Have you been dreaming about retiring early? Even if think you’re almost ready financially and mentally to retire before the average retirement age of 62, the decision to quit the working world should be carefully considered. Although there are many advantages to retiring early, you’ll also want to think about the negatives as well, and before you make any final decisions. Some pros and cons of early retirement include the following:
The chance to focus on other ventures
Maybe you’ve had enough of the typical workday or your specific job, but you’re not exactly ready to stop working entirely. For example, maybe you’ve always wanted to start your own business, even if it means not handling the day-to-day operations. Or maybe you’ve always wanted to focus more on some of your hobbies, and the things that could potentially make you money as well, such as write a book, crafting, and so on. Without having to work all day, your time is freed up for all sorts of possibilities and you can focus on these other ideas.
If you’ve always dreamt of seeing the world, you’re not alone. Many people wait for retirement to travel extensively, since there is no longer a job holding them back. Alas, by waiting for actual retirement age, your ability to travel might be affected. The longer you wait and the older you get, there is more that can get in your way of an enjoyable sabbatical, such as health problems and/or physical limitations. Even if you are able to travel with serious issues, activities that require a lot of exertion may no longer be comfortable, safe, or even feasible.
You could potentially live longer
Stress can literally make you sick, and if your job has been stressing you out to the point that you’re worried your health is getting affected, it could be a sign that you’re ready for retirement. As long as you have the financial means, leaving a stressful and toxic work environment can potentially improve your physical and mental health, which in turn can help you live a longer, happier life.
You’ll need to save more
This may seem like an obvious one, but it’s a really important one that you won’t want to overlook: retiring means no more steady paycheck. It’s important for everyone to have a retirement savings, but if you’re retiring sooner than planned, that just means you’ll have to save even more money to live comfortably. If you’ve been contributing to a retirement plan through your employer, such as a 401(k), retiring sooner also means your total contributions won’t be as much. Bear in mind that some plans will also charge penalty fees for early withdrawal, so if you do have a retirement plan, you’ll want to learn more about the exact terms and conditions about early withdrawal penalties before you make the final decision to retire early.
Your Social Security payments will be lower
As defined by Social Security, full retirement age is 67, and benefits are increased for each year you wait to retire, up until age 70. However, many Americans opt to receive their Social Security benefits once they turn 62, even though it’s not the full amount. If you retire early, you can expect your Social Security payments to be lower, so you have to carefully consider whether you want to receive maximum benefits.
Many people have health insurance through their employer, and if you retire early, you’ll need to find an alternative solution since Medicare coverage doesn’t kick in until age 65. For a lot of people, the added stress and cost of getting health insurance on their own is enough to reconsider an early retirement.
Are you receiving long-term payments from an annuity or structured settlement, but need to receive cash sooner? Contact Peachtree Financial Solutions today to learn more about selling some or all of your future payments for a lump sum.
Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.