While early retirement may seem like a dream come true, it can quickly turn into a nightmare. Early retirees who are unprepared or have not planned for the long term may find themselves headed back to work.
Be Aware: 6 Key Signs You’ll Run Out of Retirement Funds Too Early
Find Out: 4 Housing Markets That Have Plummeted in Value Over the Past 5 Years
In a recent video, personal finance expert Rachel Cruze listed six questions you should ask yourself before you retire early.
Why Do You Want To Retire Early?
The first thing those who want to retire early should be asking themselves is why they want to do so. Cruze explained that it is important to have a purpose when deciding to pull the plug on a 9-to-5 with a steady income. She noted that studies show physical and mental decline can happen rapidly in retirement, and data backs her up.
As Harvard Business Review reported, many studies have linked retirement to stress on mental health, with one analysis indicating a 28% rate of depression among retirees and another finding a 6% to 9% decline in mental health over six years post-retirement. Instead of rushing into retirement, Cruze advocated trying to find work that you love.
Check Out: Here’s How Much You Need To Retire With a $100K Lifestyle
Do You Have a Great Financial Advisor in Your Corner?
The next question she said to ask is whether you have a great financial advisor. She explained that retirees will want to have things like estate plans and insurance policies in place and that a financial advisor can help.
Across the board, money experts agree that working with a professional can help to ensure financial stability throughout retirement. As reported by Fidelity Investments, securing professional financial advice can increase long-term portfolio returns up to 5.1%, depending on the circumstances.
Do You Have Enough Money To Cover Monthly Expenses?
Next, Cruze encouraged her subscribers to ask themselves whether they have enough money to cover their monthly expenses. She said hopeful early retirees need to think long term, looking at the big picture and ensuring they can afford the lifestyle they may want to have 20 years from now.
Do You Have Enough Money To Do the Things You Want To Do?
The bestselling author also wants early retirees to make sure they have enough money saved for retirement to do the things they want to do, not just pay bills.
The amount of money needed to retire comfortably in the U.S. differs substantially depending on the state. According to Vanguard, some experts believe that a person needs between eight and 10 times their annual salary to retire, while others say a person needs between 65% to 80% of their pre-retirement income for every year during retirement.
Is Your House Paid Off?
Early retirees may also want to consider ditching their mortgage payment, according to Cruze.
She explained that while making a mortgage payment can be done during retirement, it is much easier to have the house paid off. The biggest monthly expense most people have, she noted, is for housing. Retirement money, therefore, can go further without a large mortgage payment.
What Do You Want Your Financial Legacy To Be?
Finally, Cruze suggested early retirees ask themselves what they want their financial legacy to be. She encouraged people to be intentional about their money, which can be achieved in several ways, including setting it aside for future generations or spending it now to help others.
More From GOBankingRates
- 9 Costco Items Retirees Need To Buy Ahead of Fall
- 5 Ways 'Loud Budgeting' Can Make You Richer, According to Vivian Tu
- Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy
- How Much Money Is Needed To Be Considered Middle Class in Your State?
This article originally appeared on GOBankingRates.com: Rachel Cruze Says To Ask These 6 Questions Before You Retire Early
