RETIREMENT PLANNING » IRA & ROTH ACCOUNTS

Are you thinking about taking an early retirement? If so, you're not alone. Many people want to "jump ship" from the daily grind and really live life while they're younger than 65. Of course, retiring early means you have to have plenty of money saved up in order to do it comfortably - life costs a lot of money no matter how old you are. In fact, it might cost more on average when you're older because you need more help with things. One way that many people plan for early retirement is through the very popular savings vehicle of a Roth IRA. Like the regular IRA and the 401k, the Roth IRA was created specifically for retirement savings.

With a Roth IRA, you can access the amount of money you've contributed to it at any time. So if, for example, you've been putting in $1,000 per month, you can access the total of your contributions at any age. Since a Roth IRA is an investment fund, the money you put into it should grow as the money is invested.

When it comes to accessing the earnings of your Roth IRA, however, that's a different story: You have to wait five years from the year in which you opened your account. You must also meet one of the following qualifications:

• Be 59.5 years or older.
• The withdrawal is for your beneficiary after you die.
• You have become disabled.
• You need the money for higher education costs and student loans won't cover it all.
• You have medical expenses which aren't covered by your health insurance.
• You are a first-time home buyer and need it for a down payment: the bigger the down, the better your mortgage rate.
• You plan on making substantially equal payments (SEPP).

Roth IRA accounts are flexible investment vehicles and make for a very smart complement to your early retirement dreams. Before you definitively retire early, consult with a financial advisor to make sure you are making the right decisions.

Practically everyone has to work for a living, and earn their way in the world. If they don't, they're one of the lucky few who inherit tons of money from their parents or grandparents, or win the lottery and are set for life.

For those of us who work, it can seem like endless dreariness, and retiring early may sound like an unequivocally good thing. Truth be told, however, it may not turn out to be that way.

Who should retire early?

Retiring early from your job may be a good thing if your job is scary or stressful. Coal miners, for example, can never retire too early from their jobs because of all the incredible dangers involved.

For people employed in less stressful and more common professions, like supermarket cashiering, or teaching, or accounting, retiring early may release them from what they perceive as the monotony of their jobs, but it comes with risks.

The risks of retiring early

For example, a person who retires early needs to have a serious amount of money set aside that will cover them for the rest of their lives.

Since retiring early means you most likely won't get a pension, that means you'll need even more money invested in either savings accounts, CD's, IRA's, mutual funds, money markets or other investment vehicles. When it comes to retiring early, the bottom line is that it's only a smart decision if there's enough cash to live on comfortably from that point on.

The risk to your intelligence

Another, non-financial risk to retiring early is that your brain will become dull. Many people can't wait to retire so that they can relax, but as with your body's muscles, the less you use your brain, the weaker it can become.

Too much free time on a person's hands can lead to depression and unpleasant feelings of meaninglessness and excessive contemplation of things beyond our control, like aging and death. Retiring early, therefore, may sound good on paper but be more complicated in practice.

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