advantages and disadvantages of early retirement essay

Early Retirement: Pros and Cons Analytical Essay

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In order to exhaustively evaluate the merits and demerits of an early retirement, it is important to consider the longtermview as opposed to a short term view. Reductions in personal expenditures in the short term have to be balanced with increasedpension benefit liability and expenses over thelong term. Nevertheless, budgetary and administrative discipline is necessary in order to get such reductions.

Some issues associated with early retirement should be addressed before deciding whether or not to take an early retirement. It is important to consider the economic, mental and emotional impacts of early retirement. Another important aspect is the decision’s effect on the immediate family. This paper seeks to prepare a decision paper outlining both the advantages and disadvantages of early retirement.

Many people find themselves pursuing money making activities and finding it hard to stop. Either in employment or in business, there is an insatiable urge to attain a social status. Many end up accomplishing the social status and climbing the top of the ladder, but end up having limited time to enjoy their accomplishments.

On the contrary, some people are forced to retire unwillingly or without their consent. Many companies or employers have a policy for retirement after fifty five years, unless an employee has obtained a “chief” management position in the company. Beside the government policy on retirement, early retirement is a personal decision (Martel, 2011).

The first advantage of early retirement is that after the end of a career, it is another new beginning. The retiree has a lot of time to spend with the family and friends. The retiree gets a lot of time to manage and participate in family affairs.There is adequate time to eat healthy cooked food and do more exercises and physical activities as opposed to junk food while sitting in an office. Early retiree can have an opportunity and adequate time to do the things that were impossible when working.

Some of these include travelling around the world, spending time with the grand kids and gardening. The fundamental assumption is that early retirement is for those who have already saved. This gives them a chance to do a lot in their young active lives, as opposed to after fifty five years of age(Zelinski, 2009).

An advantage that accrues to the society at large is the vacant position left by the retiree. A much younger person will be able to occupy the post; this will solve the unemployment problem that is dominant in young generation. In this way, early retirement becomes a program or a mechanism designed to solve unemployment problems in the society.

On the contrary, it should be mentioned that this is not always preferred by employers. For employers, replacing an old experienced employee is not easy. Some characteristics like conscientiousness and reasonableness cannot be easily replaced (Martel, 2011).

Early retirement is an attractive prospect for many workers especially if it is packaged with incentives. It is possible to have an early retirement and still enjoyed a stable and a secure financial ability. However, this applies only to those who spent their time to plan ahead of early retirement.

It is important to accumulate adequate financial and personal resources during employment. The retiree also requires making thorough long time projections. The retiree should hire a qualified accountant or a financial expert to help with the projections. If the income and expenditure projections on long time basis are in a safe position, then it is possible to consider early retirement(Zelinski, 2009).

Early retirement gives a person an opportunity to learn and practice new skills, and have a built-in interaction with people. The retiree gets an opportunity to concentrate on new skills while meeting new interesting people. Another way of utilizing the time and potential is by working with a humanitarian non-governmental organization. The retiree is able to bring in new skills, share with others, and acquire new skills.

The retiree can volunteer as a teacher, a move that has been proven to be successful. This enables the retiree to interact with young people who can listen unlike at workplace. It is appealing to work with a young person about job prospects and life issues than talking to an old experienced person(Zelinski, 2003).

Early retirement incentive programs are very popular strategies applied by companies around the world to reduce the employees. They are also advantage plans for companies in mergers, downsizing or takeovers. Experienced managers have also applied then to reduce layoffs.

To the employee, it is beneficial and the most humane way of ending a career in a company. Early retirement incentives are practically appealing to an employee who does not have a guarantee of keeping the employment. For those aspiring to retire without any benefits, they are the best ways of going for early retirement. However, the retiree should evaluate critically the benefits offered by the incentives, and those that will be accrued for normal retirement (Martel, 2011).

There is always a reason for avoiding early retirement. Getting the free time after retirement has some negative consequences. Some people feel redundant, a symptom for impending depression. Economically, inflation should be used as a determinant for early retirement. The pension and savings should be able to support the retiree. Since the retiree will spend a lot of time in retirement, the effects of inflation will be heavily felt.

The cost of living continues to increase after retirement until the retiree has reached eighty years of old. Statistics shows that those who retire early have an increased percentage of living expenses when they reach eighty (Paul & Townsend, 1992).

A good number of retirees mistakenly assume that their tax responsibilities will reduce after retirement. To some extent, some taxes are avoided after retirement, but on the other hand, they could also go up. Additionally, income tax never goes down than they are before retirement.

Retirees’ lifestyles changes significantly after retirement. Before planning on early retirement, a retiree should be able to curtail their lifestyle. The optimum spending after retirement should be about 75% of what was being spent during the working days. A considerable number of retirees spend more than the optimum amount, a move that complicates and worsen their life after retirement (Paul & Townsend, 1992).

Another commonly ignored expense is the cost of health insurance. This comes as a disadvantage of early retirement unless the retiree worked for a company that extends health insurance until the stipulated age, probably sixty five. The retiree is forced to pay high health insurance premiums from the accumulated savings until sixty five. Some early retirement incentives endorsed by the employer extends the health insurance until sixty five, after which one is eligible for Medicare(Zelinski, 2009).

A considerable number of early retirees gets fed up with their full time working schedules and decide to retire. After retiring early, they proceed to look for part time job without considering its drawbacks. Most of part time jobs do not have regular, fixed or full time schedules.

The catch is that most of these jobs are not financially and emotionally rewarding. It becomes hard to supplement the retiree’s income by working on part time basis. The additional income obtained is also channeled to other additional costs like higher income tax. The retiree is affected both mentally and emotionally due to reduced social security offered by part time jobs (Paul & Townsend, 1992).

The social security benefits will be cut down significantly by retiring early. The early retiree will be forced to start drawing the benefits early. The monthly spending will be lower and the effect of inflation will be hard to deal with.

If the personal savings of a person is not adequate, the social security benefits will be overused and over-relied upon. The retiree will also be forced to start drawing and spending funds that has been set aside for personal retirement plans to supplement the benefits. This will also reduce the time of contribution to the plans, and hence less benefits.

The retiree will also incur steep penalties by withdrawing from personal retirement plans before the stipulated age. The early retiree is also penalized by the company in the company pension plans. For this matter, the person is undoubtedly unfit for early retirement (Baker, 2007).

In conclusion, early retirement is not an overnight or an instant decision. The retiree should compare the psychological and emotional ramifications of continuing to work and for early retirement. Impact on the members of the family should also be put into consideration. The situation should be assessed realistically without a rush decision being made.

If the future of your job is not guaranteed, the early retirement option will be most desirable. If the company is likely to have future layoffs, it is not good to be left behind the early retirement incentive program that has been offered. As mentioned earlier, the retiree needs to hire a competent financial advisor to project the long term income versus expenses. If the figures fallin your expectation bracket, then you should consider retiring early.

Baker, S. (2007). Your Complete Guide to Early Retirement: A Step-by-Step Plan for Making It Happen. Ocala, FL: Atlantic Publishing Company (FL).

Martel, J. (2011). Early retirement with no regrets . Retrieved from Bankrate.com: Comprehensive, Objective & Free. Web.

Paul, R. J., & Townsend, J. B. (1992). Some Pros and Cons of Early Retirement. Review of Business , Vol. 14;22-34.

Zelinski, E. J. (2009). How to Retire Happy, Wild, and Free: Retirement Wisdom That You Won’t Get from Your Financial Advisor. Putian District, China: Visions International Publishing.

Zelinski, E. J. (2003). The Joy of Not Working: A Book for the Retired, Unemployed and Overworked- 21st Century Edition. Berkely, Carlifornia: Ten Speed Press.

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Early Retirement: The Pros and (Mostly) Cons

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

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Retiring early sounds great to most people. But for many, it's not possible. If you're lucky enough to have control over when you retire, it's worth thinking through the pros and cons before you make any decisions. Even if you can afford to retire early , you might not want to.

Key Takeaways

• Many Americans plan to retire early, before the proverbial age of 65.
• Pros of retiring early include health benefits, opportunities to travel, and starting a new career or business venture.
• Cons of retiring early include a strain on savings, and a depressing effect on mental health.
• There may be ways to chart a middle course: cutting back on work without fully retiring.

Some Pros of Retiring Early

1. it could be good for your health.

Sleeping in later, getting out in the fresh air and sunshine, and no more gulping meals at your desk—we can all easily imagine how leaving behind the office grind leads to healthier habits.

This isn't just supposition. A 2002 study of British civil servants, for example, found that retiring at age 60 had no adverse effect on the subjects' physical health overall. In fact, those with higher-level jobs saw an improvement in mental health, possibly because they were no longer subject to work-related stress (and potentially had better pensions than lower-ranked workers).

Other studies, however, have suggested that retirement can be hazardous to your health, as we'll get to in the next section.

2. You'll Enjoy More Time to Travel

Oh, the places you'll go! Or could go, once you're no longer limited to the proverbial two-weeks-a-year vacation. Plus, the earlier you retire, the more years you'll have before health issues begin to limit your mobility.

3. It's an Opportunity to Start a New Career

If you dream of switching fields or starting your own business , sooner may be better than later. You'll be a more desirable job candidate to many employers the more years you have ahead of you.

If you want to be your own boss, you'll have more time to get your new venture off the ground . A business you launch at age 60, for example, could easily keep you intellectually challenged for another 20 years or more.

Some Cons of Retiring Early

1. it could be bad for your health.

A 2008 analysis from the National Bureau of Economic Research reported that retirement leads to declines in mental health and mobility and increases in other poor health outcomes, such as heart disease and stroke.

While that's one argument for delaying retirement, those problems aren't inevitable. The report also concluded that retirees who remained physically active and socially connected were less likely to suffer any ill effects.

2. Your Social Security Benefits Will Be Smaller

The sooner you start to take Social Security , the lower your benefits will be. If you were born in 1960 or later, for example, and you start taking benefits at age 62 (the earliest age at which you're eligible), your monthly benefits will be 30% less than if you wait until age 67, which the Social Security Administration (SSA) refers to as your " full retirement age ."

For each year you postpone from age 67 to 70, you'll receive an additional 8% in your monthly benefit. After age 70, there's no further bonus for delaying.

3. Your Retirement Savings Will Have to Last Longer

If you retire at age 62 and live to 90, let's say, your Individual Retirement Account (IRA) and other savings will have to cover you for 28 years. You might outlive your savings. If you retire at 70 and live for the same length of time, however, your savings will only have to last for 20 years. Working longer also means you'll have more years to contribute to a 401(k) or other retirement plan, and the money in your plan will have more time to compound.

"An easy rule of thumb to estimate your retire-ability is to multiply your expected draw on investment portfolios that will supplement Social Security and other sources by 25," says Stephen J. Taddie, co-founder and managing partner of  Stellar Capital Management LLC in Phoenix, Arizona. "If you have that amount of money in your combined accounts, you're ready to put a pencil to it. If you're 'close,' think twice."

And don't assume that living will be less expensive, either. "One common myth is that your expenses decline in retirement," says Jennifer E. Myers, CFP®, president of  SageVest Wealth Management in McLean, Virginia. Myers adds the following:

We seldom find that to be the case for three primary reasons. First, you simply have more time on your hands to enjoy, partake, and spend. Second, as individuals grow older, they tend to outsource more, layering on new expenses. Third, your healthcare expenses logically tend to increase as you age. It's important to make sure your assets can sustain potential, and perhaps inevitable, growth in spending over your lifetime.

4. You'll Need to Find Health Insurance

Unless your ex-employer provides it, you'll have to pay for health insurance on your own until you're eligible for Medicare at age 65 . If you do, be ready for sticker shock: insurance premiums can easily be double or triple what you're used to paying on your workplace plan.

At the same time, unfortunately, health insurance rates climb as you get older, skyrocketing into four figures monthly after age 55.

5. You Might Get Bored and Miss Working

Many retires have a tough time making the transition from the daily routines of a full-time job to the unstructured life of retirement. They may also miss their former colleagues and yearn to return. Unfortunately, it isn't easy to get back into the workforce once you've left it, voluntarily or otherwise.

A 2012 report by the U.S. Government Accountability Office noted that people over age 55 generally need more time to find new jobs than their younger counterparts do.

If you don't want to retire early for fear you'll regret the decision, but also don't want to wait so long that you miss out on the pleasures of retirement, there are ways to have the best of both worlds.

One example: You might try to negotiate a reduced work schedule with your employer and enjoy the life of a retiree on your days off, an arrangement that's often referred to as " phased retirement ." Or, if circumstances allow, see if you can work from home part of the week—that'll give you a sense of how isolation and a more fluid schedule suits you.

Finally, take some of those vacation days all at once. Do some of the major traveling to faraway lands you've always dreamed of.

What Is Early Retirement?

Early retirement is typically defined as retiring before age 65. This is the age that you become eligible for Medicare .

How Many People Want to Take Early Retirement?

Many of us continue to dream of retiring early . A survey by the reverse mortgage company American Advisors Group found that 52% of Americans plan to exit full-time employment before age 65, with 23% before age 60.

How Long Does the Average Person Live in Retirement?

According to the Social Security Administration (SSA), a 65-year-old woman will live about 20 more years, whereas a 65-year-old man will live about 17 more years. The SSA provides a life expectancy calculator based on your birth date on its website.

Deciding when to retire is a complex decision that isn't just a question of dollars and cents. Your health, family obligations, and individual temperament all figure into it, or at least they should. Perhaps most important is whether you've thought through what you plan to do with your retirement years, however many of them lie ahead. As the wise old saying goes, it's important not just to retire from something but to something. 

National Bureau of Economic Research (NBER). " The Effects of Retirement on Physical and Mental Health Outcomes ," Pages ii, 8.

Social Security Administration. " Understanding the Benefits ." Pages 7-9.

Social Security Administration. " Delayed Retirement Credits ."

U.S. Centers for Medicare and Medicaid Services. " When Can I Sign Up for Medicare? "

United States Government Accountability Office. " Unemployed Older Workers: Many Face Long-Term Joblessness and Reduced Retirement Security ." Page 5.

American Advisors Group. " Retirement Statistics – How Americans Plan Their Golden Years ."

• Social Security Administration. "Actuarial Life Table."

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The Pros and Cons of Early Retirement: Is it Right for You?

Retirement has traditionally been associated with the golden years, a time to kick back, relax, and enjoy the fruits of decades of hard work. However, the idea of early retirement has gained popularity in recent years, enticing individuals to bid farewell to the workforce sooner than expected. While the allure of freedom and leisure is strong, early retirement comes with its own set of pros and cons. In this post, we'll explore the advantages and disadvantages of early retirement and help you determine if it's the right path for you.

Pros of Early Retirement:

Freedom and Flexibility: One of the most appealing aspects of early retirement is the freedom it brings. You gain control over your time, allowing you to pursue personal interests, hobbies, and travel without the constraints of a 9-to-5 job.

Health Benefits: Retiring early can have positive effects on your health. Reduced stress and more time for self-care activities like exercise can contribute to better physical and mental well-being, potentially leading to a longer and more fulfilling life.

Quality Time with Family: Early retirement provides an opportunity to spend more time with loved ones. Whether it's bonding with children, supporting family members, or simply enjoying the company of friends, you can build stronger relationships without work-related time constraints.

Entrepreneurial Pursuits: Some individuals use early retirement as a chance to explore entrepreneurial ventures or passion projects. With financial stability, you can take calculated risks and turn your hobbies into income-generating activities.

Avoiding Burnout: Many people experience burnout from the demands of a long and intense career. Early retirement allows you to step away before burnout takes a toll on your physical and mental health.

Cons of Early Retirement:

Financial Considerations: Perhaps the most significant concern with early retirement is financial stability. Retiring before the conventional age may mean fewer years of saving and investing, requiring careful financial planning to ensure a comfortable retirement.

Healthcare Costs: Early retirees often face higher healthcare costs, especially if they retire before becoming eligible for Medicare. Securing affordable health insurance becomes a crucial consideration.

Boredom and Lack of Purpose: Work provides a sense of purpose and structure for many individuals. Early retirement may lead to boredom or a feeling of purposelessness if you haven't identified fulfilling activities to fill your time.

Social Isolation: The workplace often serves as a social hub, and leaving it early can result in reduced social interactions. Maintaining an active social life becomes essential to prevent feelings of isolation.

Longevity Risk: Retiring early means potentially spending more years in retirement, increasing the risk of outliving your savings. Adequate financial planning, including considerations for inflation and investment returns, is crucial to mitigate this risk.

Conclusion:

In contemplating early retirement, it's vital to weigh the pros and cons carefully. Financial preparedness is a cornerstone, but equally important is understanding the non-financial aspects, such as your emotional well-being, social connections, and sense of purpose. Early retirement can be a fulfilling chapter of life, provided it aligns with your goals and you've taken steps to address potential challenges. Ultimately, the decision to retire early is a personal one, and by considering both sides of the coin, you can make an informed choice that suits your unique circumstances and aspirations.

If you're considering retiring early your next best step is to get in contact with one of our retirement experts. Let's craft a strategy to get you to the finish line. You can contact us here .

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The Pros and Cons of an Early Retirement

Retirement. It is a desire and dream many Americans work their entire life to achieve. Almost every one of them, though, has a different vision of what retirement will mean for them. For some, it might mean traveling the world. For others, it would enable them to pursue hobbies or spend more time with their grandchildren.

While the official retirement age is 66 years and two months for people born In 1955 and 67 for those born 1960 or later, many Americans plan to retire early. However, many of them are saving far too little to fund their anticipated retirement lifestyles.

With that in mind, there are plenty of pros and cons to keep in mind as you decide whether to retire early or keep on working a few more years.

Advantages of Early Retirement

These are several advantages to early retirement that make it a worthwhile consideration for some people, despite the financial risk it represents.

• Exploring a new career or money-making hobby. Perhaps one of the biggest advantages of retiring early, particularly as people are living longer lives and staying active long after retirement, is that it gives you the opportunity to explore a new career or even transform your hobby into a source of income.
• Enjoying leisure activities or education opportunities. Retiring early allows you an opportunity to enjoy things like traveling the world, returning to school, and other activities that might not be as accessible to you as you age.
• Spending more time with family or friends. Finally, retiring early gives you freedom of time that you can invest spending with family, building friendships, and forging new personal relationships.

Those are some pretty significant advantages to consider. Some of them may even help you fund your retirement in later years (if you operate a successful business venture during your retirement). However, you must also explore the cons as well.

Disadvantages of Early Retirement

The disadvantages of early retirement are primarily financial. Unfortunately, they represent some reasonably substantial sums of money you could be spending or missing out on receiving by retiring early.

• Foregoing employer-sponsored health care costs. Because Medicare coverage does not begin until you reach the age of 66 years and two months, the costs of leaving your employer-sponsored health coverage behind could be greater than you realize.
• Getting hit with penalties and fines for accessing your retirement funds early. Uncle Sam doesn’t want you to have access to your retirement funds early. He believes your time is much better spent contributing to society. Because of that, he imposes stiff financial penalties for accessing those funds before reaching your official retirement age.
• Realizing a loss of benefits. Last, if you begin withdrawing funds from Social Security before you reach full retirement age, you will receive 30 percent fewer benefits than if you wait until your full retirement age to receive them. More importantly, for each year you continue working between the ages of 67 and 70, your monthly benefit will increase by eight percent.

As you can see, the financial considerations can be devastating unless your purpose for retiring is not to cash out your retirement savings but to embark on a new career or income venture until you reach full official retirement age.

Deciding When to Retire

You have a variety of choices to consider when it comes down to retirement. You may elect to retire early, on time, or late. Each one offers its pros and cons according to your stage in life and retirement goals.

As with many things in life, the right time for you comes down to many factors, including the following:

• How long will your retirement funds last?
• How much do you intend to spend vs. save during retirement?
• What’s your financial situation (i.e., housing, vehicles, medical bills, credit cards)?
• Will you tolerate boredom or isolation well (after all, for some people, work is a social engagement)?
• Do you plan to seek supplemental employment during retirement?
• Are you ready to retire?

Early retirement may be the right choice for you. Alternatively, it may not. For many people, it comes down to a matter of dollars and cents. Which option makes the most sense for you?

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• The Pros and Cons of Early Retirement: Is It Right for You?

Introduction

Are you dreaming of leaving the nine-to-five grind behind and enjoying the freedom of early retirement? The idea of retiring ahead of schedule can be enticing, offering the promise of more leisure time, pursuing passions, and escaping the daily stress of work. However, early retirement isn’t without its challenges and considerations. Before you leap, it’s essential to weigh the pros and cons to determine if it’s the right path for you.

In this comprehensive guide, we’ll explore the advantages and disadvantages of early retirement, providing valuable insights and practical tips to help you make an informed decision. Whether you’re contemplating early retirement or simply curious about what it entails, this article will equip you with the knowledge and tools to navigate this significant life transition.

Quick Tips for Early Retirement Success:

• Start Financial Planning Early: Begin assessing your retirement savings and investments well in advance to ensure you’re financially prepared for early retirement.
• Consider Lifestyle Adjustments: Think about how you’ll fill your time during retirement and plan for activities that bring you joy and fulfillment.
• Stay Socially Engaged: Maintain strong social connections and seek out opportunities for social interaction to combat feelings of isolation during retirement.
• Seek Professional Guidance: Consult with financial advisors and retirement planners to develop a comprehensive retirement strategy tailored to your unique goals and circumstances.

Financial Independence

Retiring early offers the enticing prospect of financial independence, freeing you from the need to work for income and providing the opportunity to pursue your passions and hobbies without the constraints of a traditional job. With careful financial planning, you can achieve greater flexibility and autonomy in managing your finances, allowing you to live life on your terms.

Enhanced Quality of Life

One of the most significant benefits of early retirement is the potential for an enhanced quality of life. With more leisure time at your disposal, you can indulge in activities you’re passionate about, whether it’s traveling, volunteering, or pursuing creative endeavors. Early retirement also offers the opportunity to reduce stress and improve mental health by escaping the daily pressures of work and finding greater balance and fulfillment in life.

Health Benefits

Retiring early can have positive implications for your health and well-being. With more time for exercise, relaxation, and self-care, you can prioritize your physical and mental health, reducing the risk of burnout and related health issues associated with prolonged work-related stress. By embracing early retirement, you can focus on leading a healthier, more fulfilling lifestyle that promotes longevity and vitality.

Financial Considerations

While early retirement offers many advantages, it’s essential to consider the potential financial implications carefully. Retiring ahead of schedule means relying on savings and investments to fund your lifestyle without the security of a steady paycheck. Depleting your retirement savings too quickly or underestimating your expenses could lead to financial strain and jeopardize your long-term financial security.

Social Impact

Another consideration to weigh when contemplating early retirement is its social impact. Transitioning from a busy career to a more leisurely lifestyle can affect your social interactions and sense of purpose. Retirees may experience feelings of isolation or loneliness as they adjust to a new routine and navigate changes in their social networks. Maintaining strong social connections and seeking out opportunities for social engagement are essential for combating feelings of loneliness and maintaining a sense of belonging during retirement.

Psychological Challenges

Early retirement can also present psychological challenges, particularly in terms of identity and fulfillment. Many individuals derive a sense of purpose and identity from their careers, and retiring early can disrupt this sense of self. Retirees may struggle with feelings of boredom, lack of direction, or a loss of professional identity as they adjust to life outside the workforce. Finding new hobbies, pursuing personal interests, and exploring new avenues for personal growth can help retirees navigate these psychological challenges and find fulfillment in retirement.

Factors to Consider Before Early Retirement

Before deciding to retire early, it’s essential to consider a range of factors to ensure you’re adequately prepared for this significant life transition. Financial preparedness, lifestyle considerations, and social and emotional readiness are all critical aspects to evaluate before taking the plunge into early retirement.

Strategies for Successful Early Retirement

To maximize the benefits of early retirement and mitigate potential challenges, it’s important to adopt strategies for success. From careful financial planning to lifestyle adjustments and social engagement, several key strategies can help you navigate the transition to early retirement with confidence and ease.

Case Studies: Real-life Examples

Exploring real-life examples of individuals who have successfully embraced early retirement can offer valuable insights and inspiration for your retirement journey. By learning from the experiences of others, you can gain a better understanding of what to expect and glean practical tips for achieving your retirement goals.

Table of Things You Can Purchase:

Remember, the decision to retire early is a personal one that should be based on careful consideration of your circumstances, goals, and priorities. By weighing the pros and cons and taking proactive steps to plan for a successful retirement, you can embark on this new chapter of life with confidence and enthusiasm.

In conclusion, early retirement offers both opportunities and challenges that must be carefully weighed and considered. While the prospect of financial independence and enhanced quality of life may be enticing, it’s essential to understand the potential financial, social, and psychological implications of retiring early. By taking a thoughtful and strategic approach to early retirement planning, you can position yourself for a fulfilling and rewarding retirement experience that aligns with your values and goals

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The pros and cons of early retirement

by Joe Hearn | Lifestyle Design , Retirement

I’ve worked with many clients over the years who decided to retire early.  Sometimes that was a great decision, other times it resulted in some unexpected challenges.  Below are some of the pros and cons I’ve seen with early retirement.  Consider them carefully as you decide when to retire.  

Time control.   During your working years, you don’t control large chunks of your day.  If you retire early, however, you shed those demands and have much more flexibility and opportunity to use your time to do the things you really want to do.

Health.   Generally speaking, the younger you are, the healthier you are.  If you retire early, you get to take advantage of the fact that you’re still healthy and active.  

Open doors.   In The Funny Thing About Time , I discussed how time closes doors as we get older.  The kids grow up and move away.  You lose a spouse or other loved one.  Your physical health changes and you’re not able to do that trip you always wanted to do. Retiring early means that more of those doors are still open.

Better relationships.   One of the advantages of having more time is that you can prioritize relationships.  During our working years, we’re less proactive with relationships. It’s a side effect of less time and more obligations.  Early retirement changes that calculus.  And since relationships are key to a happy life, retiring early can be a huge advantage.

Less stress.   This one is pretty self-explanatory.

Potential opportunity for a second career or passion project.   Some retire early because they are ready to leave work/career behind.  Others still want to work, they just want to do something they enjoy or are passionate about without having to worry about what it pays.  Retiring early can give you that opportunity.

Age difference with other retirees.   I have a client who retired early and moved to a private community in Florida.  He was the youngest resident by several decades. You can feel a little out of place if you’re 50 and everyone around you is 70.  This is obviously more of an issue if you move to a destination geared toward retirees. 

Guilt.   I wrote about this in 4 Unexpected Emotions in Retirement . If you retire early, you can sometimes feel guilty because you’re doing fun stuff while your friends and family are still working.  This can make conversations awkward as you talk to each other about your day, priorities, etc.

Money.   The sooner you retire, the less time you have to save and the longer your nest egg needs to last.  If you are considering early retirement, be sure to work with a trusted adviser to create a detailed retirement plan with a high probability of success.

Comparison with peers.   Alas, comparison with others continues even in retirement.  Your friends and co-workers will likely be a little jealous of your newfound freedom and you’ll likely feel a bit green when you hear about their promotions and raises. You might even second guess your decision to walk away from the challenge and status your career.  The best way to guard against this is to do things in retirement that provide purpose and meaning.

Social Security.   Your Social Security benefits are based on the assumption that you will continue to work until full retirement age.  If you retire sooner, your benefits will be a little lower.  Likewise, if you decide to claim your benefits early (rather than waiting until full retirement age) they will be reduced.  You can retire early and still wait to claim your benefits, but that means that your portfolio will need to do the heavy lifting until you file (see my point on money above).

Health insurance.   If you retire before becoming eligible for Medicare at age 65, you’ll need to get a health care policy that bridges the gap between your employer policy and Medicare.

Timeline vs. Pie Chart

Regardless of when you retire, you’ll be faced with tradeoffs.  If you wait, you get more money, but you lose time and health.  If you retire early, you sacrifice a bit of money, but you’ll be healthier and have a much longer runway to enjoy retirement. You need to decide what’s most important to you.

One piece of advice I can give you: Don’t save the best for last.  Retirement should not be a timeline where youth is 0-20, working years equal 20-65 and retirement is 65 plus. Instead it should be a pie chart divided between time you control and time you don’t. Retirement is using whatever time you control now (whether that’s 10%, 50% or 90%) to live the life that you want to live.  

Be Intentional,

If you retire at 50… everyone in your age group will be at work. Thats a problem, most people I know are in their 70’s because that’s the only age group that isn’t at work all day.

Also don’t tell your neighbors… they get jealous no matter how successful you are and how hard you worked to get there as they all have to go to work each day. So make stuff up like you are taking a sabbatical or working under contract, this keeps them in the dark. I retired at 48 and made this mistake… I had a lot of neighbors trash me behind my back because I retired early, even though I worked 60 hours a week and put my time in for 20 years in the tech industry… I didn’t travel to exotic places, didn’t have fancy cars, didn’t pay someone else to remodel my house, didn’t have a housecleaner, didn’t have day care for my children (or a nanny)…. the list goes on on the sacrifices we made to retire early on a single income… but your neighbors don’t know this.

Great points Guy!

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Weighing the Ups and Downs of Early Retirement

You’ve always been a go-getter. 

From your early days in the corporate world, climbing up the ladder, to your 40s, where you were the one everyone looked up to for advice. You’ve lived the hustle, tasted success, and now, as you look towards the sunset years, you’re contemplating an early retirement.

Picture it — mornings free from alarm clocks, afternoons spent exploring hobbies you never had time for, and evenings with loved ones, unburdened by work stress. 

Sounds idyllic, doesn’t it? 

The allure of early retirement is strong, and why wouldn’t it be? After all, you’ve earned it.

But hold on just a minute — before you turn in your notice and break out the golf clubs, let’s talk about the pros and cons of early retirement to help you avoid making costly mistakes .

With a little bit of foresight and planning, you might just find the perfect balance between work and leisure in your golden years.

So let’s dive into retiring early…

What is Early Retirement?

Early retirement refers to the concept of quitting work earlier than the traditional retirement age of 65. It may mean leaving the workforce at 50 or it could be as early as 30 or 40. 

The idea of early retirement often comes with a sense of freedom and the ability to enjoy life outside of the 9-to-5 grind. It’s a concept that has gained popularity in recent years due to the rise of the FIRE (Financial Independence, Retire Early) movement. 

According to the EBRI 2017 survey , the reasons for early retirement vary. 

For some, it’s a way to break free from the daily grind and pursue something else (10%) or simply just because they can afford it (24%). Others may choose early retirement due to health concerns or disabilities (41%) or changes like downsizing at their company (10%).

Whatever the reason, early retirement isn’t just about lounging on the beach; it requires discipline and careful planning (beyond just finances) to achieve your desired lifestyle. 

Pros & Cons of Early Retirement

5 pros of early retirement.

#1 Freedom & Flexibility 

Early retirement is often seen as a double-edged sword, but one of the undeniable benefits is the freedom and flexibility it introduces to your life. 

After decades of structured work schedules, deadlines, and commitments, early retirement presents an opportunity to reclaim your time and live life on your own terms.

This newfound time can be dedicated to anything that brings joy or fulfillment. Retirees often find themselves with ample time to pursue leisure activities they previously didn’t have time for. 

Travel, reading , socializing, or even starting a new hobby or business venture are all within reach in early retirement. A study by the Bureau of Labor Statistics found that retirees allocate a significant portion of their time to such leisure activities.

But it’s worth noting that this luxury of time should be used wisely. The same study also found that a considerable amount of retirees’ free time is spent watching TV, which isn’t really the most fulfilling or productive use of time.

In essence, early retirement offers the chance to take control of your schedule and enjoy life’s pleasures to the fullest. It provides an opportunity to shift from a life built around work to one centered around personal growth, enjoyment, and relaxation.

But like any major lifestyle change, it requires careful planning and thoughtful decision-making to make the most out of this newfound freedom and flexibility.

#2 Quality Time

For many people, more time with loved ones ranks high on their wish list, but finding the time to actually make that happen can be a challenge. 

That’s where early retirement is beneficial — it provides the perfect opportunity to spend quality time with family and friends, strengthening bonds and creating lasting memories. 

In fact, according to research, marital satisfaction turned out to be the strongest predictor of retirement timing. So, the happier you are in your marriage, the more likely you are to take advantage of this chance and spend more time with your loved ones. 

With the freedom and flexibility that early retirement offers, you can finally make cherished moments with your nearest and dearest a top priority.

#3 Personal Growth

One of the great perks of early retirement is having more time on your hands – and with that time, comes the opportunity to focus on personal development. 

Whether you’ve always wanted to learn a new language, dive into a lifelong passion , or even pursue an advanced degree, retirement can be the perfect life phase to do it. 

The beauty of not being bound by a strict schedule or demanding job is that you’re free to explore, learn, and grow at your own pace. You can enrich your knowledge, broaden your skillset, and embark on a journey of self-discovery and exploration. 

And it’s not just for personal fulfillment — studies show that adults who consistently challenge themselves with multiple new skills can maintain cognitive abilities similar to those of people half their age. 

Essentially, you have the power to redefine your retirement period into a phase of personal growth, lifelong learning , and enrichment.

And we’ve got just the thing to help you — our Finding Clarity workbook is designed to guide you in identifying your goals , passions, and areas for growth, serving as your roadmap to a fulfilling and growth-oriented retirement.

With the extra time retirement provides, personal development can become a fulfilling and exciting adventure.

#4 Lower Stress Levels

Retirement is often associated with relaxation, but what if you could start enjoying those stress-reducing benefits earlier in life? 

The relentless pace of work life can exert a heavy toll on our mental and physical health, leading to feelings of stress and burnout — especially if you’re a blue-collar worker . 

And by choosing to retire early, you can substantially alleviate the stress associated with job performance and deadlines, promoting a more relaxed and healthier lifestyle.

In early retirement, there’s no more scrambling to meet project deadlines, fretting over that big presentation, or enduring conflicts with managers. Instead, it ushers in a new realm of possibilities for leading a fulfilling life. 

#5 Chance to Pursue a New Career

Retiring early to begin a new career can seem like an unconventional move. But for those looking to pursue their passions , it can be a game-changing decision. 

Interestingly, about a third of retirees have engaged in paid work post-retirement and a whopping 90% chose to do so to maintain an active and engaged lifestyle.

The beauty of retiring early is that money isn’t the main motivator. Instead, you have the freedom to explore different opportunities that align with your deeper values and interests. And working again after retirement can bring about a host of benefits .

Maybe you’ve always wanted to start your own business but felt like you couldn’t take the risk while working a full-time job. Or maybe you want to work for an organization that makes a more positive impact on the world. 

Whatever your dreams may be, retiring early may open the chance to finally chase them. 

5 Cons of Early Retirement

#1 Financial Stress

Even with a substantial nest egg, the fear of outliving your savings is real. Increased life expectancy means your retirement funds need to last longer, and unexpected expenses can always crop up. 

Inflation is one such factor that can significantly impact the value of your savings over time. As the cost of goods and services increases, the purchasing power of your savings diminishes. 

For instance, according to this handy inflation calculator , if you could buy something for $100 in January 2021, you’d need nearly $120 for the same items by August 2023. Therefore, it’s crucial to factor in inflation when planning for retirement to ensure your savings maintain their value over time.

Healthcare costs are also a significant consideration. As you age, healthcare needs often increase, leading to higher medical expenses. 

For instance, a 65-year-old retired couple will need an estimated $315,000 in 2022 for healthcare costs throughout retirement. And if you add chronic illness into the mix, the costs shoot up even higher.

And not to mention – retiring before you turn 59.5 can come with a hefty price tag. That’s because many tax-deferred accounts, such as traditional IRAs and 401(k) plans, impose a 10% early withdrawal penalty on funds taken out before that age. 

This can dramatically reduce the amount of money you have to live on in retirement, so it’s important to think carefully about your options.

Sounds challenging? 

Sure, but what you need before retiring early is a comprehensive plan and retirement budget that factors in these potential risks. A plan that ensures you have a steady income stream throughout your retirement years, even if they turn out to be longer than usual.

#2 Loss of Identity

So many of us have our self-worth and identities intricately woven into our careers. It’s not just about the paycheck, it’s about the sense of purpose , the daily structure, and the social interactions that come with it. 

When you decide to retire early, it can feel like you’re losing a part of yourself — even if it’s something you truly wanted and planned for. It’s a significant life transition that requires you to redefine who you are outside of your profession.

Just think about it, how many times have you introduced or described yourself with your profession? 

But it turns out that retirement doesn’t erase your professional identity. In fact, it remains a significant part of how you see yourself, according to a study on personal identity after retirement .

Interestingly, the study also found that retirement doesn’t limit self-description — quite the opposite. Retirees rate more domains as important for self-description than the non-retirees.

This suggests that with retirement comes a greater diversity in identity. You’re not just “retired.” You’re an artist, gardener, volunteer, grandparent, and so much more.

In essence, retirement is not about losing your professional identity but expanding it. It’s about exploring new facets of who you are and finding joy in them.

It’s an opportunity to explore new passions, develop new skills , and create new social networks . May you take retirement as your opportunity to redefine what fulfillment looks like for you – whether it’s volunteering at a local charity , starting a small business, or going back to school.

And if you’re wondering exactly how you’ll turn your successful career into an even better retirement, we’ve got just the thing for you. Our Rewire Method masterclass is designed to guide you through this exciting transition. So, feel free to give it a watch.

#3 Social Isolation

We spend a significant portion of our lives working, and in doing so, we form bonds and friendships with our colleagues. 

The daily interactions at work can create a sense of belonging and community that is necessary for your social and emotional well-being . But, when you retire early, you might find yourself disconnected from this vital aspect of your life. 

That’s why it’s super important to have a game plan. By proactively creating a social network — whether through volunteer groups , joining a club , or even online through friendship sites — you can actively reach out and meet people with like-minded interests. 

This way, you’ll be able to stay connected while also exploring a new chapter in your life. And research shows that having strong social bonds is key to long-term happiness and well-being. 

So don’t be afraid to reach out and connect with people. It’ll make your life much more enjoyable — retired or not.

Early retirement can sound enticing, but once the initial excitement fades and you step out of the honeymoon stage , it can be challenging to adjust to a life without the structure and purpose that work provides. 

Having 40 extra hours every week might sound like a dream come true at first, but it can quickly turn into a nightmare if you find yourself feeling bored or even useless (which a third of retirees feel like in the first year of retirement ).

And research suggests that two different types of people are vulnerable to chronic boredom — those who crave new stimuli all the time, and those who avoid risks due to fear: 

• Craving stimuli — Those who are always seeking new stimuli might struggle to stay busy and satisfied with the same hobbies or projects for a long time. 
• Avoiding risk — And those who are too scared of taking risks might have difficulty identifying new interests or activities that could provide them with the type of satisfaction that work once did.

No matter which camp you fall into, it’s important to find ways to combat boredom during retirement so you can enjoy the freedom and choices that come with it. 

Basically, instead of viewing boredom as a sign that something is wrong — use it as an opportunity to deeply self-reflect, get creative and explore all the possibilities that come with retirement.

#5 Lack of Mental Stimulation

Work can often provide mental challenges that keep the brain sharp . But when you’re in retirement, it can be hard to find new tasks that are intellectually stimulating.

In fact, according to research, people over 60 who are not working experience a higher rate of cognitive decline than those who continue to work on a regular basis.

While it might be tempting to stick with the same types of activities you did during your working years, it can actually be more beneficial to try something new.

Studies have shown that new experiences and places light up your hippocampus — the part of the brain associated with learning — far more than repeating familiar tasks. 

So if you’re planning on retiring earlier, it’s important to make sure you have activities lined up that will help challenge and stimulate your mind.

Consider signing up for new classes, taking on a part-time job , or even just traveling to new places .

And if none of those options appeal to you, there are plenty of brain games designed to help keep your mental abilities sharp — from crosswords to memory exercises.

No matter what you decide to do, make sure that the activities you choose help nourish your mind and keep it engaged — this will help prevent cognitive decline and ensure that your retirement years are as stimulating as possible.

Is It Better to Retire Early or Later?

Deciding when to retire is a deeply personal decision that hinges on various factors — your financial stability, health condition, lifestyle preferences, and long-term goals. 

Which means it’s crucial to weigh the pros and cons carefully. Here’s our recap.

The pros of early retirement are:

• Freedom & flexibility — set your own schedule, travel at will, and live life on your terms without the constraints of a 9-to-5 job
• Quality time — spend more quality time with friends and family
• Personal growth — use early retirement as an opportunity to develop new skills, delve into interests, or even start a passion project
• Lower stress levels — say goodbye to work-related stress and hello to a more relaxed lifestyle 
• Chance to pursue a new career — explore the potential for a second career or entrepreneurial venture that aligns with your passions

On the flip side, the cons are:

• Financial stress — brace yourself for potential financial stress due to having a fixed income, inflation, and unexpected expenses
• Loss of identity — grapple with potential loss of identity if you’ve tied your self-worth to your career
• Social isolation — stepping away from daily interactions with colleagues could result in feelings of loneliness and isolation
• Boredom — without the routine and challenges of work, early retirement might lead to feelings of boredom and aimlessness
• Lack of mental stimulation — consider the risk of reduced mental stimulation, as the intellectual challenges provided by work may be hard to replace in retirement

Whether you choose early retirement or decide to extend your working years, retirement is a chance to redefine your life on your terms. So, take your time, go inward to find clarity, and listen to your heart. 

Retirement is one of the most significant milestones in your life, so make sure it’s a journey worth embarking on. 

And if you want help, that’s our specialty – we shortpath your way to your best retirement life (early or not). Feel free to schedule a breakthrough session to see if it’s a good fit. 

What's Your Retirement Purpose?

Retirement Life Coach

As a certified retirement life coach since 2018, Cyn has helped thousands of older adults turn their retirement years into remarkable years full of growth, purpose, and passion. Through her signature program Rewire My Retirement, she helps people achieve their best life across the 5 Rings of Retirement, which covers topics Growth, Community, Health, Giving Back, and Finance.

Cyn combines specific life coaching tools, neuroscience, and her extensive background in marketing (spanning 17 years) to make a powerful impact with Second Wind Movement – an organization dedicated to providing educational resources and coaching for seniors.

With meticulous research, insight, and passion, Cyn’s mission is to usher in a new wave of positive experiences for generations of retirees.

As a certified retirement life coach since 2018, Cyn has helped thousands of older adults turn their retirement years into remarkable years full of growth, purpose, and passion (beyond the stereotypical financial planning side of retirement). 

She combines specific life coaching tools, neuroscience, and her extensive background in marketing (spanning 17 years) to make a powerful impact with Second Wind Movement – an organization dedicated to providing educational resources and coaching for seniors.

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How to consider inflation into your retirement strategy, pros and cons of early retirement.

Are you thinking about early retirement? Depending on your profession, early retirement may be as young as age 55. A healthy savings portfolio and debt-free living can provide a solid retirement platform. And the opportunity to pursue your own interests — travel, hobbies, time with family, volunteering — can be highly motivating.

Like any choice in life, early retirement involves trade-offs. For what you gain in me-time, you pay in opportunity costs. As you evaluate your financial readiness, here are some pros and cons to consider.

Pro: Making a fresh start

Pumping the brakes on your full-time career doesn’t mean slowing down completely. More retirees are working during retirement — some as consultants in their old profession while others pursue part-time work in new areas. Some start their own businesses. Early retirement enables you to work because you want to work, not because of financial obligations. Personal accomplishment becomes the motivator, not the compensation.

Pro: Deepening personal relationships

If you can afford to take an early retirement, chances are your hard work has cost you time away from loved ones and family. Retiring in your early fifties gives you more time to spend with your family now. For many early retirees, that’s the ultimate benefit. Time to reconnect with spouses, partners, and friends. Time to engage more actively with children during their teen years and early adulthood. Investing extra time in loved ones pays dividends for the entire household.

Pro: Traveling in good health

Most retirees look forward to some form of travel. Whether your vacation style involves calming beaches or active adventure, both time and opportunity abound. An early retirement often comes with good health, agility and stamina. Adventure-based vacations and bucket-list experiences such as rock climbing, long hikes and whitewater rafting are approachable — and potentially safer — at an earlier age.

It’s easy to dream about the opportunities an early retirement offers. But have you considered these costs?

Con: Paying for healthcare

You can’t enroll in a Medicare plan until you’re age 65 unless you have a disabling medical condition. If you retire at age 55, that leaves a 10-year gap during when you have to foot your own medical bills, typically without the protection of an employer-sponsored health plan. And self-insurance can be prohibitively expensive. One solution is to put money aside in a Health Savings Account (HSA) and allow the funds to roll over, year after year, until you retire. HSA assets can be invested: those funds grow tax-free and withdrawals are tax-exempt. Certain limits and qualifications apply, so get the facts .

Con: Incurring early withdrawal penalties

Using tax-advantaged accounts to save for retirement can be a smart move but tapping into those funds early can cost you. A 401(k) typically carries a 10% penalty for early withdrawals before the age of 59 ½. However, if you leave your company at age 55 or older, the IRS will allow you to make withdrawals penalty-free. Those with traditional IRAs face a 10% withdrawal tax on distributions taken before the age of 59 ½ unless they agree to adjusted periodic payments based upon life expectancy. Similar 10% early withdrawal penalties may be applied to funds converted into a Roth IRA depending on the composition of the account. Know the costs associated with accessing your own money and how they affect your early retirement budget.

Con: Leaving Social Security money on the table

You worked hard for your Social Security benefits, but the earlier you retire, you may receive a smaller monthly amount for the remainder of your life than waiting until 67 or even 70 when you maximize your monthly amount.  If you retire prior to age 67, you could lose as much as 30% of your benefits (or more if you’re drawing as a spouse). Employer-paid pensions aren’t immune either. Civil servants face a 2% reduction per year in retirement annuity payments drawn under the age of 55. Private pensions typically reduce payments for those retiring before age 65.

One way to supplement lost retirement benefits is to consider a whole life insurance policy . In addition to providing financial protection for loved ones through a death benefit, a whole life policy gives you access to cash throughout your lifetime to pay for unexpected expenses in retirement. 1

An early retirement requires careful planning and professional help. Try out our  retirement planner  to evaluate some of the bigger financial responsibilities that can impact your retirement. Having a clear vision of your retirement needs can help you build a sturdy and personalized strategy.

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2022-147682 Exp. 12/2024

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1 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

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Pros and Cons of Early Retirement: Realities and Strategies

SUMMARY: Early retirement might sound like a way to win extra time in one's personal life, but the financial realities can be challenging. We look at the facts surrounding retiring early, and at some strategies to live better on post-career resources.

If retirement is already a complicated step to take in life, then leaving your working days behind before you're in your 60s is even more complex. Some choose it proactively, with all the money in place to live well outside of a career - but others can end up in a scenario of early retirementbecause of illness, or because the recession took their job, and their career, and neither are coming back.

For those retiring on the early end of the spectrum, take heed. Managing the process without causing undue damage to your lifestyle takes know-how and careful planning.

Let's turn to the realities of early retirement, and some strategies to make the most of the years it entails.

• Frugal living. For the early retiree, unless you're talking significant independent wealth, investment windfalls, pensions, and/or an inheritance, the post-work scenario means a dramatic shift in one's standard of living - and it's usually a shift toward a more frugal lifestyle. Start with the idea that conventional retirement advice, on the most basic level (and there are many variables) pegs the amount you need to save to retire at 15% of your annual take-home for about 45-50 years. Say you take home $100,000 annually, then we're talking about accruing some $675,000-$750,000 - if you started saving at 25. And that's a modest nest egg. You'd then live, under typical models, on about 4% of what you tucked away - so, in our example, that's $27,000-$30,000 per year, plus income from any assets. Early retirees need to approach the equation even more aggressively. Assuming one could live frugally before retirement and save 30% for 30 years, you could sock away about $900,000 by the time you're 55. And then your annual budget would be closer to $36,000, plus asset-based income.
• Early retirees and Medicare. One benefit of retiring early is that considerations of health are often farther off than is typically the case for those who leave work in their 60s, or later. In any case, for individuals seeking coverage away from the workplace, buying health insurance under the ACA may be a more flexible environment than before Obamacare- especially given the removal of obstacles surrounding pre-existing conditions - but remember that you still won't qualify for Medicare until you're 62. And even when that program kicks in, you'll have spent resources for up to (or exceeding) a decade already. Bottom line, if you retire early, you'll likely need additional monies to cover health expenses given the longer span of exposure to personally covered events.
• The Social Security hit. If you were born after 1960, full retirement age is 67. While you can collect Social Security as an early retiree, you probably won't get the full benefit of the program. That's because the government calculates your payments based on a full 35 years of your highest earnings as a worker. Retirees who haven't racked up those 35 years are penalized, in a sense, because the non-working years amount to zeros in the Social Security calculation.
• Penalties for early account withdrawals. If your early retirement depends upon withdrawing funds from a 401(k) or an IRA, the government is going to take a penalty share of that money when you draw it down before age 59-1/2. Unless you can show hardship or a medical emergency, expect to pay 10% for withdrawing from these kinds of instruments before you reach the minimum age.

If all of this amounts to early retirement sounding like a challenging step, remember that it's not impossible. People do retire early, and they do so successfully, but they need strategies in place to absorb some of the long-term costs that come with a non-salaried lifestyle. By taking into consideration housing, taxes and the budget on which you'll buy food, entertainment, travel, and the like, early retirees can maximize the money they have to spend.

• Downsize your home. Housing can consume more than 1/4th of the average household's budget. Downsizing one's home, renting part of it, refinancing to a shorter-term mortgage to save on interest, even selling one's house and creating a savings instrument with the net can significantly change your early-retirement equation for the better.
• Consider location in light of taxes. States that do not levy income tax can create savings for early retirees facing what is probably an extra decade or more of making their nest egg last. But even a less-than-total reduction of taxes can help keep more money in place for longer, and this includes sales tax and property tax. Part of the care that goes into a successful early retirement is the concept of location. Where you choose to live is deeply intertwined with how you're able to live after work.
• Identify and minimize go-forward expenses. Controlling expenses for early retirees means re-approaching even basic concepts, such as transportation. For example, owning and maintaining a car can run into the five-digit realm during the life of the vehicle - particularly when said life spans more years for the early retiree. Public transportation options and rentals can create significant savings. If you travel abroad, which is an oft-cited desire of many retirees, pick places where your dollar is worth more because of exchange rates. Countries such as Chile, Argentina, and India are often advantageous destinations, in this regard.

Finally, remember that many retirees - early and otherwise - return to part-time work to augment their available resources.

"Retiring today doesn't necessarily mean not working," says Don Tebbe, a consultant to retiring executives for the past 20 years, in an e-mail interview. "For many it means post-career work, paid or unpaid - maybe even an encore career - that is more engaging, offers more freedom, and provides greater contribution and satisfaction."

And this can be key to balancing all the frugality we've just examined.

Say you love driving, but you've given up your car to save money. Explore driving shifts in a cab, part time. Another example: if you want to be near the water, but have relocated away from the beach to cut expenses, pitch off-season care-taking services to homeowners in waterfront locales.

These kinds of moves pair helpful revenue with upticks in quality of life that can go a long way for the early retiree - not only providing additional purpose to one's days, but also increasing the longevity of the plan they've put in place.

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The Pros and Cons of an Early Retirement

Retirement. It is a desire and dream many Americans work their entire life to achieve. Almost every one of them, though, has a different vision of what retirement will mean for them. For some, it might mean traveling the world. For others, it would enable them to pursue hobbies or spend more time with their grandchildren.

While the official retirement age is 66 years and two months for people born In 1955 and 67 for those born 1960 or later, many Americans plan to retire early. However, many of them are saving far too little to fund their anticipated retirement lifestyles.

With that in mind, there are plenty of pros and cons to keep in mind as you decide whether to retire early or keep on working a few more years.

Advantages of Early Retirement

These are several advantages to early retirement that make it a worthwhile consideration for some people, despite the financial risk it represents.

• Exploring a new career or money-making hobby. Perhaps one of the biggest advantages of retiring early, particularly as people are living longer lives and staying active long after retirement, is that it gives you the opportunity to explore a new career or even transform your hobby into a source of income.
• Enjoying leisure activities or education opportunities. Retiring early allows you an opportunity to enjoy things like traveling the world, returning to school, and other activities that might not be as accessible to you as you age.
• Spending more time with family or friends. Finally, retiring early gives you freedom of time that you can invest spending with family, building friendships, and forging new personal relationships.

Those are some pretty significant advantages to consider. Some of them may even help you fund your retirement in later years (if you operate a successful business venture during your retirement). However, you must also explore the cons as well.

Disadvantages of Early Retirement

The disadvantages of early retirement are primarily financial. Unfortunately, they represent some reasonably substantial sums of money you could be spending or missing out on receiving by retiring early.

• Foregoing employer-sponsored health care costs. Because Medicare coverage does not begin until you reach the age of 66 years and two months, the costs of leaving your employer-sponsored health coverage behind could be greater than you realize.
• Getting hit with penalties and fines for accessing your retirement funds early. Uncle Sam doesn’t want you to have access to your retirement funds early. He believes your time is much better spent contributing to society. Because of that, he imposes stiff financial penalties for accessing those funds before reaching your official retirement age.
• Realizing a loss of benefits. Last, if you begin withdrawing funds from Social Security before you reach full retirement age, you will receive 30 percent fewer benefits than if you wait until your full retirement age to receive them. More importantly, for each year you continue working between the ages of 67 and 70, your monthly benefit will increase by eight percent.

As you can see, the financial considerations can be devastating unless your purpose for retiring is not to cash out your retirement savings but to embark on a new career or income venture until you reach full official retirement age.

Deciding When to Retire

You have a variety of choices to consider when it comes down to retirement. You may elect to retire early, on time, or late. Each one offers its pros and cons according to your stage in life and retirement goals.

As with many things in life, the right time for you comes down to many factors, including the following:

• How long will your retirement funds last?
• How much do you intend to spend vs. save during retirement?
• What’s your financial situation (i.e., housing, vehicles, medical bills, credit cards)?
• Will you tolerate boredom or isolation well (after all, for some people, work is a social engagement)?
• Do you plan to seek supplemental employment during retirement?
• Are you ready to retire?

Early retirement may be the right choice for you. Alternatively, it may not. For many people, it comes down to a matter of dollars and cents. Which option makes the most sense for you?

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The Pros and Cons of Early Retirement

What's better than early retirement and getting a head start on the golden years? Depending on your situation, early retirement may or may not be the best choice for you and your family.

Reviewed by Patty Caballero

Written by Anne-Marie Kennedy

Posted June 09, 2023

When most of us envision early  retirement , we think it will be spent pursuing new hobbies, spending more time with family, and traveling the world — all in good health, and all with enough spending money to occasionally enjoy a little room service.

But the reality of it can be far less dreamy. What about income? How do you portion out your savings? What's left to pass on to your kids? Before making the  decision to retire early , consider the pros and cons of early retirement.

Pros of Early Retirement

Though the traditional retirement age in the U.S. is 65, many Americans hope to retire sooner, somewhere around age 62 or earlier. 1  The benefits of retiring early include opportunities to travel, explore a new business venture or hobby, or do meaningful volunteer work. There may even be health benefits.

Consider these advantages of early retirement:

1. The chance to do work that is meaningful to you

Retiring from your job does not have to mean retirement from every job. Many people take on new careers or start businesses when they retire. If you have sufficient retirement savings, you can choose your job based on what actually interests you, not what interests your wallet — a first for many.

2. More leisure time to pursue interests or hobbies

With more free time comes more opportunities to pursue passions you may have put on a back burner while you were busy with your career. Some retirees report being busier in retirement with personal hobbies and interests or meaningful volunteer or philanthropic work than they were during their career years. 2

3. Improved general health

Early retirement may allow you more time to prioritize your overall health. Some studies show that early retirees are more likely to reduce alcohol consumption, quit smoking, get more sleep, and exercise more often. 3

Having less stress, no commute, no office politics, and no schedule of endless meetings doesn't hurt either. More free time can mean more time to dedicate to eating right, regular exercise and attending to medical issues you may have put off.

4. Ability to travel

Many retirees say they hope to travel in retirement, with the U.S., Europe, Mexico, and the Caribbean topping the list of destinations. 4  Whether your travel goals include high-adventure vacations, relaxing beaches or sightseeing tours, early retirement allows you the flexibility and time to get to everything on your bucket list.

5. More time with family

Early retirement leaves you free to spend more time with family, whether it's with an aging parent or children. For many people, deeper personal relationships are the ultimate upside to early retirement. 5

6. Early retirement lasts longer

For some people, another five to 10 years of work might as well be an eternity. For others, more time with family is the be-all and end-all.

For people with chronic medical issues or potentially terminal conditions, early retirement will provide more time to relax and enjoy the things that matter most. Depending on your condition, you may be eligible for  Social Security Disability Income  (SSDI), which can help cover costs until you can earn retirement benefits. 6

Cons of Early Retirement

Some experts say retiring early could be a big financial mistake for most Americans, and that many working families are poised for a sharp decline in their standard of living after retirement. 7  Every situation is different, but consider the following downsides to early retirement:

1. Outliving your savings

Exiting the workforce early means  your retirement savings needs to last , possibly decades longer than you expected. According to the Society of Actuaries, a woman who retires at 55 will need her savings to last an average of 28.6 years, while a man will need his for an average of 25.1. 8  And, if you're lucky, your lifespan may exceed the average, so you will want to be prepared.

You might also  need more money than you think . Conventional wisdom says you will spend about 80% as much in retirement as during your working years. 8

2. You could lose some Social Security benefits

Some people retire later to receive more retirement benefits. Others prefer to take the reduced income and retire earlier. Let your savings, investments and retirement income prospects  be your guide .

You can start collecting  Social Security benefits  as early as age 62, but waiting until you are of  full retirement age  (FRA) can help you maximize benefits. To estimate what your FRA might be in the eyes of the government, consider that for those born after 1960, the FRA is age 67. 9  You can see your FRA, as well as an estimate of the monthly social security benefits you would collect at certain retirement ages, on the  Social Security Administration website .

3. You might incur early withdrawal penalties on your retirement accounts

If you retire before your FRA, you may be penalized for accessing your dedicated retirement accounts. For instance, if you withdraw money from a  401(k)  retirement account before the age of 59 ½, you will need to pay both a penalty fee of 10% of the withdrawal as well as taxes on the money withdrawn. The only exception is if you are laid off or fired between the ages of 55 and 59 ½. 10

Penalties apply to traditional IRAs as well. You'll pay both taxes and a 10% penalty on the money you withdraw before 59 ½. You can set up  72(t)  payments to try to avoid this penalty, but that comes with its own series of penalties for not following the payment schedule. 11

4. Loss of employer health insurance

If you have an employer health insurance plan, you could lose it when you retire early. Most people are not eligible for  Medicare  until they turn 65, unless they have a qualifying medical condition. Thus, you may need to pay for your own  health insurance  at a far higher cost. 12

Keep in mind that health expenses tend to increase as people get older. You may want to wait to retire until you can apply for  Medicare , and it's never a bad idea to maintain a  Health Savings Account (HSA)  to offset healthcare costs until then. 13

Being on the job can provide a sense of purpose, opportunities for social interaction and mental engagement. Without a workday structure, some retirees struggle to fill their time and experience increased feelings of loneliness. This may be especially true if you have retired early and many of your friends, family and colleagues are still employed and unavailable to socialize during the workday. 14

6. Increased risk of cognitive health issues

While early retirement may provide a general health boost at first, some research suggests that early retirement can have an overall negative effect on cognitive function in the long term.

Social isolation, lack of mental and intellectual stimulation, and shrinking connection with family and friends are all thought to be factors in increased cognitive decline. 15

Determining if Early Retirement Is Right for You

Getting a head start on the golden years may sound ideal, but depending on your situation, it may or may not be prudent. What is early retirement worth to you? What is it worth to your mental and physical health? What does it matter to your balance sheet? It is all a matter of what is best for you and your family.

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Anne-Marie Kennedy is a freelance writer with more than 20 years of experience covering health and wellness, personal finance, and real estate/investing.

Our Expert Reviewer

Patty Caballero and her team of consultants together have more than 35 years of health insurance knowledge working for some of the biggest health insurance companies in the US. She has knowledge in building brands and strategic initiatives to help consumers better understand their health benefits.

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The information, opinions and recommendations expressed in the article are for informational purposes only. Information has been obtained from sources generally believed to be reliable. However, because of the possibility of human or mechanical error by our sources, or any other, Synchrony and any of its affiliates, including CareCredit, (collectively, “Synchrony") does not provide any warranty as to the accuracy, adequacy, or completeness of any information for its intended purpose or any results obtained from the use of such information. All statements and opinions in this article are the sole opinions of the reviewer. The data presented in the article was current as of the time of writing. Please consult with your individual advisors with respect to any information presented.

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1  Konish L. Here is the age when many Americans hope to retire. CNBC. Published January 3, 2022. Accessed February 1, 2023.  https://www.cnbc.com/2022/01/03/here-is-the-age-when-many-americans-hope-to-retire.html

2  Hartman R. The Pros and Cons of Early Retirement. U.S. News & World Report. Published July 8, 2022. Accessed February 2, 2023.  https://money.usnews.com/money/retirement/aging/articles/the-pros-and-cons-of-early-retirement

3  Haridy R. Unique real-world data shows early retirement hastens cognitive decline. New Atlas. Published January 10, 2023. Accessed February 1, 2023.  https://newatlas.com/health-wellbeing/early-retirement-accelerates-cognitive-decline-china-pension-study/

4  Retirement Statistics – How Americans Plan Their Golden Years. AAG. Accessed February 5, 2023.  https://www.aag.com/retirement-stats/

5  Pros and cons of early retirement. Living Confidently. Accessed February 2, 2023.  https://livingconfidently.com/pros-and-cons-of-early-retirement/

6  Disability Benefits. Social Security Administration. Accessed February 3, 2023.  https://www.ssa.gov/benefits/disability/

7  Kotlikoff LJ. A Harvard-trained economist says 'early retirement is one of the worst money mistakes'—here's why you'll 'regret' it. CNBC. Published February 1, 2022. Updated August 12, 2022. Accessed February 1, 2023.  https://www.cnbc.com/2022/02/01/why-early-retirement-is-one-of-the-worst-money-mistakes-youll-regret-says-harvard-economist.html

8  Waggoner J. 10 Things No One Tells You About Early Retirement. AARP. Updated June 17, 2022. Accessed February 2, 2023.  https://www.aarp.org/retirement/planning-for-retirement/info-2021/pre-early-retirement-reality-check.html

9  “Social Security." SSA,  https://www.ssa.gov/benefits/retirement/planner/1960.html.  Accessed March 31, 2023

10  Phipps M. What Is the Rule of 55? The Balance. Updated December 1, 2022. Accessed February 5, 2023.  https://www.thebalance.com/what-is-the-rule-of-55-2894280

11  Anspach D. How to Use 72(t) Payments for Early IRA Withdrawals. The Balance. Updated November 22, 2021. Accessed February 5, 2023.  https://www.thebalance.com/how-to-use-72-t-payments-for-early-ira-withdrawals-2388257

12  The Pros and Cons of an Early Retirement. Metro Credit Union. Accessed February 5, 2023.  http://advice.metrocu.org/retirement-planning/saving/article/the-pros-and-cons-of-an-early-retirement

13  Fontinelle A. Retirement Uses for Your Health Savings Account (HSA). Investopedia. Updated November 20, 2022. Accessed February 5, 2023.  https://www.investopedia.com/articles/personal-finance/091615/how-use-your-hsa-retirement.asp

14  Brumberg R. Retirement Is One Of Life's Major Transitions—Maintaining Cognitive Health Can Make It Easier. Forbes Health. Updated January 23, 2023. Accessed February 10, 2023.  https://www.forbes.com/health/healthy-aging/cognitive-health-in-early-retirement/

15  Retiring early may accelerate cognitive decline: study. New York Post. Published January 19, 2023. Accessed February 11, 2023.  https://nypost.com/2023/01/19/retiring-early-may-accelerate-cognitive-decline-study/

The Pros and Cons of an Early Retirement

For many people, it comes down to a matter of dollars and cents.

Retirement. It is a desire and dream many Americans work their entire life to achieve. Almost every one of them, though, has a different vision of what retirement will mean for them. For some, it might mean traveling the world. For others, it would enable them to pursue hobbies or spend more time with their grandchildren.

While the official retirement age is 66 years and two months for people born In 1955 and 67 for those born 1960 or later, many Americans plan to retire early. However, many of them are saving far too little to fund their anticipated retirement lifestyles.

With that in mind, there are plenty of pros and cons to keep in mind as you decide whether to retire early or keep on working a few more years.

Advantages of Early Retirement

These are several advantages to early retirement that make it a worthwhile consideration for some people, despite the financial risk it represents.

• Exploring a new career or money-making hobby.  Perhaps one of the biggest advantages of retiring early, particularly as people are living longer lives and staying active long after retirement, is that it gives you the opportunity to explore a new career or even transform your hobby into a source of income.
• Enjoying leisure activities or education opportunities.  Retiring early allows you an opportunity to enjoy things like traveling the world, returning to school, and other activities that might not be as accessible to you as you age.
• Spending more time with family or friends.  Finally, retiring early gives you freedom of time that you can invest spending with family, building friendships, and forging new personal relationships.

Those are some pretty significant advantages to consider. Some of them may even help you fund your retirement in later years (if you operate a successful business venture during your retirement). However, you must also explore the cons as well.

Disadvantages of Early Retirement

The disadvantages of early retirement are primarily financial. Unfortunately, they represent some reasonably substantial sums of money you could be spending or missing out on receiving by retiring early.

• Foregoing employer-sponsored health care costs.  Because Medicare coverage does not begin until you reach the age of 66 years and two months, the costs of leaving your employer-sponsored health coverage behind could be greater than you realize.
• Getting hit with penalties and fines for accessing your retirement funds early.  Uncle Sam doesn’t want you to have access to your retirement funds early. He believes your time is much better spent contributing to society. Because of that, he imposes stiff financial penalties for accessing those funds before reaching your official retirement age.
• Realizing a loss of benefits.  Last, if you begin withdrawing funds from Social Security before you reach full retirement age, you will receive 30 percent fewer benefits than if you wait until your full retirement age to receive them. More importantly, for each year you continue working between the ages of 67 and 70, your monthly benefit will increase by eight percent.

As you can see, the financial considerations can be devastating unless your purpose for retiring is not to cash out your retirement savings but to embark on a new career or income venture until you reach full official retirement age.

Deciding When to Retire

You have a variety of choices to consider when it comes down to retirement. You may elect to retire early, on time, or late. Each one offers its pros and cons according to your stage in life and retirement goals.

As with many things in life, the right time for you comes down to many factors, including the following:

• How long will your retirement funds last ?
• How much do you intend to spend vs. save during retirement?
• What’s your financial situation (i.e., housing, vehicles, medical bills, credit cards)?
• Will you tolerate boredom or isolation well (after all, for some people, work is a social engagement)?
• Do you plan to seek supplemental employment during retirement?
• Are you ready to retire?

Early retirement may be the right choice for you. Alternatively, it may not. For many people, it comes down to a matter of dollars and cents. Which option makes the most sense for you?

Learn More About IFW’s Retirement Planning Education Services

The IFW provides valuable financial education, resources, and services that help people live their best life. 

Please remember, be mindful of the messenger that positions certain products or services as “always” bad or “always” perfect.  The fact of the matter is there are no “bad products” or “perfect products”.   The right product is the one that aligns with your goals and objectives.

The Institute of Financial Wellness  believes when it comes to financial decisions; never say “Never” never say “Always”…It Depends.

The Institute of Financial Wellness is the first and most comprehensive multi-media network for financial education, resources, and services. In fulfilling our mission to help people “Get There” and live their best life, we deliver the following five unique value propositions: – The industry’s most engaging, informative, and objective financial education content – Clarity and confidence to help individuals make informed financial decisions – Access to the IFW Network of Financial Professionals for everything financial – Full implementation of effective, custom-tailored solutions for everyone’s unique needs – Ongoing guidance and support to ensure maximum financial success through every stage of life

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Pros & Cons of Retiring Early

Early retirement has become a popular notion that many people are actively trying to achieve. The thought of not having to work and instead living your life to the fullest gives many people the motivation to find a way to make it happen. Before actively moving toward a life of, more freedom, and less work, it’s important to evaluate the pros and cons of choosing a lifestyle that cuts off your income years before you otherwise would have. Let’s consider the most popular pros and cons of retiring early. 

Pros of Early Retirement

Early retirement means freedom from the daily monotony of going into an office or ensuring that your team is moving the project in the right direction. It could improve your health or give you more time to travel and experience the things you’ve always wanted to do. Retiring early could give you the balance in life that you’ve struggled to have while working. With that said, let’s look at the most common pros of retiring early. 

• Freedom to Pursue Your Passions

Without managing your work daily, you’ll have a lot of time on your hands. This can open up opportunities to pursue passions you’ve never had time for. From traveling and seeing the world to learning how to cook better or how to sail, retiring early can give you the ability to be happier through what you spend your time on every day. 

So many people  cannot experience the things they want while working, and early retirement lets you get to that portion of your life faster.

• Benefits to Your Personal Health

Mental health can be a huge struggle for many people, and if you don’t enjoy your work, then going into the office every day can be detrimental to you. Many individuals have negative health impacts such as higher blood pressure or weight gain that leads to heart issues. These health conditions can shorten your life and give you less time to pursue your passions in retirement. 

Early retirement can eliminate many of those issues since you’ll be taking out the stresses causing many of those problems. People who can do what they enjoy tend to be much healthier than those forced into stresses they have no passion for. This added stress wears on you over time, and early retirement can be a breath of fresh air to your overall health. 

• Spend More Time With Those You Love

Many people get to the end of their careers and wish they would have spent more time with the people who mean the most to them. Unfortunately, careers can not just be time-consuming, but they can also consume most of your brain power. This leaves less time for those you truly care about as you work hard to care for them. Early retirement gifts you that time to spend how you would like, including more time with those that make you happiest. This can have an enormous impact on your overall happiness and well-being. 

Cons of Early Retirement

Before getting caught up in the benefits of early retirement, it’s important to point out that retiring early can negatively impact your finances. From earning less money to reducing how much you have to spend during retirement, it’s essential to evaluate the potential negative impact to properly plan your retirement for the right time. 

• Social Security Benefits Will Likely Decrease

Your social security benefits are based on the average earned over a 35-year period. If you don’t work for 35 years, then you get a “0” for each year you didn’t work to calculate your average. The lower your overall average is, the less you’ll receive in retirement. If you retire early, your social security benefits could be dramatically reduced, and you may not receive the amount of money you were counting on to help you maintain your lifestyle. 

• Retirement Savings Must Be Stretched

Many people will fund the majority of their retirement through their savings into specific retirement plans like their 401(k) or individual retirement account (IRA). Planning to live off these funds in retirement is normal but retiring early can dramatically reduce how much you can take out every month, meaning you’ll need to stretch your savings further now. 

The amount of money you’re saving is likely based on when you initially planned to retire. Changing the age, you are when you retire can significantly impact how much you need to save each month. This  retirement plan  can be adjusted, but you’ll likely need to save more every month for years before you hit your original total in savings. 

• Health Insurance Becomes More Difficult and Expensive

Health insurance at average retirement age is achievable through Medicare. That doesn’t kick in until you’re 65 years old. Your benefits options in early retirement become less while the prices will likely increase. In fact, the cost of individual health benefits as you age can be substantially more than you’re paying now through an employer. This can increase your overall monthly budget while you wait to access Medicare, but you’ll have no income to support that increase. 

Bottom Line

On the surface, early retirement sounds like a dream that benefits your well-being. It would allow you to spend more time with your loved ones while traveling and experiencing things you’ve always wanted to do. However, several financial cons to early retirement must be considered before moving forward. From reduced social security benefits to needing more money in your retirement savings, early retirement might not be the right option for everyone. It’s important to evaluate your circumstances before deciding on the right  retirement strategy  for you. 

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The Pros and Cons of an Early Retirement

Retirement. It is a desire and dream many Americans work their entire life to achieve. Almost every one of them, though, has a different vision of what retirement will mean for them. For some, it might mean traveling the world. For others, it would enable them to pursue hobbies or spend more time with their grandchildren.

While the official retirement age is 66 years and two months for people born In 1955 and 67 for those born 1960 or later, many Americans plan to retire early. However, many of them are saving far too little to fund their anticipated retirement lifestyles.

With that in mind, there are plenty of pros and cons to keep in mind as you decide whether to retire early or keep on working a few more years.

Advantages of Early Retirement

These are several advantages to early retirement that make it a worthwhile consideration for some people, despite the financial risk it represents.

• Exploring a new career or money-making hobby. Perhaps one of the biggest advantages of retiring early, particularly as people are living longer lives and staying active long after retirement, is that it gives you the opportunity to explore a new career or even transform your hobby into a source of income.
• Enjoying leisure activities or education opportunities. Retiring early allows you an opportunity to enjoy things like traveling the world, returning to school, and other activities that might not be as accessible to you as you age.
• Spending more time with family or friends. Finally, retiring early gives you freedom of time that you can invest spending with family, building friendships, and forging new personal relationships.

Those are some pretty significant advantages to consider. Some of them may even help you fund your retirement in later years (if you operate a successful business venture during your retirement). However, you must also explore the cons as well.

Disadvantages of Early Retirement

The disadvantages of early retirement are primarily financial. Unfortunately, they represent some reasonably substantial sums of money you could be spending or missing out on receiving by retiring early.

• Foregoing employer-sponsored health care costs. Because Medicare coverage does not begin until you reach the age of 66 years and two months, the costs of leaving your employer-sponsored health coverage behind could be greater than you realize.
• Getting hit with penalties and fines for accessing your retirement funds early. Uncle Sam doesn’t want you to have access to your retirement funds early. He believes your time is much better spent contributing to society. Because of that, he imposes stiff financial penalties for accessing those funds before reaching your official retirement age.
• Realizing a loss of benefits. Last, if you begin withdrawing funds from Social Security before you reach full retirement age, you will receive 30 percent fewer benefits than if you wait until your full retirement age to receive them. More importantly, for each year you continue working between the ages of 67 and 70, your monthly benefit will increase by eight percent.

As you can see, the financial considerations can be devastating unless your purpose for retiring is not to cash out your retirement savings but to embark on a new career or income venture until you reach full official retirement age.

Deciding When to Retire

You have a variety of choices to consider when it comes down to retirement. You may elect to retire early, on time, or late. Each one offers its pros and cons according to your stage in life and retirement goals.

As with many things in life, the right time for you comes down to many factors, including the following:

• How long will your retirement funds last?
• How much do you intend to spend vs. save during retirement?
• What’s your financial situation (i.e., housing, vehicles, medical bills, credit cards)?
• Will you tolerate boredom or isolation well (after all, for some people, work is a social engagement)?
• Do you plan to seek supplemental employment during retirement?
• Are you ready to retire?

Early retirement may be the right choice for you. Alternatively, it may not. For many people, it comes down to a matter of dollars and cents. Which option makes the most sense for you?

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The Pros and Cons of an Early Retirement

Retirement. It is a desire and dream many Americans work their entire life to achieve. Almost every one of them, though, has a different vision of what retirement will mean for them. For some, it might mean traveling the world. For others, it would enable them to pursue hobbies or spend more time with their grandchildren.

While the official retirement age is 66 years and two months for people born In 1955 and 67 for those born 1960 or later, many Americans plan to retire early. However, many of them are saving far too little to fund their anticipated retirement lifestyles.

With that in mind, there are plenty of pros and cons to keep in mind as you decide whether to retire early or keep on working a few more years.

Advantages of Early Retirement

These are several advantages to early retirement that make it a worthwhile consideration for some people, despite the financial risk it represents.

• Exploring a new career or money-making hobby. Perhaps one of the biggest advantages of retiring early, particularly as people are living longer lives and staying active long after retirement, is that it gives you the opportunity to explore a new career or even transform your hobby into a source of income.
• Enjoying leisure activities or education opportunities. Retiring early allows you an opportunity to enjoy things like traveling the world, returning to school, and other activities that might not be as accessible to you as you age.
• Spending more time with family or friends. Finally, retiring early gives you freedom of time that you can invest spending with family, building friendships, and forging new personal relationships.

Those are some pretty significant advantages to consider. Some of them may even help you fund your retirement in later years (if you operate a successful business venture during your retirement). However, you must also explore the cons as well.

Disadvantages of Early Retirement

The disadvantages of early retirement are primarily financial. Unfortunately, they represent some reasonably substantial sums of money you could be spending or missing out on receiving by retiring early.

• Foregoing employer-sponsored health care costs. Because Medicare coverage does not begin until you reach the age of 66 years and two months, the costs of leaving your employer-sponsored health coverage behind could be greater than you realize.
• Getting hit with penalties and fines for accessing your retirement funds early. Uncle Sam doesn’t want you to have access to your retirement funds early. He believes your time is much better spent contributing to society. Because of that, he imposes stiff financial penalties for accessing those funds before reaching your official retirement age.
• Realizing a loss of benefits. Last, if you begin withdrawing funds from Social Security before you reach full retirement age, you will receive 30 percent fewer benefits than if you wait until your full retirement age to receive them. More importantly, for each year you continue working between the ages of 67 and 70, your monthly benefit will increase by eight percent.

As you can see, the financial considerations can be devastating unless your purpose for retiring is not to cash out your retirement savings but to embark on a new career or income venture until you reach full official retirement age.

Deciding When to Retire

You have a variety of choices to consider when it comes down to retirement. You may elect to retire early, on time, or late. Each one offers its pros and cons according to your stage in life and retirement goals.

As with many things in life, the right time for you comes down to many factors, including the following:

• How long will your retirement funds last?
• How much do you intend to spend vs. save during retirement?
• What’s your financial situation (i.e., housing, vehicles, medical bills, credit cards)?
• Will you tolerate boredom or isolation well (after all, for some people, work is a social engagement)?
• Do you plan to seek supplemental employment during retirement?
• Are you ready to retire?

Early retirement may be the right choice for you. Alternatively, it may not. For many people, it comes down to a matter of dollars and cents. Which option makes the most sense for you?