by D. Victor

Created on: May 28, 2009   Last Updated: December 14, 2009

Early retirement (ceasing full-time employment before the full or normal retirement age) is a mixed blessing. On one hand, you have more time and freedom to enjoy the rest of your life. On the other hand, you have a higher risk of outliving your savings because you may live for a longer period without full-time employment.

Unless you are independently wealthy, you have to plan carefully to retire early without jeopardizing your financial future. To mitigate the attendant risks of living longer in retirement, you must accelerate the speed at which you obtain

financial independence. The following tips can help you to achieve this.

1) Eliminate or reduce debt quickly

You should not bear the same debt-servicing ratio during your retirement period. If you are planning to retire earlier, you must try to eliminate or significantly reduce your debt even faster. You may be forced to bear some level of debt when you retire early. However, having too much can handicap your dreams of early retirement or create discomfort when you retire early.

2) Do a robust retirement needs analysis

Regardless of when you plan to retire, you need to do a proper retirement needs-assessment. However, when you plan to retire early, it is more critical to do a financially prudent needs-assessment. You should assess the impact of inflation before and during retirement, retain a higher percentage of your pre-retirement income and plan to leave more money for contingent expenses. A post-retirement analysis- based on the figures derived from your pre-retirement analysis- will be very handy as well.

3) Get lifetime medical coverage if possible

It is important to financially protect your health and well-being. You must ask yourself,' How will my health and well-being be protected when I no longer work?' Self-insuring is always a risk- particularly when you are dependent on money working for you.

4) Place emphasis on capital growth

When you retire, you ought to have a sizeable retirement fund that is impervious to poor spending, medical bills or increased living expenses. You cannot accumulate wealth merely by saving. You must invest- and invest wisely at that! Although you have a shorter investment horizon when you retire early, you need to allocate a greater percentage of your portfolio to capital growth options.

5) Allow pension plans/ annuities to mature beyond your retirement age

Having your annuities and individual pension plans mature at the time of early retirement is not a good idea. You

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