Single, Female, and Looking to Retire Early? 5 Things to Think About

Maura Schauss |

By Ann D. Blakey, CFP®

If you’re a single female, you may assume retiring early is out of reach for you. Your income needs to cover all your household expenses, leaving less for savings. And, if you are like many women, you may have taken time out of the workforce for family needs.  That’s just one reason why you may have earned less over your career than a man who remained in the workforce. Whether you want to stop working entirely or leave a more lucrative career to pivot to a second act, here are five things to keep in mind.

Why Are You Retiring Early?

Before you start running the numbers on whether you can step away from the working world, think about why you want to retire early. Is it because you are burned out from working? Or do you want to help care for a family member such as a new grandchild?  Is this a permanent step or perhaps a sabbatical?  Or are you looking to embark on a second career? All of these are valid reasons, but they require you to consider the impact your decision will have on your finances and your lifestyle. Retiring early with a well-thought-out plan can prevent regrets years down the road, when it may be too late to re-enter the workforce.

Your Retirement Savings

Many of us see our retirement savings goal as hitting a predetermined dollar figure, then walking away from work. In reality, instead of focusing on a static lump sum figure, it’s more important to determine the monthly income that can be generated from your retirement savings.

To do that, first add up all the money in all your retirement accounts (401k, IRA, etc.) and estimate the monthly income from any pensions you expect to receive.  Keep in mind that monthly pension payments will typically be reduced if you retire early. Don’t forget to factor in your monthly Social Security benefits estimated by using the Social Security benefits calculator. Though you can start taking Social Security benefits as early as age 62, your monthly payout will increase for each year you delay starting benefits until age 70.

There are a number of online financial calculators that can provide an estimate of how much your retirement savings will provide in income each month, as well as how many years of retirement they will cover. A financial advisor can also run the numbers and provide you with figures and advice tailored to your situation.  One critical consideration will be how much risk you will be willing to take with your retirement savings.  As your timeline shortens, you will need to consider both how much income you need and how much risk are comfortable taking.

Your Retirement Expenses

In addition to projecting your expected retirement income, you will also need to estimate how much you will spend in retirement. Unless you’re planning a big lifestyle change (moving to a new locale, for example), you can generally work off your current monthly budget with some tweaks. Don’t forget to account for increased leisure spending if you plan to travel more or pursue your passion.  If you have never really followed a monthly budget, take the time to add up how much you typically spend each month and year.  Without a salary, this expense figure is the key to how long your assets will last you in retirement.

Retirement Healthcare Expenses

If you’re currently covered under a workplace healthcare plan and looking to stop working before you turn 65, you will likely need to secure your own healthcare coverage until you are eligible for Medicare starting at age 65. Factor in the cost of paying for your own healthcare coverage which can be several hundreds of dollars or more a month.  In addition, consider what options you will have should you need expensive long-term care as you age.  An insurance or financial advisor can help you determine whether your assets could cover such a need.

Bridging the Retirement Income Gap

What if, after running the numbers, you realize your current retirement savings won’t cover your expected monthly expenses in retirement? To boost savings, consider working a few more years. Or explore the possibility of consulting in your area of expertise or working part-time to close the gap between your savings and expenses.  Depending on your timeline, you could also consider adjusting the risk profile of your investments. 

Also take a hard look at your major expenses. If you live in a high-cost area, would moving somewhere less expensive cut your monthly outflow? Not commuting to an office five days a week can free up where you are able to live. Can you sell your car if you no longer need it, or switch to a less expensive model?

Ready for Early Retirement?

Running the retirement numbers for yourself can be complicated. At Washington Wealth Advisors, together we can review your options and build a savings, investing, and spending plan. If you’re thinking of early retirement or looking for peace of mind that you’re on track to reach other goals, we are ready to help. Please call 703.584.2700, email clientservices@washingtonwealthadv.com, or schedule a complimentary initial consultation to connect with us. 

 

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About Washington Wealth Advisors

Washington Wealth Advisors is a Fee-Only registered investment advisory firm serving busy families, executives, women building wealth and small business owners.  We provide Wealth Advisory Services – financial planning coupled with asset management – guided by a personalized investment strategy based on each client’s unique goals. Our unbiased advice, independent approach, and proactive investment management help to support our client’s overall financial peace of mind.