Things to Consider When Retiring Early

For those considering FIRE (Financially Independent, Retire Early), here are some of the items I learned about when retiring early.

• Health insurance costs may increase.  I had family health insurance from my company.  When I retired early, I was eligible for retiree insurance, at a much higher cost.  My spouse and I each paid an amount that was previously just family insurance premiums, so double.  However, my daughter paid the COBRA cost, which is full fare.  A 3.5 X increase.  I don't know the impact for people that need to change to ACA Health Insurance (Obamacare).
  
  
• Know where funds for expected expenses are coming from.  I had not thought much about this.  When I retired, all of our expenses were paid from my paycheck.   We had to start using funds from interest/dividend payments, and savings.  We did not use any funds from retirement accounts.   I did do a few part time jobs, but they may have covered a months expenses at most over the year.  I did work a temporary full time job for 11 months, and declined an permanent extension since I was retired.  Also, I had some stock options that covered some annual expenses.
  
  
• Understand that Social Security payments may be significantly reduced.  I did not think about this when I retired early.  Social Security payments are calculated based on the highest 35 years of wage income.   If one only works 25 years, 10 years of income will be counted as $0 and the resulting payment will be lower.
  
  
• Consider when to start Social Security payments.  Originally, I estimated the ability to retire without ever getting Social Security.  Then I assumed I would wait until 70 to maximize my benefit.  I ended up starting at 64 due to auxiliary benefits my children and spouse were eligible to receive.
  
  
• Tax planning can significantly reduce tax liability.  I took advantage of being able to be in lower tax brackets than when I was working.  When earning a W-2 paycheck, I had little opportunity to make adjustments to reduce our tax liability.   With no paycheck, I could modify how much taxable income to take, in order to be in a lower tax bracket that allowed us maximize tax credits and take more deductions.  In addition, we did Roth Conversions and paid taxes at a lower tax bracket than we expect to have when RMDs are required.
  
  
• Protect one's time.   Other people often see retired persons as "free work" for their projects, whether it be with a non-profit or helping with their kids, since the are still "too busy" with work. I learned how to say "No" graciously many times.

GLTA thinking about retiring early.   For me, it was much less money and much more time.  Looking back, it was worth the tradeoff.

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This is not financial nor early retirement advice. Please consult a professional advisor.

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