Did you go on vacation this summer? Perhaps to the beach or maybe even overseas? Summer vacation is a great time to leave your worries behind and relax. Of course, eventually vacation ends and you have to return to the working world.
 
But what if you didn’t have to get back to work? What if you could retire early and spend your time as you wish? You could travel, pursue a favorite hobby, or spend time with family and friends.
 
Early retirement may be difficult, but it is possible. It takes strategy, focus, and financial discipline. Below are some tips to help you achieve early retirement. These tips alone won’t guarantee that you can retire early, but they’ll certainly help you make progress towards your goal.

Become a prolific saver. 

Saving money is always important, but it’s even more so if you want to retire early. It’s possible that you could live into your 90s or even beyond. If you retire in your 50s, you may need to plan for a retirement that lasts 40 years. It will take a substantial amount of assets to fund a comfortable lifestyle over that period of time.
 
There are a few ways to save. One option is via qualified retirement plans like a 401(k) or IRA. These vehicles are tax-deferred, which means you don’t pay taxes on your growth as long as the funds stay in the account. That tax deferral could help you accumulate assets at a faster rate than you would in a taxable vehicle.
 
In most tax-deferred accounts, you can’t access the funds until age 59½. If you take a withdrawal before that age, you may face a 10% early withdrawal penalty. If you’re planning on retiring early, you may need access to funds before age 59½, so it could make sense to save money in a taxable account as well. That account could be used for income until you’re able to access your 401(k) and IRA.

Use a budget. 

Do you use a budget? If your answer is no, you’re not alone. According to a recent study, only 41% of Americans use a budget to guide their spending.¹ A budget is one of the most useful financial tools at your disposal. You can use it to make informed spending decisions and stay on-track to hit your savings goals.
 
A budget can be of extra importance if you retire early. Again, you could be retired for several decades. You’ll have to make smart spending choices to make your assets last over that period of time. You can use your budget to preserve your assets and avoid overspending in the early years of retirement, so you have enough assets to live comfortably in the later years.
 
If you don’t have a budget, now may be the time to start using one. You can use apps, software, or even a simple spreadsheet. A financial professional can help you get started.

Plan for healthcare. 

One of your biggest expenses in retirement may be healthcare. According to Fidelity, the average 65-year-old can expect to pay $285,000 out-of-pocket on healthcare in retirement.² Keep in mind, those are costs for someone retiring at 65 and on Medicare. If you retire early, your healthcare costs in retirement could be even greater.
 
Also, you can’t file for Medicare until age 65.³ Again, if you retire early, like in your 50s, you’ll need to have some kind of health coverage until you reach eligibility for Medicare. You may want to explore individual coverage options. Also, consider funding a health savings account so you can cover healthcare costs in a tax-efficient manner.

Minimize risk. 

If you’re going to retire early, that means you have a shorter time horizon to save and invest until you reach retirement. You may need to take a risk averse approach, so you minimize your exposure to market loss.
 
Fortunately, there are vehicles that can help you protect yourself from risk. For instance, a fixed indexed annuity can offer growth potential without exposure to market volatility. You earn tax-deferred interest based on the performance of an external market index, like the S&P 500. If the index performs well, you may earn more interest, up to a limit. If it performs poorly or declines, you earn less interest, but you won’t lose money due to market loss. An annuity could provide stability to your retirement income strategy.
 
Ready to plan your early retirement? Let’s talk about it. Contact us today at Boston Independence Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
 
1https://money.cnn.com/2016/10/24/pf/financial-mistake-budget/index.html
2https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs
3https://www.hhs.gov/answers/medicare-and-medicaid/who-is-elibible-for-medicare/index.html
 
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
19152 - 2019/8/19

Labor Day traditionally marks the end of summer. The kids are back in school. Beach season is over. It may be the last weekend to enjoy warm weather before fall arrives. If you’re like many Americans, you might enjoy your Labor Day weekend with family and friends.
 
Labor Day isn’t just about parties, however. It’s an official national holiday to celebrate the efforts and contributions of the nation’s labor movement. Starting in the 19th century and continuing through the 20th century, labor organizations and workers’ rights groups fought for many of the benefits that are now standard options in many companies. For example, labor unions and workers fought for everything from minimum wage to health insurance to paid time off.
 
One of the biggest employee benefits in the 20th century was the company defined-benefit pension plan. The first defined benefit pensions in the United States were offered to soldiers, firefighters, and city workers in the mid-1800s.¹
 
Private companies started to adopt defined benefit pension programs in the late 1800s. American Express created the first private defined benefit pension plan in 1875. By 1926, there were more than 200 private defined benefit pensions. By 1990, over 40% of the private sector workforce was covered by a defined benefit pension.¹
​
The Decline of Defined Benefit Pensions 

A defined benefit pension is a valuable resource because it provides a steady stream of consistent guaranteed* income through retirement. You don’t have to worry about where your income will come from each month. That means you can enter retirement with a solid foundation of income.
 
Unfortunately, defined benefit pension plans have been in decline over the past several decades. Many companies have transitioned away from defined benefit pensions in favor of defined contribution plans, like a 401(k) plan. In 1998, 59% of Fortune 500 companies offered a defined benefit pension. That figure dropped to 16% by 2017.²
 
In a 401(k) plan, the employee contributes to their own retirement. The employer may make matching contributions. However, much of the burden is on the employee. That makes a 401(k) a more appealing option for many companies.

The Defined Benefit Pension Alternative 

Are you one of the millions of Americans who don't have a defined benefit pension? If so, you’ll have to develop a strategy to generate reliable, predictable income from your own retirement savings. Fortunately, you have options available.

One possible option is an annuity with an optional guaranteed* income rider. Annuities are tax-deferred insurance-based vehicles. You deposit a lump sum of money and then potentially grow your assets over time. The type of growth depends on the type of annuity. Some pay interest. Others, such as variable annuities, let you invest in the financial markets. And there are some, called fixed indexed annuities, that pay interest based on the performance of an external market index.
 
On many of these policies, you can select an optional benefit called a guaranteed* minimum withdrawal benefit. This allows you to withdraw a guaranteed* amount each year. As long as your withdrawal never exceeds the limit, the income is guaranteed* for life. It doesn’t matter how long you live or how the financial markets perform. Your income is guaranteed.*
 
While an annuity isn’t exactly like a defined benefit pension, it can serve as an alternative for income in retirement. Are you ready to see how an annuity might fit your retirement strategy? Let’s talk about it. Contact us today at Boston Independence Group. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
 
1https://www.workforce.com/2016/06/21/the-history-of-retirement-benefits/
 
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
19146 - 2019/8/19