When it comes to planning for retirement, most people are in one of two camps: they can’t wait for their Golden Years to begin, or they don’t plan on retiring until they have no other choice. If you’re on the first team, it’s important to consider all the aspects of early retirement before you jump in headfirst.
Most of us recognize that there will be a financial impact, but what about the other parts of not having a job to guide your life that might you need to prepare for? In this blog, we’ll take a look at the pros and cons to help you as you explore the potential of early retirement.
Pro #1: The World is Your Oyster
Have you always been passionate about traveling, and those few days of vacation time a year just weren’t enough? Or maybe you’ve dreamed of the days when you could learn a new instrument, read all the books you’ve collected, or indulge in another favorite hobby.
Whatever it is that you long to fill your days with, you’ll finally have the time! The key is to make sure you have enough interests to keep you motivated to stay active and healthy — and to ensure you have the finances to do it all.
Pro #2: Your Health May Thank You
This pro is individual-dependent. If you have a job where you’re stuck inside with minimal fresh air and sunshine, retiring could be the opportunity you need to recapture your health. However, it’s up to you to find things to keep you moving. You may want to take up gardening or join a local pickleball team, start (or continue) golfing, or swim every day.
Getting out from behind the desk or under the fluorescent lights and into the great outdoors will make your retirement years healthy. But be warned: Many studies show that retiring early can be detrimental if you haven’t planned ways to fill your time and keep up with your health!
3. Pro: You Can Take Up Side Gigs
Finding out that retirement isn’t what you thought it would be can be a disappointment, but today’s world is full of other in-between options. Instead of going back to work full-time, you might benefit from a side gig.
For example, many physicians cut back their patient care hours and work from home for insurance companies or write blogs about medical care. This semi-passive income could help extend your retirement funds.
4. Con: Life Gets More and More Expensive
How many times have you caught yourself shaking your head and lamenting when food, gas, and everything else was cheaper? Those days of inexpensive living are gone, and inflation continues to drive up the cost of basic necessities.
If you haven’t had a professional cost of living analysis discussion for the years or decades of retirement, you may not have enough in your assets to keep you in the style of living you prefer. This is especially true for retiring doctors aiming for a higher quality of living. This article by OJM Group explains more about the necessity of investing to prepare for retirement from a medical career.
5. Con: You’ll Lose Out on Your Full Social Security Benefits
You’ve paid into Social Security all your working years with the understanding that you’d have a monthly check when you retire. But retirement for those born in 1960 and after begins at 67. If you retire early and begin collecting your benefits between 62-66, your permanent monthly check is 30% smaller. On the other hand, putting off retirement (or at least collecting Social Security checks) increases your benefit by 8% per year from age 67-70.
6. Con: You’ll Need a Plan for Health Insurance
The older we get, the more vital health insurance becomes in our overall wellness and financial plan. Most of us have this coverage through our employers until age 65 and 4 months, when Medicare kicks in. If you retire early, how will you handle your healthcare? Keep in mind that the rates you see with your paycheck are much smaller than the average self-insured premiums, and the older you get, the more expensive insurance becomes.
Conclusion
The decision of early retirement isn’t one to take lightly. You may be tired of your career, but are you ready to handle the social, health, and financial impact of quitting work entirely?
Take some time to consider all the implications and talk to a financial advisor to get an in-depth picture of your assets and liabilities. Then, decide if it’s time for retirement, or maybe a career change or a few more years in the field could be the answer.
