matter how prepared you are. And while it would be great to have a new purpose — get a Phd, write, start a fun business — it’s hard to connive that after working full time. So for me, others, give yourself the time. Be patient and just know that…ah there I felt it, a twinge of fear. But it is a good fear I think.
So many great points! It’s so important to give ourselves space and permission to go through this huge adjustment and know what we can’t anticipate what it will all feel like!
I see there at 10 questions to retire early on your list. I am here to tell you there is only one question that really makes any difference. That is health insurance coverage. If you don’t have it, you can’t quit work unless you are worth tens and tens of millions of dollars. I have been in a position that I could have retired for quite a few years now. I say this based on all the early retirement blogs. But I was smart enough to know that this ACA Obamacare was going to fail. So I kept holding on to the job and it seems one way or another the ACA will either be collapsing on itself or it will be voted out. Either way, it needs to be gone and a new plan figured out. I read all of these early retirement type of sites. I read about some people who claim to have retired but they are still on the health insurance plan of a working spouse. What a joke. It just means your spouse is the one who is working to support their easier lifestyle. Some I have emailed to ask how they “retired early” advised they just don’t even buy health insurance and take a chance.
So i am trapped and continue to work in a very lucrative job for more than 25 years.. that I desperately want to exit. Lets all keep wishing and hoping for something to change, but I am guessing the entire healthcare system implodes upon itself along with a lot of other things before you can “retire early”.
Thanks for reading and for your comment, Bob!
Health insurance is mandatory and for me, retiring before medicare is not an option.
Anyone in the states in this situation – there is a solution – move overseas!
Thailand is still pretty cheap and has some of the best medical care in the world.
Latin America has some decent options too.
Think outside the box.
Bob, it sounds like you are making excuses to continue working or are just misinformed. You can get affordable health care insurance that is subsidized based on income. If your income is too high to qualify for a subsidy than paying for the plan should be attainable. Do some actual research and you may be surprised!
Anyone feeling stressed out about the health care uncertainty right now definitely has my sympathy! Though it’s important to be informed about options, those options could also change anytime, so I get that it’s hard to leave work that offers a feeling of certainty. :-)
Hi Bob, If your ability or desire to retire depends on health care then why would you want the Affordable Care Act to “be gone “and not to be tweaked until repaired? Just curious. As a small business owner I hoped for it to succeed so that I could be self employed with insurance. Right now my husband is doing great as a independent carpenter and I am looking for a job as my company grows not because I need a job but because we need insurance.
This question is not for or against Trump or Omama or race.
Does Bob live in St. Petersburg?
Can’t answer that one. ;-)
Bob, There’s always geo-arbitrage. A recent podcast I was listening to mentioned the cost of an ambulance ride, ER visit, 2 mopeds getting repaired, and associated medical costs in Bali. $150. Total. We might travel and use pay as you go medical or relocate to a location that has a better medical system than the US.
-Bob (not the same Bob ;) )
While health care tourism (or expat living) isn’t for everyone, it can certainly be an option worth considering!
Bob I am retired I here MA we have the ACA …well we had it before too. It’s important to retirement you need it and if you are under 47k you and your spouse can get very reasonable health care. ACA will only collapse it they want it to I think if they cannot fix health care they should get out and let someone who can in.
Agree with you, Hank! ;-)
I took early retirement at age 62 1/2. I could have never done this without Obamacare. I have a 12 year old son at home that I am solely responsible for. I pay 180.00/ month for his insurance and 202.00 / month for mine with no deductible .
I LOVE Obamacare. Until the affordable care act I was without any insurance at all. And I am a Registered Nurse.😌
I just found your site and love it. I retired last summer on my 48th birthday and have obsessed over over every one of these excellent points (in fact, I continue to on many of them).
Two things I have found have helped me a lot:
1) Every single day I try to determine what I am going to do that day to stimulate myself intellectually, physically and socially. Often I do all three simultaneously, perhaps by doing a long bike ride with former coworkers or business acquaintances.
2) Throw out all of the retirement “rules of thumb.” None of them are relevant to the incredible complexity of early retirement. Instead I rely on a financial “life model” spreadsheet that models my income and expenses for each month of my expected life. Importantly, I review the model at the end of each month to look for trends and to adapt my plan where necessary.
Honestly, the biggest problem I have seen in my first year of independence is that there is a strong tendency to not spend enough – due to the fear (consciously or subconsciously) of running out of money. To combat this, we have instituted a “Goal Day” where if we meet our financial goals for the month, we force ourselves to splurge a bit on the last day – within the overall plan of course.
Thanks so much, Brett! That’s awesome to hear. :-D Congrats on retiring last year! I LOVE that question you ask yourself each day and your plan to stay mentally, physically and socially engaged. So important. You’re also not the first person I’ve heard say that it’s hard to spend money, especially at first. I could definitely see us falling into that pattern, too, just because we tend to be so financially cautious. I think your forcing yourselves to splurge is a great idea! Thanks for sharing that!
We aren’t close to FI (~15 years out), but living well within our means has already significantly impacted our lives. When our son was born, my plan was to work very PT until he was 6mo and then go back FT, which I did for a few months and found that our lives with frantic and unhappy and stressful for it. Because we could financially live on just my husband’s income, I felt comfortable bringing up the conversation about cutting back my hours, knowing if the answer was no, I could not work for a while until I found a way that I could. Instead, I was able to take an hours/pay cut to 80% and I now get to spend my mornings and afternoons with my son. Life has gotten SO much better for it now, even without FI, all because we had options and weren’t completely reliant on my paycheck. It might not be total FI, but it definitely felt similar to make that change.
Wow, you’re really attacking the backlist. I love it! ;-) And that’s awesome that you’ve been able to figure out a way to make employment work in your lives without it taking them over or making you unhappy. Kudos!
Oh man it looks so complicate and so many questions to answer that I’ll definitely not pursue FIRE but regular retirement instead.
Try taking on the questions one at a time instead of all at once to make it less complicated. You’ll need to answer all the same Qs for traditional retirement, so the only difference is timing. ;-)
Hi, what did you study to find out more on the various investments, the right stocks?
I recommend The Simple Path to Wealth by JL Collins (http://amzn.to/2yHTZAW) and The Bogleheads Guide to Investing (http://amzn.to/2ztoEPA). Though we for sure lean toward a more streamlined, hands-off approach to investing. If you’re a fan of more active management, I’m not of much help. ;-)
Definitely start with the simple path to wealth, much better read.
Congrats on making it to your next life. We are in Tahoe City doing something similar with kids. We can pull the income plug at anytime but haven’t done so yet. We just found your blog via the Money mag coverage. Looking forward to following your blog.
Thanks, Tracy! How exciting to “meet” other local folks doing something similar! We’re going to start hosting meetups after we quit, so stay tuned for info. :-)
This is two for the price of one – great post and some great comments from your readers to go with it. I retired just under a year ago, aged 48, and it’s been great so far. There have been a small number of things that I could have done better, if only I’d seen your list of questions sooner😜
Picking up on a few of the other comments already made – yes, I’ve retired from corporate life, but that doesn’t mean I’m not “working”, it’s just my work is not what the general population calls work and it’s great; I have a list of things I can do between 9am and 5pm and I have fun doing them; travelling starts next July – Bali, Australia, New Zealand, Thailand, Vietnam and India.
The key thing going forward is to find the long term “purpose”, the thing or things that make sure I stay excited to get out of bed in the morning. I’m not stressed about this, in fact I’m not stressed about anything these days. Once we’ve done our travelling I’ll discover this purpose, even if I have a few false starts – I have the time for trial and error.
Looking forward to your upcoming posts, All the best, David
Congrat, David! So awesome that you pulled off retirement before age 50! :-D If purpose is something you’re thinking about, you might find this post helpful: https://ournextlife.com/2016/01/18/what-do-you-want-your-tombstone-to-say-defining-our-purpose/
HI, just found your blog. I’ve really enjoyed reading a lot of things – seeing your savings rates and how they started low then took off (I felt better though I started from 0.01% to last year was 30% despite getting married and buying a car). The ten questions have also helped, we have a few rentals which we will focus on in retirement and are also building a share portfolio. We are in New Zealand so have very different health care (thank goodness!) and superannuation (not so good). We are keen trampers and travellors so can see ourselves working on our own business (ie our property portfolio) and travelling when we FIRE. I would love to invite you to come visit NZ we have amazing skiing, hiking, camping and scenery and are quite friendly! NZ is to the East of Australia and its well worth spending 4 – 6 months here. Thanks for sharing your journey and congratulations on retiring! Trace
Hi Trace! So glad you found us. Though it breaks my heart a little to see you think we don’t know where New Zealand is, only because that’s the reputation of American schools. I suppose when we have a president who doesn’t understand foreign policy, you can’t be blamed for assuming we know very little about the world. (I’m kidding! … sort of.) But so glad the blog is helpful to you! Your savings rate absolutely will climb over time, so no worries there. You’re normal! And your rental-plus-travel plan sounds terrific. We will absolutely make it to New Zealand one of these days and will share it here when we do!
All taken care except #8. I don’t need any friends!
I think that this forum makes very good points about the importance of rainy day funds, and the importance of choosing the right time to retire. If you choose to retire extremely early and have no plans for retirement then you may find yourself in a boring situation with a lot of saved money you don’t know what to do with.
You forgot the most important question of all:. Do you want to have kids? If so, then FIRE probably isn’t for you. Or am I wrong and someone’s figured this out?
I have spent endless evenings searching and reading all subject matter related to early retirement. While my early retirement plan is 1 year away, and I will be 55 at the time of my “planned” plug pulling (I will admit, I am not sure I will actually be able to leave a nice paying job), I still need to answer the “what will I do” question. I had an engineer that worked for me, and when he was nearing retirement, he would keep asking “Where is my fishing hole?”, which is basically what am I going to do once I stop doing what I have done for the last 35+ years.
Based on running the numbers through nearly every on-line retirement gizmo calculator, it appears we should be good to go on retirement, but the continual theme of “work just a couple more years” definitely pops up frequently. Reading the concerns on health care, I also have looked at various ways of funding health care. The ACA is still alive, and I suspect it will remain for some time, and hopefully it eventually is worked on to improve. But, even w/o ACA we should be able to swing fully funding our health care, but it does remove some of the buffer in the budget. I have read about people flying overseas for major medical procedures, and while that can work for some, I just don’t see me or my wife jumping on a plane for a medical procedure, but who knows, maybe we change our minds once we start fully footing our own health insurance.
Love the Blog, and will be revisiting often to read more comments and articles.
Enjoy today, look forward to tomorrow!
You make a good point about keeping your body and mind healthy. I think most importantly it is keeping your brain healthy. I see many retired people who have plenty of money but are simply bored to death. All the money in the world is not worth anything without your health.
Hi I’m new to your blog.
My biggest question is what about kids? Not sure if you have written about this anywhere on your blog but it looks like your early retirement lifestyle more suits individuals who do not plan on having or do not have kids. With the costs of raising a child and college it seems almost impossible to plan something like this.
Thanks for this beginner guide. I’ve heard from a friend that early retirement is such a trend now and was curious about it. This is a great place to start getting the necessary info.
Tanja, very interested to see the trajectory of your life since high school, congrats on your successes, you always seemed destined for a career in politics. I do have a couple of questions. What is your monthly premium for your health insurance? Also, have u built in a plan for your finances should there be a major medical event? Also have u considered what would happen to your long term plan should the market take a significant downturn within the first five years of retirement? My other question is, what if health insurance exchanges would change and base the monthly premium off savings/net worth rather then income, which in your case would increase your monthly premium? Also, are u ever considering having children? – because I don’t think a plan like this is feasible with children. The cost of raising children would be prohibitive for me to retire early even though I have a significant net worth. Take care, AK.
Im relatively new in following your posts but find them highly interesting and inspiring.
We this year have taken the leap and are in the process of stablising our financial independance also.
We have done a lot of research, and most advice suggests not to go over 50% of an investment portfolio for real estate/rental investments. I get the feeling in looking at your charts that your levels of diversification are a little less stringent and that real estate/rental investments may play a more important role in your plans.
For sure diversification is important in any investment plan to ensure that we are never over-exposed to any one risk at a time. Id be keen to get your point of view on this aspect.
Looking forward to your feedback!
Some very good questions here, which led me immediately to take some practical steps which I had failed to consider before. I trained as a mediator in the course of my job and practiced for more than a decade, but I do not mediate in my current role. Since I would like to retire to service projects in conflict resolution, conflict prevention, and restorative practice, one important consideration is keeping my certification and CPD requirements current until I retire. I approached my manager about it, and given that she is a certified mediator too, she was all supportive about me joining a panel of workplace mediators in our larger employment context. I sold it to her by saying that it would be a pity to let this expensive training and certification go to waste. Which IS true after all. Why should our employer not get a bit more of a return on their investment? Win-win.
But the reason I am bringing this up here is to say that if someone wishes to continue a professional practice of some sort which has an accreditation/CPD system, it pays to consider how you will keep up your case work or whatever the requirement is when your job doesn’t send it to you by default any longer.
Regarding healthcare and retirement policies in EU countries (where I live) my guess would be that publicly financed healthcare is such an ingrained society-wide right, that I cannot see it being touched by politicians. Social security retirement benefits, on the other hand, have already undergone a lot of change. My age cohort (I will be 55 in a few weeks) will not be able to access their SS retirement benefits in the country in which I live until age 68. Until then, my government worker pension will have to tide me over.