While early retirement may seem like a dream come true, it can quickly turn into a nightmare. Early retirees who are unprepared or have not planned for the long term may find themselves headed back to work.
Be Aware: 6 Key Signs You'll Run Out of Retirement Funds Too Early
Find Out: Boomers Are Facing a New Retirement Problem -- Here's How To Deal With It
In a recent video, personal finance expert Rachel Cruze listed six questions you should ask yourself before you retire early.
Why Do You Want To Retire Early?
The first thing those who want to retire early should be asking themselves is why they want to do so. Cruze explained that it is important to have a purpose when deciding to pull the plug on a 9-to-5 with a steady income. She noted that studies show physical and mental decline can happen rapidly in retirement, and data backs her up.
As Harvard Business Review reported, many studies have linked retirement to stress on mental health, with one analysis indicating a 28% rate of depression among retirees and another finding a 6% to 9% decline in mental health over six years post-retirement. Instead of rushing into retirement, Cruze advocated trying to find work that you love.
Check Out: Here's How Much You Need To Retire With a $100K Lifestyle
Do You Have a Great Financial Advisor in Your Corner?
The next question she said to ask is whether you have a great financial advisor. She explained that retirees will want to have things like estate plans and insurance policies in place and that a financial advisor can help.
Across the board, money experts agree that working with a professional can help to ensure financial stability throughout retirement. As reported by Fidelity Investments, securing professional financial advice can increase long-term portfolio returns up to 5.1%, depending on the circumstances.
Do You Have Enough Money To Cover Monthly Expenses?
Next, Cruze encouraged her subscribers to ask themselves whether they have enough money to cover their monthly expenses. She said hopeful early retirees need to think long term, looking at the big picture and ensuring they can afford the lifestyle they may want to have 20 years from now.
Do You Have Enough Money To Do the Things You Want To Do?
The bestselling author also wants early retirees to make sure they have enough money saved for retirement to do the things they want to do, not just pay bills.
The amount of money needed to retire comfortably in the U.S. differs substantially depending on the state. According to Vanguard, some experts believe that a person needs between eight and 10 times their annual salary to retire, while others say a person needs between 65% to 80% of their pre-retirement income for every year during retirement.