Beautiful Virgin Islands

Friday, Sep 05, 2025

6 Signs You Are Ready to Retire Early

6 Signs You Are Ready to Retire Early

If you are thinking about retiring younger than age 65, look for these six signs that you're prepared financially.
Ready to Retire?

If you're considering retiring early, you'll forego not only the headaches of working but also the additional earnings that could have made your retirement even more comfortable. Make sure you're truly ready before you leave.

Here are six signs you may be able to retire early instead of continuing to work.

1. Your Debts Are Paid Off
If your mortgage is paid off and you don't have any loans, credit lines, large credit card balances, or other debt, you won't have to worry about making large payments during retirement. This leaves your savings and retirement income available to enjoy life and free to use in the event of an emergency.

2. You Have Ample Savings
You planned and set a goal for retirement savings. Now your investments meet or exceed the amount you were hoping to save. This is another good sign you could take early retirement.


If you didn't plan for early retirement, you will need to recalculate how long your savings will last. Also, depending on your age, you may not yet be eligible for Social Security or Medicare. Your savings will need to cover your expenses until you reach the eligible age.

"Think 'Rule 25.' Prepare to have 25 times the value of your annual expenses," says Max Osbon, partner at Osbon Capital Management, in Boston. "Why 25? It's the inverse of 4%. At that point, you only need to achieve a 4% return per year to cover your annual expenses in perpetuity."

3. You Can Get At Your Savings
No one likes to pay unnecessary penalties.

If your 59th birthday was at least six months ago, you're eligible to take penalty-free withdrawals from any of your 401(k) plans. These policies generally apply to other qualified retirement plans but there are exceptions.

For instance, the 457 plan doesn't have an early withdrawal penalty. But remember that you'll still pay income tax on your withdrawals.

There's also good news for wannabe early retirees with 401(k)s. If you continue working for your employer until the year that you turn 55 (or after), the IRS allows you to withdraw from only that employer's 401(k) without penalty when you retire or leave, as long as you leave it at that company and don't roll it into an IRA.

"There is a caution, however: If an employee retires before age 55 [except as noted above], the early retirement provision is lost and the 10% penalty will be incurred for withdrawals before age 59½," says James B. Twining, CFP, founder and CEO of Financial Plan Inc., in Bellingham, Washington.

The third option for penalty-free retirement plan withdrawals is to set up a series of substantially equal withdrawals over at least five years, or until you turn 59½, whichever is longer. Like withdrawals from a 457 plan, you'll still have to pay income taxes on your withdrawals.

If your retirement plans include any of the above penalty-free withdrawal options, it's another point in favor of leaving work early.

4. Your Healthcare Is Covered
Healthcare can be incredibly costly, and early retirees should have a plan in place to cover the costs before becoming eligible for Medicare at age 65. If you have coverage through your spouse's plan or if you can continue to get coverage through your former employer this is another sign that early retirement could be a possibility for you.

Keep in mind that COBRA may extend your healthcare coverage for a period of time after leaving your job, although your costs with COBRA may be higher than other options.

Another option for early retirees is to purchase private health insurance. If you have a Health Savings Account (HSA), you can use tax-free distributions to pay for your out-of-pocket qualified medical expenses no matter what age you are (although if you leave your job, you won't be able to continue making contributions to the HSA).

5. You Can Live on Your Budget
Retirees living on fixed incomes, including pensions or retirement plan withdrawals, usually have lower monthly incomes than they did when they were working.

Try practicing sticking to your reduced retirement budget for at least a few months before you actually retire. You'll get a sense of just how easy or difficult it would be to make that lower budget permanent.

"Humans do not like change, and it is hard to break old habits once we have become accustomed to them. By 'road-testing' your retirement budget, you are essentially teaching yourself to develop daily habits around what you can afford in retirement," says Mark Hebner, founder and president of Index Fund Advisors Inc., in Irvine, California, and author of Index Funds: The 12-Step Recovery Program for Active Investors.

6. You Have a New Plan
Leaving work early to spend long days with nothing to do will lead to an unhappy early retirement. Having a defined plan-or even the outline of a daily routine-can help you prepare.

Perhaps you'll replace sales meetings with a weekly golf outing or a volunteer gig, and add daily walks or trips to the gym. Plan a long-overdue trip or take classes to learn something new.

If you can easily think of realistic, non-work-related ways to enjoyably pass your days, early retirement could be for you. In the same way you test-drive your retirement budget, try taking a week or more off work to spend your days as you would in retirement. If you become bored with long walks, daytime TV, and hobbies within a week, you'll certainly get antsy in retirement.

The Bottom Line
They're questions nearly all young and middle-aged workers have asked themselves: Should I leave my job and retire early? What would I need? How do I know I'm ready?

When it comes to deciding if you should retire early, there are several signs to watch for. The signposts also point to a number of plans you can make now to increase the chances that you could fulfill this dream if you end up wanting (or needing) to do so.

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Putin Celebrates ‘Unprecedentedly High’ Ties with China as Gazprom Seals Power of Siberia-2 Deal
China Unveils New Weapons in Grand Military Parade as Xi Hosts Putin and Kim
Queen Camilla’s Teenage Courage: Fended Off Attempted Assault on London Train, New Biography Reveals
Scottish Brothers Set Record in Historic Pacific Row
Rapper Cardi B Cleared of Liability in Los Angeles Civil Assault Trial
Google Avoids Break-Up in U.S. Antitrust Case as Stocks Rise
Couple celebrates 80th wedding anniversary at assisted living facility in Lancaster
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
The White House on LinkedIn Has Changed Their Profile Picture to Donald Trump
"Insulted the Prophet Muhammad": Woman Burned Alive by Angry Mob in Niger State, Nigeria
Trump Responds to Death Rumors – Announces 'Missile City'
Court of Appeal Allows Asylum Seekers to Remain at Essex Hotel Amid Local Tax Boycott Threats
Germany in Turmoil: Ukrainian Teenage Girl Pushed to Death by Illegal Iraqi Migrant
United Krack down on human rights: Graham Linehan Arrested at Heathrow Over Three X Posts, Hospitalised, Released on Bail with Posting Ban
Asian and Middle Eastern Investors Avoid US Markets
Ray Dalio Warns of US Shift to Autocracy
Eurozone Inflation Rises to 2.1% in August
Russia and China Sign New Gas Pipeline Deal
China's Robotics Industry Fuels Export Surge
Suntory Chairman Resigns After Police Probe
Gold Price Hits New All-Time Record
Von der Leyen's Plane Hit by Suspected Russian GPS Interference in an Incident Believed to Be Caused by Russia or by Pro-Peace or by Anti-Corruption European Activists
UK Fintechs Explore Buying US Banks
Greece Suspends 5% of Schools as Birth Rate Drops
Apollo to Launch $5 Billion Sports Investment Vehicle
Bolsonaro Trial Nears Close Amid US-Brazil Tension
European Banks Push for Lower Cross-Border Barriers
Poland's Offshore Wind Sector Attracts Investors
Nvidia Reveals: Two Mystery Customers Account for About 40% of Revenue
Woody Allen: "I Would Be Happy to Direct Trump Again in a Film"
Pickles are the latest craze among Generation Z in the United States.
Deadline Day Delivers Record £125m Isak Move and Donnarumma to City
Nestlé Removes CEO Laurent Freixe Following Undisclosed Relationship with Subordinate
Giuliani Seriously Injured in Accident – Trump to Award Him the Presidential Medal of Freedom
EU is getting aggressive: Four AfD Candidates Die Unexpectedly Ahead of North Rhine-Westphalia Local Elections
Lula and Putin Hold Strategic BRICS Discussions Ahead of Trump–Putin Summit
WhatsApp is rolling out a feature that looks a lot like Telegram.
Investigations Reveal Rise in ‘Sex-for-Rent’ Listings Across Canada Exploiting Vulnerable Tenants
Chinese and Indian Leaders Pursue Amity Amid Global Shifts
European Union Plans for Ukraine Deployment
ECB Warns Against Inflation Complacency
Concerns Over North Cyprus Casino Development
Shipping Companies Look Beyond Chinese Finance
Rural Exodus Fueling European Wildfires
China Hosts Major Security Meeting
Chinese Police Successfully Recover Family's Savings from Livestream Purchases
Germany Marks a Decade Since Migrant Wave with Divisions, Success Stories, and Political Shifts
Liverpool Defeat Arsenal 1–0 with Szoboszlai Free-Kick to Stay Top of Premier League
Prince Harry and King Charles to Meet in First Reunion After 20 Months
Chinese Stock Market Rally Fueled by Domestic Investors
×