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5 signs you can retire early

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By AJ Smith/Credit.com

While you're at work, it can be comforting to dream about the possibility of retirement -- planning the activities, calculating how much savings you need to retire and beginning the countdown. But maybe you don't have to wait as long as you thought. If you are willing to work hard and plan harder early in your career, you may be experiencing the "no work, all play" life sooner that you ever thought possible.

Figuring out how to retire early is different for everyone, but here are some signs that you might be ready.

Financial stability

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The most important part of financial readiness for retirement is having consistent cash flow. If your savings have exceeded your retirement goals, you are in great shape to call it quits. But before you retire, make sure you consider how your expenses will change throughout the future. Get into the habit of tracking your cash flow and practice living on your retirement budget for 12 months.

If you will be taking money from your retirement account early, check that you will not suffer any withdrawal penalties.

Adequate health insurance

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Government medical coverage (Medicare) will not begin until you are 65, so you need to fund your own health care until then (and you may want supplemental coverage thereafter). You may be able to keep your employer-sponsored program for a certain length of time, so try to negotiate the best possible deal with your job before leaving.

Remember also that you can be covered by your spouse's insurance and find options from the health exchange. It's important to do your research to be sure you will be well taken care of during your retirement.

Financially independent children

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If your offspring and relatives are financially independent, you may feel more comfortable saying goodbye to a steady paycheck. On the other hand, if anyone else is relying on you for support, leaving your job before your expected retirement age may not be possible. It's a good idea to clearly communicate to everyone previously relying on your for financial help that your situation will be changing before you make the jump.

Being debt-free

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If you have consumer debt, you are probably not ready to retire early. If your mortgage is paid off and you don't have loans, large credit card balances or other debt, you won't have to worry about costly payments or added stress in retirement. This leaves your savings and retirement account available to enjoy life after work and ready in case of an emergency. If your debts are paid off -- or mostly paid off with a solid payment plan in place -- you may be ready to start living the retired life.

Emotional readiness

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This last part is harder to measure, but very important. Having long days without work may seem great while you are tired or overwhelmed on the job, but it can actually lead to a very unhappy retirement. If you have a hobby you want to pursue or a well-planned trip, you will probably find retirement more satisfying. Whatever new project or plan you want to try, it's a good idea to have a strong idea about post-retirement life before you take the plunge.

Next time you are at work, don't just dream about retirement. Make a plan, pay your debts, manage your budget and make it happen. With some hard work and careful planning, you can find yourself hitting your goals years before the rest of the crowd.

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