4 Key Decisions for Early Retirement

‘Will your money last?’ isn’t the only question to consider before retiring.

I was chatting with a friend the other day about his retirement—possibly an early one. At age 60, he has worked hard, saved aggressively, and invested well. Most important, he’s pretty burned out. He’d love to find a way to pursue his many interests, get more sleep, and not have to shoehorn the whole rest of his life into the weekends.

Happily for him, he had received wonderful guidance from his financial advisor; they had discussed the viability of his portfolio under various asset allocations and simulations, as well as what healthcare would cost if he were to retire before 65 and what he would do for cash flows before his Social Security income commences. But as he and I talked through this momentous decision, it was clear that the key inputs were much more nuanced than looking at his portfolio value, asset allocation, and budget pre-Medicare/pre-Social Security. There were a lot of lifestyle and quality-of-life decisions swirled in, too, and those decisions have financial implications. It’s a bit like a Rubik’s Cube. The right decision for him—and indeed the right retirement plan—rests on a few key decisions. Note that the below isn’t an inclusive list, but it’s the gist of what we discussed.

Will You Continue to Work in Some Fashion, or Are You Planning on a Hard Stop?

Being willing to work a bit longer—in some capacity—wasn’t my friend’s first choice. He’d love to make a clean break. But continuing to earn an income for at least a few more years would help him worry less about his portfolio’s ability to last; otherwise, his plan looks a bit tight. Even if he downshifted into a lower-paying or part-time position and couldn’t save as much as he was able to do in his highly paid position (or even if he had to stop saving altogether), he’d still be forestalling portfolio withdrawals. That would mean that, when he did eventually fully retire, he could spend more without having to worry so much about running out. Continuing to earn an income would also help him stick with his plan to delay Social Security until 70, and if he continued to work in a position that offered healthcare benefits, he could avoid having to cover health insurance out of pocket until Medicare coverage kicks in. And as much as his job has been exhausting him these last few years, he’s had a wonderful career and his professional life seems intertwined with his personal identity.

Ultimately, my friend decided to propose a reduced schedule to his employer; at 30 hours a week, he would still be able to maintain his healthcare coverage. And if that didn’t pan out, he decided that he would keep his ears open for consulting positions in his field or consider less stressful and less remunerative work in an adjacent field. For someone else—and indeed my friend at some later date—making a clean break could be the right call, especially if continuing to work begins to have implications for physical or mental health. For now, he still likes working—he just wants less of it.

What Lifestyle Changes Do You Plan to Make?

We also talked through whether my friend’s spending would likely change a lot when he retired. He lives and owns a condo in a beautiful but expensive part of the US but has considered moving back to the Midwest when he retires in order to be closer to family. Moving to a cheaper locale would free up some funds that he could plow into his portfolio, but it would also take him away from his social network and pull him away from the center of his industry. Staying put seems like the right call for the time being, especially as continuing to work is in the mix, though downsizing or moving somewhere with a lower cost of living is a valuable thing to have in his back pocket.

How Flexible Are You Willing to Be With Your Spending?

This is a major dimension in our retirement income research, and it should be a key consideration for anyone embarking on retirement, too. If a retiree is willing to and has the leeway to tighten up spending when the portfolio takes on losses—right now, for example—that improves the portfolio’s ability to last over a 25- or 30-year horizon. The reason is simple: Lower portfolio spending during and after losses leaves more of the portfolio in place to recover with the market. Our retirement spending research also shows that flexible spending strategies increase total lifetime spending relative to strategies that maintain static inflation-adjusted spending, like the 4% guideline.

In my friend’s case, he’s quite willing to adjust his spending as he goes. He’s not a big spender, and years of work travel mean that he doesn’t have an appetite for lots of expensive globe-trotting, unlike many new retirees. When Social Security comes online for him at age 70, he’ll have even more leeway to adjust spending. It’s also worth noting that retiree spending tends to trend down throughout the lifecycle, though some retirees have high healthcare-related costs, notably for long-term care, toward the ends of their lives.

How Do You Feel About Lifetime Spending Versus Leaving a Bequest?

This is a key aspect of retirement spending: Do you want to spend as much as you can (and/or give away as much as you can) during your own lifetime, or do you aim to leave a bequest? That was the idea behind the “spending/ending ratio” that we introduced in our 2025 retirement spending research; we wanted to help retirees see whether retirement spending strategies generally helped front-load lifetime spending or left a high possibility of portfolio leftovers for bequests. Flexible strategies like the guardrails strategy tend to encourage lifetime consumption and spending, whereas more rigid ones tend to leave more leftovers.

My friend is single and doesn’t have children; his nieces and nephews are all financially well and have affluent parents themselves. Leaving a bequest isn’t a priority for him; enjoying his money is. That underscores the value of using a flexible spending strategy and taking steps to enlarge lifetime income rather than using a more rigid strategy that could cause him to underspend.

https://www.morningstar.com/retirement/4-key-decisions-early-retirement