By Alex Albert, CFP®


  • Americans want to retire earlier than ever (by age 62)
  • Most don’t have the savings to support their expected retirement lifestyle
  • We highlight several “must dos” for those planning early retirement

Estimated read time: 4 mins

COVID-19 has changed our attitudes and behaviors as individuals and as a society. It has caused us to hold our loved ones a little tighter and re-assess what we value most in our lives, including our expectations for retirement.

In fact, a recent survey by the Federal Reserve Bank of New York found that Americans plan to retire earlier than ever━by age 62 (or sooner). However, another recent survey found that most Americans over 40 don’t have the savings to support their expected retirement income.

Planning for retirement is challenging enough, especially for those who didn’t adequately save in their 20s, 30s, and 40s. So retiring by your late 50s or early 60s requires immediate planning and action. We recommend breaking out goals and action steps into a concrete checklist. What follows are some top priorities if you’re among those planning early retirement.

Step 1: Maximize Retirement Savings

This one’s a no brainer. You need to immediately maximize your contributions if able. Current tax laws allow those 50 and older to make additional “catch-up” contributions each year. For 401(k), 403(b) and most 457 plans, this means an extra $6,500 on top of the standard limit of $19,500 in 2021. For Traditional and Roth IRAs, the catch-up contribution is $1,000 for a total of $7,000. For SIMPLE IRAs, it’s an extra $3,000 for a total contribution limit of $16,500 this year.

Step 2: Review and Recalibrate Your Asset Allocation (Often)

At a younger age, you were likely well-advised to set your portfolio to “growth” mode and you rarely re-visited your strategy. That’s because you had a significant amount of time before you needed to draw on your retirement savings. As retirement nears, and the time horizon narrows, you should revisit your asset allocation. The reason: To avoid having to liquidate riskier assets ─ like stocks and real estate ─ during weak market periods. Selling equity positions at a low locks in the losses and puts you at risk of missing the potential recovery. We don’t suggest becoming “too” conservative before retirement, but there should continuously be enough in low risk assets to cover a few years of expenses.

Step 3: Decide a Social Security Game Plan

For most of us, the days of defined benefit plans are behind us, as private pensions have been replaced with defined contribution plans such as 401(k)’s and 403(b)’s. Now, we are left with Social Security for guaranteed income. The monthly Social Security benefit is determined by your lifetime earnings and your age when you begin withdrawing. While you’re eligible to withdraw at 62, the benefit amount significantly increases each year you wait until age 70, at which time you’re eligible to receive the maximum amount. In 2021, the maximum Social Security benefit is $2,324 per month for those at 62 and as much as $3,895 per month for those who start at 70. (For those interested, the average retiree benefit was $1,543 per month this year.)

It’s a significant swing, so it’s an important retirement decision. Although it may seem logical to wait for a higher benefit, the benefit of withdrawing at 62 may be greater for those who retire early and/or those who don’t have longevity in their family. We recommend planning ahead of time and determining your annual benefit amount before retirement by creating an account with the Social Security Administration or by making an in-person appointment with your local SSA office.

Step 4: Determine Your Income Need

As you approach retirement, it’s important to monitor expenses to understand your monthly income needs. Expenses should be broken down into “essential needs” (housing, groceries, utilities, etc.) and “lifestyle spending” such as travel and hobbies. After monitoring for a full year, you should have a good idea of how much income you will need for the essentials and how much you will have reserved for leisure or luxuries.

We recommend using a budgeting template to help, or at the very least exporting all your expenses for a year from financial accounts (bank and credit card accounts) and tallying the total. Though the general rule used to be to assume 80% of your pre-retirement expenses in retirement, many retirees spend 100% or more, especially in the first few years.

The Joy is Worth the Journey

The thought of retirement planning, especially early retirement, can feel overwhelming. But it’s 100% achievable for those who take the steps, remain committed, and have a trusted financial guide to show the way. Doing so means reaching your goal of financial independence and enjoying the fruits of your labor sooner than most.

We hope these insights inspire your own journey to retirement, and our own financial advisors here at Lincoln Capital are ready to help.

About The Author

Alex Albert is a Certified Financial Planner for East Greenwich-based Lincoln Capital, a financial planning and wealth management firm. He is a graduate of the University of Rhode Island and earned CFP® certification from Bryant University.

DISCLOSURES – This presentation is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be dependable; however, its accuracy is not guaranteed and should not be relied upon in any way whatsoever. This presentation may not be construed as investment advice and does not give investment recommendations. Any opinion included in this report constitutes the judgment of Lincoln Capital Corporation as of the date of this report and are subject to change without notice. Additional information, including management fees and expenses, is provided on Lincoln Capital Corporation’s Form ADV Part 2. As with any investment strategy, there is potential for profit as well as the possibility of loss. Lincoln Capital Corporation does not guarantee any minimum level of investment performance or the success of any portfolio or investment strategy. All investments involve risk (the amount of which may vary significantly) and investment recommendations will not always be profitable. The investment return and principal value of an investment will fluctuate so that an investor’s portfolio may be worth more or less than its original cost at any given time. The underlying holdings of any presented portfolio are not federally or FDIC-insured and are not deposits or obligations of, or guaranteed by, any financial institution. Past performance is not a guarantee of future results. Lincoln Capital Corporation prepare presentation, 401.454.3040, Copyright © 2024, by Lincoln Capital Corporation.