London Daily

Focus on the big picture.
Friday, Oct 03, 2025

6 Signs You Are Ready to Retire Early

6 Signs You Are Ready to Retire Early

If you are thinking about retiring younger than age 65, look for these six signs that you're prepared financially.
Ready to Retire?

If you're considering retiring early, you'll forego not only the headaches of working but also the additional earnings that could have made your retirement even more comfortable. Make sure you're truly ready before you leave.

Here are six signs you may be able to retire early instead of continuing to work.

1. Your Debts Are Paid Off
If your mortgage is paid off and you don't have any loans, credit lines, large credit card balances, or other debt, you won't have to worry about making large payments during retirement. This leaves your savings and retirement income available to enjoy life and free to use in the event of an emergency.

2. You Have Ample Savings
You planned and set a goal for retirement savings. Now your investments meet or exceed the amount you were hoping to save. This is another good sign you could take early retirement.


If you didn't plan for early retirement, you will need to recalculate how long your savings will last. Also, depending on your age, you may not yet be eligible for Social Security or Medicare. Your savings will need to cover your expenses until you reach the eligible age.

"Think 'Rule 25.' Prepare to have 25 times the value of your annual expenses," says Max Osbon, partner at Osbon Capital Management, in Boston. "Why 25? It's the inverse of 4%. At that point, you only need to achieve a 4% return per year to cover your annual expenses in perpetuity."

3. You Can Get At Your Savings
No one likes to pay unnecessary penalties.

If your 59th birthday was at least six months ago, you're eligible to take penalty-free withdrawals from any of your 401(k) plans. These policies generally apply to other qualified retirement plans but there are exceptions.

For instance, the 457 plan doesn't have an early withdrawal penalty. But remember that you'll still pay income tax on your withdrawals.

There's also good news for wannabe early retirees with 401(k)s. If you continue working for your employer until the year that you turn 55 (or after), the IRS allows you to withdraw from only that employer's 401(k) without penalty when you retire or leave, as long as you leave it at that company and don't roll it into an IRA.

"There is a caution, however: If an employee retires before age 55 [except as noted above], the early retirement provision is lost and the 10% penalty will be incurred for withdrawals before age 59½," says James B. Twining, CFP, founder and CEO of Financial Plan Inc., in Bellingham, Washington.

The third option for penalty-free retirement plan withdrawals is to set up a series of substantially equal withdrawals over at least five years, or until you turn 59½, whichever is longer. Like withdrawals from a 457 plan, you'll still have to pay income taxes on your withdrawals.

If your retirement plans include any of the above penalty-free withdrawal options, it's another point in favor of leaving work early.

4. Your Healthcare Is Covered
Healthcare can be incredibly costly, and early retirees should have a plan in place to cover the costs before becoming eligible for Medicare at age 65. If you have coverage through your spouse's plan or if you can continue to get coverage through your former employer this is another sign that early retirement could be a possibility for you.

Keep in mind that COBRA may extend your healthcare coverage for a period of time after leaving your job, although your costs with COBRA may be higher than other options.

Another option for early retirees is to purchase private health insurance. If you have a Health Savings Account (HSA), you can use tax-free distributions to pay for your out-of-pocket qualified medical expenses no matter what age you are (although if you leave your job, you won't be able to continue making contributions to the HSA).

5. You Can Live on Your Budget
Retirees living on fixed incomes, including pensions or retirement plan withdrawals, usually have lower monthly incomes than they did when they were working.

Try practicing sticking to your reduced retirement budget for at least a few months before you actually retire. You'll get a sense of just how easy or difficult it would be to make that lower budget permanent.

"Humans do not like change, and it is hard to break old habits once we have become accustomed to them. By 'road-testing' your retirement budget, you are essentially teaching yourself to develop daily habits around what you can afford in retirement," says Mark Hebner, founder and president of Index Fund Advisors Inc., in Irvine, California, and author of Index Funds: The 12-Step Recovery Program for Active Investors.

6. You Have a New Plan
Leaving work early to spend long days with nothing to do will lead to an unhappy early retirement. Having a defined plan-or even the outline of a daily routine-can help you prepare.

Perhaps you'll replace sales meetings with a weekly golf outing or a volunteer gig, and add daily walks or trips to the gym. Plan a long-overdue trip or take classes to learn something new.

If you can easily think of realistic, non-work-related ways to enjoyably pass your days, early retirement could be for you. In the same way you test-drive your retirement budget, try taking a week or more off work to spend your days as you would in retirement. If you become bored with long walks, daytime TV, and hobbies within a week, you'll certainly get antsy in retirement.

The Bottom Line
They're questions nearly all young and middle-aged workers have asked themselves: Should I leave my job and retire early? What would I need? How do I know I'm ready?

When it comes to deciding if you should retire early, there are several signs to watch for. The signposts also point to a number of plans you can make now to increase the chances that you could fulfill this dream if you end up wanting (or needing) to do so.

Newsletter

Related Articles

0:00
0:00
Close
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
FBI Removes Agents Who Kneeled at 2020 Protest, Citing Breach of Professional Conduct
Trump Alleges ‘Triple Sabotage’ at United Nations After Escalator and Teleprompter Failures
Shock in France: 5 Years in Prison for Former President Nicolas Sarkozy
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
BNP Paribas Abandons Ban on 'Controversial Weapons' Financing Amid Europe’s Defence Push
Typhoon Ragasa Leaves Trail of Destruction Across East Asia Before Making Landfall in China
The Personality Rights Challenge in India’s AI Era
Big Banks Rebuild in Hong Kong as Deal Volume Surges
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Arnault Denounces Proposed Wealth Tax as Threat to French Economy
Study Finds No Safe Level of Alcohol for Dementia Risk
Denmark Investigates Drone Incursion, Does Not Rule Out Russian Involvement
Lilly CEO Warns UK Is ‘Worst Country in Europe’ for Drug Prices, Pulls Back Investment
Nigel Farage Emerges as Central Force in British Politics with Reform UK Surge
Disney Reinstates ‘Jimmy Kimmel Live!’ after Six-Day Suspension over Charlie Kirk Comments
U.S. Prosecutors Move to Break Up Google’s Advertising Monopoly
Nvidia Pledges Up to $100 Billion Investment in OpenAI to Power Massive AI Data Center Build-Out
U.S. Signals ‘Large and Forceful’ Support for Argentina Amid Market Turmoil
Nvidia and Abu Dhabi’s TII Launch First AI-&-Robotics Lab in the Middle East
Vietnam Faces Up to $25 Billion Export Loss as U.S. Tariffs Bite
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Indonesia Court Upholds Military Law Amid Concerns Over Expanded Civilian Role
Larry Ellison, Michael Dell and Rupert Murdoch Join Trump-Backed Bid to Take Over TikTok
Trump and Musk Reunite Publicly for First Time Since Fallout at Kirk Memorial
Vietnam Closes 86 Million Untouched Bank Accounts Over Biometric ID Rules
×