The prospect of early retirement sounds alluring, as you imagine yourself unshackled from work commitments and with far more time for relaxation, travel, family, and travel. But leaving the workplace as soon as possible might not be the best decision for everyone, and here are some persuasive reasons why.
Reduced Financial Security
Investopedia warns, “When retiring early, you have less time to save for retirement and more time to spend in retirement.” This equates to a greater strain on your finances, particularly if you haven’t saved enough to support a (potentially long) retirement. Running out of money later on can be stressful and necessitate a change in lifestyle or assistance from others.
Longer Retirement Period
Similarly, an earlier start to your retirement means you will be retired for longer. With life expectancy increasing, early retirees face an extended retirement of up to 30 years or more. Funding such a long period out of work requires careful planning and substantial savings to ensure your finances don’t run out.
Social Isolation
Going into a workplace every day may seem like a chore, but it has hidden benefits, such as increasing social interactions and maintaining work-based friendships. According to The NYT, retiring as soon as possible increases loneliness and social isolation for many people over 65, negatively impacting their mental health.
No More Employer Benefits
Leaving employment early means losing any benefits you receive from your employer, including health insurance, retirement contributions, dental plans, and other perks. This can increase healthcare costs at a time when health is likely to be declining due to aging, eating into funds you’ve allocated for a comfortable retirement.
Market Volatility
The fiscal timing of your retirement can impact your savings, as taking retirement during a market downturn will deplete your funds much faster, says CNN Business. Consequently, market volatility should be a serious consideration when picking the optimal time to stop working.
Impact on Spouse
Retiring ASAP doesn’t only affect the retiree; it also has financial implications for their husbands and wives. If one partner retires early, the other may be forced to keep working longer or suffer financial struggles. Couples should ensure their retirement goals align and that both partners are happy with the financial implications of such decisions.
Inflation Impact
Early retirees face a longer time when inflation can potentially erode their purchasing power because they spend less time earning a wage and more time dependent on their savings. If you don’t want to threaten your standard of living, ensure you consider the rising cost of living when calculating feasible retirement age.
Health Insurance Costs
You won’t be eligible for Medicare until age 65, so health insurance premiums must be covered until then, which can be expensive (Humana). If you retire early, the number of years you’ll need to pay these premiums grows, which can significantly negatively impact your total retirement pot.
Loss of Purpose
Work may add stress and reduce free time, but it also provides a sense of purpose and accomplishment. Early retirement eliminates both the negative and positive aspects of working, potentially inducing boredom, aimlessness, and a lack of personal fulfillment.
Limited Retirement Income
Unsurprisingly, the longer you spend in retirement, the poorer you’ll be and the further your fund will be financially stretched over time. Retiring before time might sound great, but if you can’t afford to do the things that make you happy, it might be better to delay it and opt for retirement quality over quantity.
Relocation Challenges
Many people relocate once they retire, as being further from their old, urban workplaces often equates to cheaper housing and living expenses. However, early retirees may be forced to relocate much earlier than others, potentially disrupting their social lives, lifestyles, and family ties before they are ready.
Career Reentry Difficulty
What if you change your mind about retiring later on? Those who take early retirement find returning to the workplace more difficult than others of the same age. This is because they’ve had a more protracted unemployment ‘gap’ and may struggle to secure a job at the same skill and salary level as before.
Long-Term Care Costs
As we’ve seen, many aspects of early retirement limit the amount of money available. As early retirees age, the likelihood that they’ll require long-term care increases, potentially putting strain on insufficient savings or seriously depleting their already-reduced funds.
Earlier Legacy Planning
Retiring early necessitates writing a will and planning what will happen to your estate once you pass at a much earlier stage. Having to make such decisions early on can be difficult because your personal wishes and desired inheritance allocation amongst your heirs, as well as appropriate clauses, can change or become invalid over time.
Loss of Career Achievements
Leaving behind a long and successful career means losing your professional accomplishments and any potential for further growth or accomplishments. This can lead to feelings of irrelevance and unimportance, particularly for those retirees who were especially capable in their roles.
Impact on Future Generations
If your children and grandchildren aren’t entirely financially independent, your decision to retire early can affect them, too. A smaller retirement fund means less flexibility to help your loved ones should they ever need financial support.
Boredom
Many early retirees report feeling bored or restless after leaving the workplace, possibly because they were too young to disengage from working life and have been left with an excess of free time at an age when their minds are still not ready to take it quite so easy!
