A Q&A With a Schwab Expert on Retiring Early

Hey everyone, we have a fun detour for you this week — a Q&A we recently did with Rob Williams, managing director of financial planning at Charles Schwab. Our news editor, Julia Glum, asked him for early-retirement tips and actionable steps you can take now to make sure you’re in a good place should you need to stop work tomorrow.

Money's questions are in bold, followed by Williams' replies. Enjoy!

Why should people be prepared for the possibility that they'll have to retire before expected? How would it affect their financial plan?

Each of us may have an ideal retirement age in mind. But it may not always work out as planned. Due to an unforeseen change in health, decisions of an employer, or other factors, it’s possible retirement — or at least a change in work circumstances — may occur earlier than expected.

We suggest starting with a plan that has a targeted retirement age. But stress-test it, as well, to determine if you’re prepared and how you might respond, for the possibility of retiring earlier. Reviewing disability insurance is important in case of illness. It also pays to continue to invest in new skills in case a transition in employers or work is needed to support your finances. 

We suggest that savers plan to spend about what they’re spending prior to retirement, minus what they’re saving for retirement, or even a bit more, as they transition into the first years of retirement.

If you have to retire early, what steps would you recommend?

Start saving and investing more now if you plan to retire earlier than full retirement age, which is currently age 67, for Social Security. If you plan, or are driven, to leave employment earlier, the earlier the better to create your contingency plans, including saving enough to supplement Social Security and live comfortably in full or partial retirement.

How much does this advice change based on how old the person in question is? For example, are the steps a 30-year-old may want to take to prepare for an early retirement different from those a 60-year-old should take?

A 30-year-old should start saving and investing now. Time is on your side, and Social Security is not designed to pay for the full cost of retirement. We can each take ownership in our finances to make a transition from work to retirement possible.

For those nearing traditional retirement age, continue to save, invest, and dedicate resources toward staying relevant in the workforce. A phased retirement could make sense also, on your own, or working with an employer, to determine how to continue to work while moving toward full retirement. 

Above all, be prepared for whatever comes, both emotionally and financially. There are a limited number of things we can control as individuals. A forced early retirement or transition from a long-term employer may be one of them. Part of planning is planning for things we don’t hope will happen but could. Factor these possibilities and risks into your financial plans.

— Mike Ayers, executive editor

Money's investing editor, Jordan Chussler, recently reported on a survey from the Financial Planning Association and Journal of Financial Planning that found 89% of financial planners use and/or recommend ETFs. Do you invest in ETFs? Let us know your thoughts on their growth — and how you see this asset fitting in your portfolio long-term.

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