You've worked 30-to-35 years for the same employer — or for maybe several employers. You’re tired of the politics. You’re disgusted with trying to be an innovator, only to have your ideas dismissed by a superior who thinks that the word change applies to what he keeps in his pocket. You've accepted the fact that you’ll never be anyone’s CEO. Or if you've already made it that far, the challenge is dead in the water for you. It’s time to travel, spend more time with your family, and do the things you've always wanted to do.
You’re 60, maybe even 55. You've socked away a hefty portion of your salary, and then some in an employer-matching 401(k) throughout your working years; and though money remains important to you, you’re not overly concerned about it. So what’s keeping you? Just pull the rip cord, and let that golden parachute ease you into your new life.
But wait a minute; slow down! You've been at it too long to walk out on an impulse. Unless you've been offered the option of an early retirement because you’re being given the axe, you still have control over whether you can stay or leave. If you have to leave, you’ll have your work cut out for you. Let’s look at five important steps you must take before you bid goodbye to your employer through early retirement.
Get Rid of Your Debt
Don’t be fooled by the low monthly payments you’re shelling out for your credit cards. The interest rate can creep up on you; and won’t you feel cheated when you’re working from a reduced income and the monthly payments start to balloon? Besides, if your retirement is paid from an income fund, there’s a good chance that you’re receiving that income on 4-to-8% of the principal. Not an impressive deal if you’re paying between 9 and 25.9% on credit card debt on a significant sum of money.
Calculate How Much You’ll Need to Live on
Make sure you work out the numbers for the rest of your life. Yes, of course you don’t know how long you’re going to live. Nobody does. But you can use life-expectancy tables, as well as your family history to make a decent guess. This is no time to put your head in the sand. (Get over it: odds favor that you and I and everybody we know won’t live to 150. It should be some consolation though that if you’re currently in your 50s or 60s, your life expectancy is higher since you've already made it this far.) You’re trying to get at an approximate year, within a margin of error of about 6-7 years.
You don’t need a financial planner to do the numbers. There are some reasonably simple and reliable online formulas for doing so. Here’s one from CNN Money.
Learn to Live More Frugally
If you need to impress your friends by maintaining a big house and driving a luxury car, maybe it’s time to consider finding more sincere and devoted friends. Here’s a better idea though. Downgrade to a more modest home, and sell the luxury car — then bank the extra bucks. More sincere and devoted friends will find you. Or your current crop of friends just might surprise you. Maybe you don’t need to impress them, and your bad case of keeping up with the Joneses was all your idea to from the start. Another insight you’ll develop from living frugally is one you should have had all along: it’s not how much you make that counts; it’s how much you get to keep.
Don’t Rule Out the Prospect of Temporary or Part-Time Work
If you’re disappointed in yourself at this point because you had thought you wouldn't have to work by now, don’t sweat it. Again, you don’t have to prove anything to anybody. Besides, now that you’re no longer climbing a career ladder, you’ll find you can approach temporary or part-time work with a sounder attitude. You’ll enjoy your work for its intrinsic value, and you’ll feel free to enjoy mentoring younger employees.
Retire with a Plan in Place
This is especially important if your retirement is a forced one. The last thing you want is to leave with a feeling of being pushed through the chute. Don’t worry if you can’t come up with a plan for the rest of your life. A one or two-year plan will be sufficient. At this point, some short-term help from a career counselor or may prove well worth the expense.
But whatever you do, don’t panic. The most important thing you can do is to maintain a reasonable sense of control. If you do, and put the above tips to work, your post-retirement life will fall in place before you know it.