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Should You Take Early Retirement?
You’ve heard the saying ‘a bird in the hand is worth more than two in the bush’. It turns out, folks across America over the past five years are paralleling the thought, taking early retirement to lock in pension payouts. A contrarian thought to the general consensus, that the majority of people are delaying retirement. The unspoken harsh reality is 44 out of 50 states have underfunded pension and retirement plans. Will America’s public pensions be the next government bailout? Not to be a negative Nancy but we expect retirement pension shortfalls to be fully exposed by 2025, when the youngest Baby Boomer is blindsided collecting no pension check.
Government agencies and the private sector are alluring retirees to take early retirement. The downside, early retirement seems risky for retirees and may force them to rely on early withdrawal's from their 401K’s and IRA’s. If they choose not to, eligible retirees may be forced to take salary cuts, have their work hours reduced and lose company paid contributions. The upside, it could be smarter for retirees to maximize early retirement taking the lion’s share of the funds available and move to lower cost of living states in one of the best master planned communities.
The same debate exists over applying for social security at age 62. If your annual social security statements are similar to ours, the estimated monthly payout continues to decrease each year as time ticks away, even though our income is consistent. To us, this reflects less money in the social security kitty. We plan to lock in our social security benefits the moment the clock strikes midnight on our 62nd birthday. While there are income limitations when collecting social security, self employed entrepreneurs like us have the flexibility with our income levels and deductible business expenses. This brings up an important point. Starting a home based business is a smart move for people over age 50 and here’s why.
Employees in the public sector have been accustomed to 9 to 5 jobs, 2 weeks vacation and a weekly paycheck. Retirement to most represents freedom. Freedom comes in many forms; no time clock, no bosses to answer to and no more monotonous job tasks. If we managed our money well, financial freedom is included in the list. But don’t wait to receive a gold Timex watch before you consider how to offset and take early retirement which may be unexpectedly presented to you. Do you know, during the last 5 years, Baby Boomers over age 50 have launched more new start up businesses than folks under age 50? Is this because there are more people in America over age 50? Possibly, but we believe the reasons go deeper.
A new challenge in life, extra income and brain fitness are the obvious reasons. The internet provides access to so many fascinating options that we could write a book on that topic alone. We've mentioned many times the retirement buying power Baby Boomers have today. If you relocated to a lower cost of living state in the South, you could easily save 30% per year on your annual expenses, not including housing. It is easy to compare when you review the Cost of Living Comparison found in our library and if relocation is on your mind, we are here to help. We visit over 200 master planned communities each year scoring them to provide you with the most accurate information we can find. This is how we help folks in the real estate market. Reach out to us and say 'hello' by writing email@example.com or call toll free 866.384.1799 to talk more.
If you’re like some New Yorker's, when your employer announces early retirement options, it may be worth taking take money and run.