6 keys to a great early retirement

Granted, some of your living costs will go down, as you quit buying work clothes, fueling up with that double espresso on the way to work and paying $7 for a turkey sandwich for lunch. Your at-home food costs can go down, too, because you'll have more time to cook and less need to rip open a package of (expensive) ready-to-eat at the end of your commute. But travel costs may go up, simply because you have more time.

Then there's the question of where to live. If you have more than one home, you need to establish permanent residency somewhere for both tax and estate planning, says Reginald Tilley, a certified financial planner in Bellevue, Wash. You may remember that there was a big to-do about the first George Bush establishing residency in Texas rather than in Maine, where he owned a substantial home, because Texas had no state income tax. Some states have no property taxes, some have no sales taxes and some have high taxes of every kind. North Carolina and Florida even have an intangibles tax, which hits the value of investments.

What to do, what to do

So now that you're free, what are you going to do with your time? Some people go back to their old jobs part-time to maintain friendships and collect a little spending money. Some head off in a whole new direction. Joe Cerullo, 60, of Columbia, Mo., retired at 54 due to a downsizing from his federal government job. He had been in the military, then worked as an aircraft ordnance supervisor teaching fighter pilots about electronic systems. He had a beeper, a radio, and a slew of employees to manage. Now he's a landscaper, and enjoying it immensely.

"I want to be held accountable, but I'm not interested in opening the shop or closing the shop, and I don't want to get into managing people," he says. "I just want something to occupy my time. I call it toy money."

If you're the type of person who has worked hard enough and saved enough to retire early, there's a good chance you haven't spent a lot of time on non-work activities, Tilley says. "If they've been so wrapped up in work to get to this point, there's a whole set of questions they're going to have to deal with," he says. "Some of these types of people have trouble going on vacation without champing at the bit."

Tilley recommends getting a psychological evaluation that tells you more about your personality and about what kinds of challenges will give you a sense of personal worth and fulfillment, even if you're not earning a paycheck from it.

For some, it's volunteering as a mentor, for others it's playing sports or working at the local hardware store for minimum wage. Quitting cold turkey is tough, he says, so it's important to segue into other activity.

Part-time work is more of an option now that you can earn Social Security while drawing a paycheck. But there are others, like journalist George Gunset of Chicago, who have no intention of working. He took retirement extra early, just to have the summer off.

"I made up my mind not to do a darn thing all summer," he says, "and I did pretty well, although my wife made sure some things got done."

Gunset is someone who will probably be successful in retirement, because he is passionate about his hobbies. He has written a family history for one branch of his family, and is working on another. He's also taking a French course so he can go to France and look for further family history, and he wants to write a novel or two, although he doesn't care if they ever get published.

"The biggest challenge for some of these people is going to be how to spend that time," says Tilley, "because if you get six months into this thing and you find that you're bored, you have no sense of purpose, there's a big void in your life, you're probably at more risk from an emotional point of view than you'll ever be from a financial point of view."

Richard Davies, 65, of Tellico Village, Tenn., isn't at risk. He retired from his job as vice president of manufacturing for Goodyear Tire & Rubber when he was 58. A brother had died of cancer, and he didn't want to spend his remaining years working. Two years later, he was diagnosed and treated for colon cancer himself. Now more than five years out, he is so healthy that he competes in basketball, track and tennis in the Senior Games.

"Being a cancer survivor, I thought that in the Senior Games I could compete with people my own age," says Davies, who was a guard on the 1964 United States Olympic basketball team. "I thought that if I did well, or more important, if I could improve each year or at least stay the same, then I must be doing OK from a physical standpoint."

Davies built an eight-bedroom home on a lake, where he boats when he isn't golfing. He even had a 17-seat theatre built into the house. It's everything he hoped retirement would be.

"I really stay busy," he says. "I often have to cancel my golf games on the weekends to go play in tennis tournaments."

Updated July 29, 2008

< previous |  1 | 2 |