Of course, not everyone will have a say in the matter. Job loss, health issues, or family obligations can all disrupt even the best-laid retirement plans, causing people to leave the working earlier than planned.
However, if you have control over when you retire, it’s important to consider the advantages and disadvantages before deciding. Even if you have the financial means to retire early, you may not want to.
Some Pros of Retiring Early
It could be good for your health.
- We can all readily imagine how leaving behind the office grind leads to healthy habits: sleeping later, getting out in the fresh air and sunshine, and no more gulping meals at your desk. This isn’t simply a guess. A 2002 study of British civil officials showed that retiring at 60 had no negative impact on the individuals’ general physical health. In fact, individuals with higher-level employment reported better mental health, probably because they were no longer stressed at work (and had better pensions than lower-ranked workers).
You’ll enjoy more time to travel.
- What amazing sites you’ll visit! Or you could go once you’re no longer constrained to the annual vacation of two weeks. The earlier you retire, the longer you’ll have before health difficulties limit your mobility.
It’s an opportunity to start a new career.
- If you want to change careers or start your own business, now is a better time than later. The more years you have ahead of you, the more desirable you will be to numerous employers. You’ll have more time to launch your new business if you wish to be your own boss. For example, a business you start at 60 may easily keep you mentally challenged and out of mischief for
another 20 years or so.
Some Cons of Retiring Early
It could be bad for your health.
- According to a 2008 study by the National Bureau of Economic Research, retirement causes losses in mental health and mobility, as well as increases in other negative health outcomes like heart disease and stroke. While that is one reason to postpone retirement, those issues are not unavoidable. The survey also found that retirees who stayed physically active and socially connected were less likely to have negative consequences.
Your Social Security benefits will be smaller.
- The earlier you receive Social Security payments, the smaller your benefits will be. For example, if you were born in 1960 or later and begin receiving benefits at age 62, the earliest age at which you’re eligible, your monthly payments will be 30% lower than if you wait until age 67, which Social Security refers to as your “full retirement age.” You will earn an additional 8%
increase in your monthly payment for each year you delay from age 67 to 70. There is no longer any benefit to waiting after the age of 70.
Your retirement savings will have to last longer.
- If you retire at 62 and live to be 90, your individual retirement accounts (IRAs) and other investments must last for 28 years. However, if you retire at 70 and live, your funds will only need to last 20 years. Working longer also means you’ll have more years to put money into a 401(k) or other retirement plan, giving your money more time to compound.
You’ll need to find health insurance.
- You’ll have to pay for health insurance until you’re eligible for Medicare at age 65, unless your ex- employer provides it. Be prepared for sticker shock if you do: Insurance rates can easily double or triple what you’re used to paying on your employer-sponsored plan—no, there’s longer a firm footing on the bill. Health insurance prices unfortunately rise as you become older, reaching four figures per month around age 55.
You might get bored and miss working.
- Many retirees struggle to go from the controlled life of a full-time work to the unstructured life of retirement. They may also miss their old co-workers (and even their boss) and wish to return. Unfortunately, getting back into the workforce after a break, whether voluntary, is difficult.
A Middle Ground
There are methods to have the best of both worlds if you don’t want to retire early for fear of regretting your decision, but don’t want to wait too long to enjoy the benefits of retirement.
For instance, you could try to negotiate a reduced work schedule with your employer so that you can live the life of a retiree on your days off, a practice known as “phased retirement.” Alternatively, if your circumstances permit, see if you can work from home for a portion of the week to get a sense of how isolation, a more flexible schedule, and not having to leave your house/apartment fits you.
Finally, use some of your vacation days all at once to go on some significant vacations to faraway countries you’ve always wanted to visit.
The Bottom Line
Choosing whether to retire is a complicated issue that involves more than simply money. Your health, family duties, and personal disposition all play a role, or should play a role. The most crucial question is whether you’ve considered what you want to accomplish with your retirement years, whatever long they may be. As the wise old adage says, it’s important to retire to something rather than from something.
Read about Strategic Retirement Planning: Building a Purposeful Portfolio for Financial Security
