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4 questions for early retirees

By Jennie L. Phipps · Bankrate.com
Thursday, October 7, 2010
Posted: 4 pm ET

For the last couple of years, Wayne Copelin, a financial planner and owner of Copelin Financial Advisors in suburban Houston, says his retirement planning clients are increasingly people in their early-to-mid 50s who want to retire right away because they feel they can't cope with the changing and increasingly stressful corporate environment.

Most of his clients are people who earn somewhere in the neighborhood of $130,000 to $200,000 per year. They are engineers or highly trained specialists, many of them with advanced degrees. If they retire in their early 50s, their companies are likely to offer them a lifetime pension of about $3,000 per month or a lump sum of about $650,000. They will be welcome to continue to participate in the company's health insurance plan. Once they reach 55, they can begin to draw on their 401(k)s without penalty. On average, Copelin says, his clients have between $1 million and $3 million in their 401(k)s.

If you are in the situation that Copelin describes, he recommends considering these retirement planning issues before you make the leap:

  1. Is the stress temporary? Obviously, these aren't hardship retirements, but retiring with a long life ahead is a stretch -- even for people with lots of resources. If you can hold your nose and keep working, you ought to do that.
  2. Are you walking away from something good? Will waiting a year make a big difference in your pension? Will your matching contributions vest in a matter of months? Will you get employee-sponsored medical coverage if you wait awhile longer? Think hard before you leave behind these valuable benefits.
  3. Can you replace the job, at least partially, with consulting or other work? Copelin says many of his clients are able to find consulting jobs where the pay averages between $1,000 and $1,800 per day. If you can count on a few months of that kind of work for several years, retirement could look very appealing. Many of his clients go back to work for the company they just left, but in their new consulting role, "They turn down the projects they don't want. Independence makes all the difference in the world," Copelin says.
  4. Can you deal with downsizing? If you can't count on finding work that replaces most of your previous salary, can you be happy living on less? Keep in mind, though, that you're going to be stretching your resources to last at least 30 years and it's hard to guess what life and the economy will be like that far down the road.

What about the rest of us who are tired of working and stressed, but don't have Copelin's clients' advantages? Copelin, who is himself 64, doesn't hold out much hope.

"If they are in their 50s and they are the normal American worker, they aren't getting a big chunk of money, and they can't keep their medical under the group plan; they are going to have to keep working."

No surprise, but I'm still sorry to hear it.

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