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Jeff Bezos is now a retiree. Kind of, kind of, that’s it.
Bezos formally stepped down as Amazon CEO on July 5, after he announced his plan to resign in February. When he was no longer in charge of the company he founded in 1994, his net worth was $211 billion, making him the richest person on the planet.
Bezos is 57 years old, 7 years younger than the average U.S. retired worker, who calls him 64 years old. The median net worth of people between 55 and 64 years old is $212,500. This means that Bezos is about $210,999,787,500 more than his peers.
To be clear, Bezos has not fully retired. Like many people who retire early, he is transitioning to different types of jobs. He will still serve as the executive chairman of Amazon. He will devote more time to passion projects, such as tackling climate change and monitoring the Washington Post.
He will also celebrate his new chapter with a big trip: when his rocket company Blue Origin makes its first manned space flight this month, he plans to take an 11-minute journey into outer space.
So yes, I just want to say that Bezos’ retirement life will be very different from yours. Nevertheless, ordinary people may retire early like Amazon’s founder.
If you retire early (and you are not Jeff Bezos), 5 things you can expect
For the middle class, early retirement is more affordable in the past, because Pension plan very common. But today, if you work in the public service, you are most likely to retire through a defined benefit plan-which means you will receive retirement benefits.Otherwise, you will need to live on your own Retirement savings, Social security benefits And any other sources of income you have, such as income from part-time work.
If you plan to retire early, you need to prepare for the financial reality that three-comma club members don’t have to worry about. If you are a non-billionaire who wants to retire early, then you can look forward to the following five things.
1. Medical care will be expensive
Billionaires like Bezos obviously don’t have to worry about paying for medical expenses. But for ordinary people, the medical expenses after retirement is a big problem.Usually you are not Eligible for medical insurance Until 65 years old. Paying for private health insurance in your 50s and 60s may take up your budget.
According to ValuePenguin’s data, according to the Affordable Care Act, for the average 60-year-old person, Silver plans to spend $1,016 per month. A 64-year-old can expect a monthly premium of US$1,123. Health care costs usually rise faster than the overall inflation rate, so if you want to retire early, you must budget for medical expenses.
2. You actually have to pay taxes
A billionaire like Bezos, Warren Buffett And Elon Musk recently made headlines ProPublica report The wealthiest Americans pay only a small portion of their income in taxes. According to the report, Bezos’ “real tax rate”, which is the amount he paid for wealth growth, was only 0.98% per year from 2014 to 2018.
Even after retirement, ordinary people can expect to be taxed at a much higher tax rate than Bezos.Withdrawal Traditional 401(k)s with Traditional IRA Taxed Ordinary income rateIn many cases, if you make a distribution from your retirement account before the age of 59 ½, you will be fined 10%.
Even your social security benefits are not restricted. If you are a single filer with an income of more than $34,000, or if you are married and have an income of more than $44,000, your benefits can be up to 85% taxable.Of course you can still Work while receiving social security payments, But this is limited.
3. Social security planning is tricky
Bezos may not have considered his social security claim strategy too much. That’s a luxury that ordinary people don’t have. According to data from budget and policy priority centers, about half of the elderly depend on social security for at least 50% of their income. The average Social Security check for 2021 is $1,543 per month.
When you retire early, deciding when to receive social security becomes more complicated. Financial planners usually recommend waiting as long as possible for benefits to begin. After you turn 70, your monthly benefits will be 76% higher than if you started receiving benefits as early as possible. However, if you no longer have a salary, you may have no choice but to start receiving benefits early.
please remember Social Security Living Expenses Adjustment This is insignificant compared to the actual increase in costs faced by the elderly. In 2021, social security benefits increased by only 1.3%. Receiving benefits early may expand your budget to the limit after your retirement. Your benefits cannot keep up with inflation, so over time, they will pay less and less.
4. You may have to choose between early retirement and helping your children
Billionaires don’t have to make difficult choices, such as saving more for retirement or helping your kids save for college. But you might.
Most people only have investments they can afford. When you plan to retire early, you need a reserve that can sustain you for at least 30 to 40 years. The general rule of thumb is that you should plan to replace 70% to 80% of your pre-retirement income.
If you really want to retire early, it may mean you can’t 529 plan For your children or grandchildren, or help them with tuition. In this case, you must communicate your plan to your child in advance and as soon as possible.
5. Early retirement is not always an option
No matter how carefully you adjust your retirement plan, life will take a toll on you.It is estimated that as many as half of older workers are Forced to retire early Because of illness, layoffs and care responsibilities, they have more than they planned.
When you are not rich, being forced to retire may ruin your financial situation. Even if you want to work as long as possible, you must plan for the possibility of early retirement. This means saving and investing as much as you can during your working life, because your retirement time may be longer than you expected.
Robin Hartill is Penny Hoarder’s certified financial planner and senior writer. She wrote a column of personal financial advice for Dear Penny.Send your tough money questions to [email protected].
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