Points to Consider before Taking Early Retirement
While some individuals are forced to take early retirement due to job losses, deteriorating health, or unexpected family responsibilities, others may choose to retire early so that they can spend more time engaging in activities that they enjoy such as traveling, volunteering, or spending time with friends and family. Regardless of why you may be considering retiring early, it’s essential to consider the following pros and cons before pulling the plug on your job.
Pros of Early Retirement
It can be Beneficial for your Health
When you no longer have to rush to work each day, you’ll be able to get the sleep you truly need, spend more time out in the fresh air and sunshine than before and generally enjoy a more relaxed pace of life.
You’ll have Time to Travel
Having more time on your hands will also mean that you’ll be able to travel more – no more limitations due to only having a few vacation days per year at your corporate job. The earlier you’re able to retire, the more time you’ll have to see as many places as possible before age-related health issues arise.
You Have the Chance to Embark on a New Career
If you’ve been considering changing careers, doing so sooner rather than later will allow you to stand more chance of being noticed by potential employers. You may even be considering starting your own business, and the earlier you can do this, the more chance you’ll have of making a success of it. Launching your own business at age 55 could provide you with intellectual stimulation for at least another 15 to 20 years.
Cons of Early Retirement
A Smaller Social Security Benefit
The earlier you take Social Security, the smaller your payments will be. For example, if you were born in 1960 or later and you start taking benefits at age 62 (the earliest age you’ll be eligible to do so), you will receive payments that are 30% lower than if you had to wait until age 67. For every year that you don’t take Social Security from age 67 to 70, your payments would be 8% higher each month.
Retirement Savings will have to Last Longer
If you retire at 50 or 55 and live to age 90, your IRAs and other retirement accounts will need to have sufficient balances in them to support you for 35 to 40 years. However, if you retire at 70 or 75, these funds will only have to last for between 15 and 20 years.
You’ll have to Foot the Bill for Health Insurance
In many cases, you’ll have to cover the cost of health insurance yourself until you become eligible for Medicare when you turn 65 – and premiums can be double or even triple of what you were paying while working.
Deciding when you should retire is not just a matter of making up your mind and handing your notice into your boss. If you would like to learn more about making the most of retirement, contact us today.