I'm Retiring at 45: Here's How We Prepped for Early Retirement and Our Financial Journey

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Most people retire in their 60s, and some plan to work even later because they have concerns about their future financial stability and their ability to make their nest egg last. Some dream of early retirement, though, and are able to make it happen and buy themselves the freedom to live the life they want for many more years.

One Reddit user is in this situation. The poster has indicated being on track with her husband to retire at the very young age of 45. The poster also shared some details about personal finances to demonstrate the actions taken to be ready and the steps taken to ensure enough confidence to leave work young and rely on savings for many years to come.

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Here are some details on how the original poster (OP) in the Reddit thread is making the dream of early retirement that so many aspire to a viable reality.

Getting your finances ready for early retirement

The OP provided a lot of insight into personal finances and discussed feeling ready to retire. According to the OP, family spending typically amounts to around $8,000 a month, but the couple is planning for $10,000 to give themselves a cushion. Their plan is to live off the cash savings they have, as well as to make withdrawals from their brokerage account and potentially convert some traditional retirement accounts to Roth accounts in order to optimize their tax situation.

The couple has $1.3 million in taxable brokerage accounts, the equivalent in several other retirement plans, and $500,000 in accessible cash. College and cars for their children are also taken care of. They have only a small mortgage with $400,000 in home equity, and they recently converted some stock to cash in order to give them more of a financial buffer if they need it because if it comes time to make withdrawals and the market is down, they don’t want to be forced to sell stocks at a loss to do it.

Based on all of these details, it seems clear that the couple is in pretty good shape. They seem to have thought ahead to prepare for bigger expenses, such as cars and school for their children; they’ve paid off debt and are giving themselves a buffer in spending to have wiggle room in case they end up spending more on hobbies, travel, or other indulgences in retirement. And they’re getting tax help, so they’re obviously not afraid to ask a professional if needed.

They’ve even made plans to ensure that the family’s health insurance needs are covered once an employer is not available to subsidize coverage. The family has health insurance under the Affordable Care Act and is paying $1,226 monthly but expects that subsidies will reduce that cost to $300 monthly after their income declines. This will free up some more wiggle room in their budget and will help to ensure that the family’s funds last.

A lot goes into retiring early — but it’s doable

As this Reddit poster shows, taking the right steps can make it possible to live your dream of early retirement. This includes things like:

• Starting to save early and aggressively build a large nest egg, as this couple already has several million saved.
• Anticipating as many big future expenses as possible before retiring. For example, the OP here thought ahead to the fact that her teenage children will need cars and budgeted for this in her retirement preparations.
• Making a plan for healthcare, as early retirement means you become responsible for covering insurance without assistance.

A number of other Reddit posters praised the OP for the careful planning and for being ready to retire. Some also shared their own early-retirement experiences and urged looking into health insurance coverage options carefully to get a full understanding of what types of expenses will be necessary and how comprehensive the coverage will be.

With thousands in cash, the OP is also well prepared for emergencies without having to sell stock, and with a tax professional to help, the family will look to minimize the amount they’re sending to the government. Of course, the couple will likely want to make a budget to ensure they stick to the $8,000 spending limit they have set. Since they are young and healthy with lots of spare time, they must ensure they don’t fall into the overspending trap.

Others can follow the steps this Redditor took to try to achieve their own early-retirement journey as well, but it will require some discipline and diligent saving to make it happen.