Regardless of your retirement age, you can start collecting Social Security at age 62, although you get docked five-ninths of 1% for every month you are younger than your full retirement age. That means you'd get 25% less per month retiring at 62 than you would at 66.

(That's assuming you were born in 1954 or earlier, making your full retirement age 66. Full retirement age goes up from there; those born in 1960 or later don't reach the required age until 67. That cuts into monthly benefits even more; you'll find the math on the Social Security website.)


While inflation has been held in check recently, over the long haul you're safe in figuring on 3% a year, which means the $50,000 you think you have to live on will be worth only $48,500 next year, $36,871 in 10 years and $27,189 in 20.

There's a big difference between living on $50,000 and on $27,189, and it's unlikely that your expenses will be cut in half in that time.

Lose the mortgage?

So should you pay off the mortgage, or keep making the payments? Like everything else, it depends. After all, the interest you pay on your mortgage is tax-deductible at your regular income-tax bracket, so it's probably the best debt you can have. Go by the old tried-and-true: Pay off more expensive debt first, like credit cards or auto loans.

If you still have enough to pay off your mortgage, it's time to compare the after-tax cost of the debt with how much you're making on your investments. If your portfolio is averaging 11%, as the stock market had been before the recent downturn, and your mortgage is at 8% before your tax deduction, then leave the money in the market and keep paying the mortgage.

Remember, though, that if you're 25 years into a 30-year fixed-rate mortgage, you're paying almost nothing in deductible interest. By now, almost your entire payment is going to principal, which is not tax deductible. "Essentially, you're paying so little in mortgage interest, there's no reason to prepay it," Doyle says.

Some people, though, are just more comfortable knowing they own their home free and clear. If that's you and you choose to pay it off, it might be comforting to know that you can get money back out of your house by using a reverse mortgage, in which a lender pays you for a portion of the ownership of your home, or through a home equity line of credit. You also could sell it, of course. But as Doyle says, if you're counting on income from your house when contemplating early retirement, you probably ought to keep working for a while.

"When you retire, your house is your home," he says "Don't look at it as an investment. You can convert it if you need to, but if you're retiring because of the equity in your house, you better get back to work."

The little things

There are plenty of little things to consider when you're thinking about early retirement. Greens fees, for example, and gas for the RV.

Bonnie Arnold of Columbia, Mo., a former retirement consultant at the University of Missouri staff benefits office, says you also should analyze the condition of your home and cars. If your roof is about to cave in or your car is on the blink, figure out if you can afford repairs and replacements. It's much easier to deal with such things while you're still bringing in a paycheck.

Consider, too, your family's financial health. "You always need to make sure that not only can you meet your normal month-to-month expenses, but emergencies, too, because they don't stop happening just because you retire."

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Granted, some of your living costs will go down, as you quit buying work clothes, fueling up with that double espresso on the way to the office and paying $8 for a turkey sandwich for lunch. Your at-home food costs can go down, too, because you'll have more time to cook and less need to rip open a package of (expensive) ready-to-eat at the end of your commute. But travel costs may go up, simply because you have more time to go places.

Then there's the question of where to live. If you have more than one home, you need to establish permanent residency somewhere for both tax and estate planning, says Reginald Tilley, a certified financial planner in Bellevue, Wash. Some states have no property taxes, some have no sales taxes and some have high taxes of every kind. North Carolina and Florida even have an intangibles tax, which hits the value of investments.

What to do, what to do

So now that you're free, what are you going to do with your time? Some people go back to their old jobs part-time to maintain friendships and collect a little spending money. Some head off in a whole new direction. If you're the type of person who has worked hard enough and saved enough to retire early, there's a good chance you haven't spent a lot of time on nonwork activities, Tilley says. "If they've been so wrapped up in work to get to this point, there's a whole set of questions they're going to have to deal with," he says. "Some of these types of people have trouble going on vacation without champing at the bit."

Tilley recommends getting a psychological evaluation that tells you more about your personality and about what kinds of challenges will give you a sense of personal worth and fulfillment, even if you're not earning a paycheck from it.

For some, it's volunteering as a mentor, for others it's playing sports or working at the local hardware store for minimum wage. Quitting cold turkey is tough, he says, so it's important to segue into other activity.

Part-time work is more of an option now that you can earn Social Security while drawing a paycheck. But there are others who have no intention of working.

"The biggest challenge for some of these people is going to be how to spend that time," says Tilley, "because if you get six months into this thing and you find that you're bored, you have no sense of purpose, there's a big void in your life, you're probably at more risk from an emotional point of view than you'll ever be from a financial point of view."