4 Things to Think about when Planning on Retirement at 55

If you are planning on retirement at 55, there are a number of things that you will need to think about. This is a big transition period in your life and you need to make sure that you consider all of the variables. Here are a few things to think about when planning on retirement at 55.

1. Early Withdrawal Penalty

If you are going to retire at the age of 55, you need to consider the fact that you cannot start to gain access to your retirement accounts until you reach the age of 59 1/2. With the 401(k), IRA, and any other type of retirement account, there will be a early withdrawal penalty that you will have to be concerned about. If you take money out of your account before the age of 59 1/2, you are going to pay a 10% early withdrawal penalty on the amount that is withdrawn. You are also going to have to pay income taxes on the money that you withdraw. This penalty could severely cut into your retirement funds.

2. Life Expectancy

You will also need to consider how long you are going to live after the age of 55. Based on this information, you will need to come up with an estimate as to how much money you are going to need to live comfortably. You do not want to cut yourself short, so you need to be generous with your estimates. You also need to take into consideration the impact of inflation over the next several years. The amount of money that you need to live now is not going to be the same amount of money that you need 20 years from now.

3. Health Insurance and Medicare

You are also going to have to give some thought as to how you are going to pay for medical insurance after retiring. Most individuals have some type of a group insurance plan that is offered through their employer. Once you retire, you may not have access to this plan anymore. Many retirees utilize Medicare as their main source of health coverage. If you plan on retiring at the age of 55, you are not going to be eligible to utilize Medicare for another 10 years. This means that you will have to get some type of health insurance that can cover you for the next 10 years at least. Even if you get Medicare, you are going to most likely need some type of supplemental health insurance to fill in the gaps. Make sure that you leave enough money from your retirement funds to pay for this expense.

4. SEPP

The Substantially Equal Periodic Payment program is a way that you can tap into your retirement funds early. With this program, you will take equal payments from your retirement plan until you reach the age of 59 1/2. If you are considering this program, make sure that you have enough money in your retirement portfolio to pay for this and your living expenses after 59 1/2.

 

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