Being able to get out of the 9-5 grind earlier than anticipated is a dream for millions of workers around the world. An early retirement sounds like an incredible experience. Sometimes early retirement is a choice, but sometimes it is also forced upon individuals who are within certain career fields. The average age of retirement in the United States right now is 62. Are you wanting to retire before reaching that age? Here are some of the key points to consider when evaluating the pros and cons of early retirement from your career.
The Pros of Early Retirement
1. It may improve your health.
Working long hours on a regular basis takes its toll on the human body. Not only are there physical stresses that must be managed, but there can be high amounts of emotional stress as well. This applies even when people are passionate about their careers. It may not be the perfect situation for everyone, but those who have an established pension or retirement plan they can draw upon typically have the best experiences with early retirement.
2. It provides people more time to chase a dream.
One of the dreams that many people share is the desire to travel. Early retirement provides more of an opportunity to see the world because there is suddenly more time available. At some point, health issues that are related to the natural aging process are going to set in and begin taking over. Early retirement gives people a better chance to chase one last dream before they are forced to limit their movements.
3. It can be a chance to try something new.
Early retirement doesn’t always mean that you’re out of the workforce for good. Sometimes it just means that you’re going to begin looking toward a different career field in your later years. How many times have you heard employers lament the fact that they can’t find job candidates who don’t have any work experience? An early retirement is a fast way to start a new job, a new business, or even let you get back into school if you want. Even if you start a new business at the age of 62, you’ve got a good 10-15 years to keep yourself active and still maintain flexible hours.
4. There’s a chance to establish or repair family connections.
The world may be a smaller place, but that doesn’t mean there aren’t great distances between people. Early retirement gives people the chance to establish and repair family connections that lapse thanks to the busy lifestyles and amount of distance that exists between people. Talking with someone on Skype is a poor substitute for having dinner with them.
5. You can keep investing your money to live on the profits.
Just because you retire early doesn’t mean you automatically stop investing your money. With enough saved back as a core investment amount, it becomes possible to live off of the profits of investments for a few years and not need to touch that core cash that will become the foundation of a long-term retirement plan. Although you’ll want to avoid distributions from certain tax advantaged accounts until the age of 59.5, some plans do allow for penalty-free distributions from company retirement plans after the age of 55.
The Cons of Early Retirement
1. It may not be beneficial to certain individuals.
There can actually be a negative health impact on early retirees who are in certain living situations. Many people only have their job to look forward to doing every day and once that is taken away from them, depression can begin to set in right away. Mobility may be reduced. Some folks with limited social connections may find themselves completely isolated from the outside world. When physical activities are limited, there is a greater risk of ill health being suffered.
2. Early retirement direct affects Social Security benefits in the US.
When you retire early and don’t have adequate savings in place for support, then the natural conclusion for Americans is to draw upon their Social Security benefits. For those who retire at age 62 and begin taking benefits, the monthly benefit will be 30% smaller [or more] when compared to if benefits were taken at age 67. For those who can wait until age 70 to start taking the benefit, the amount may increase by up to 8%.
3. There must be a financial plan in place to manage the extra time.
The average person who retires has enough cash set aside to be able to live comfortable for 10-15 years. When contemplating early retirement, that means the cash might run out even before the age of 70. With people living longer than ever before and average life spans reaching the mid-80s in some countries, that’s a lot of living left that won’t have adequate funding in place, especially if there was a medical emergency that needed to be managed.
4. Health insurance doesn’t begin until the age of 65 in the US.
Early retirees won’t have any health coverage in place. In the US, this means a health care plan would need to be purchased from one of the exchanges until the age of 65 when Medicare would begin providing benefits. For those with a health savings account in place, this may not be much of an issue. For some, however, the costs of health care may be enough to consider staying in the working world on at least a part-time basis so the costs can be offset and not eat into the investments being used to pay for the early retirement.
5. Boredom? It happens.
There are only so many rounds of golf one can play with their buddies before the routine begins to get a little old. Throw in some poker, church activities, and some travel and you’ll be able to fill a few more days – but eventually the routine can feel stale. Boredom happens during an early retirement. Some people begin to miss the networking and creativity that was demanded of them during their job. Since those in the 55+ age demographic have the most difficult time finding new employment, boredom that changes one’s mind can put a person into a difficult position.
The pros and cons of early retirement show that if you can afford to do it and can stay physically and socially active, then it may be the right decision for you. Retirement is simply a new stage in life and is often seen as a just reward for putting in some long years of working. Evaluate these key points about early retirement today to see if you’ve got a chance to get rid of the 9-5 grind for good.
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