IF YOU TAKE EARLY retirement, there are three key issues you need to worry about. First, and most important, do you have enough saved? In this part of the guide, we talk about a 4% portfolio withdrawal rate. But if you’re quitting the workforce in your 50s, you might play it a little safer and assume not a 4% withdrawal rate, but 3% instead.
Second, if you retire before age 59½, you could potentially face tax penalties if you tap your retirement accounts. There are ways around that, as you’ll learn in the chapter on taxes. Still, if your goal is early retirement, you might sidestep potential problems by building up your regular taxable account.
Third, if you retire before you turn age 65 and become eligible for Medicare, you’ll likely need to buy your own health insurance. That’s become easier, thanks to the health care exchanges launched as part of the Affordable Care Act, as well as the advance premium tax credit. You might also cover yourself for 18 months by taking advantage of the so-called COBRA coverage that may be offered by your employer. For more on both topics, check out the discussion of health insurance.
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