Early retirement has become a popular notion that many people are actively trying to achieve. The thought of not having to work and instead living your life to the fullest gives many people the motivation to find a way to make it happen. Before actively moving toward a life of, more freedom, and less work, it’s important to evaluate the pros and cons of choosing a lifestyle that cuts off your income years before you otherwise would have. Let’s consider the most popular pros and cons of retiring early.
Pros of Early Retirement
Early retirement means freedom from the daily monotony of going into an office or ensuring that your team is moving the project in the right direction. It could improve your health or give you more time to travel and experience the things you’ve always wanted to do. Retiring early could give you the balance in life that you’ve struggled to have while working. With that said, let’s look at the most common pros of retiring early.
- Freedom to Pursue Your Passions
Without managing your work daily, you’ll have a lot of time on your hands. This can open up opportunities to pursue passions you’ve never had time for. From traveling and seeing the world to learning how to cook better or how to sail, retiring early can give you the ability to be happier through what you spend your time on every day.
So many people cannot experience the things they want while working, and early retirement lets you get to that portion of your life faster.
- Benefits to Your Personal Health
Mental health can be a huge struggle for many people, and if you don’t enjoy your work, then going into the office every day can be detrimental to you. Many individuals have negative health impacts such as higher blood pressure or weight gain that leads to heart issues. These health conditions can shorten your life and give you less time to pursue your passions in retirement.
Early retirement can eliminate many of those issues since you’ll be taking out the stresses causing many of those problems. People who can do what they enjoy tend to be much healthier than those forced into stresses they have no passion for. This added stress wears on you over time, and early retirement can be a breath of fresh air to your overall health.
- Spend More Time With Those You Love
Many people get to the end of their careers and wish they would have spent more time with the people who mean the most to them. Unfortunately, careers can not just be time-consuming, but they can also consume most of your brain power. This leaves less time for those you truly care about as you work hard to care for them. Early retirement gifts you that time to spend how you would like, including more time with those that make you happiest. This can have an enormous impact on your overall happiness and well-being.
Cons of Early Retirement
Before getting caught up in the benefits of early retirement, it’s important to point out that retiring early can negatively impact your finances. From earning less money to reducing how much you have to spend during retirement, it’s essential to evaluate the potential negative impact to properly plan your retirement for the right time.
- Social Security Benefits Will Likely Decrease
Your social security benefits are based on the average earned over a 35-year period. If you don’t work for 35 years, then you get a “0” for each year you didn’t work to calculate your average. The lower your overall average is, the less you’ll receive in retirement. If you retire early, your social security benefits could be dramatically reduced, and you may not receive the amount of money you were counting on to help you maintain your lifestyle.
- Retirement Savings Must Be Stretched
Many people will fund the majority of their retirement through their savings into specific retirement plans like their 401(k) or individual retirement account (IRA). Planning to live off these funds in retirement is normal but retiring early can dramatically reduce how much you can take out every month, meaning you’ll need to stretch your savings further now.
The amount of money you’re saving is likely based on when you initially planned to retire. Changing the age, you are when you retire can significantly impact how much you need to save each month. This retirement plan can be adjusted, but you’ll likely need to save more every month for years before you hit your original total in savings.
- Health Insurance Becomes More Difficult and Expensive
Health insurance at average retirement age is achievable through Medicare. That doesn’t kick in until you’re 65 years old. Your benefits options in early retirement become less while the prices will likely increase. In fact, the cost of individual health benefits as you age can be substantially more than you’re paying now through an employer. This can increase your overall monthly budget while you wait to access Medicare, but you’ll have no income to support that increase.
On the surface, early retirement sounds like a dream that benefits your well-being. It would allow you to spend more time with your loved ones while traveling and experiencing things you’ve always wanted to do. However, several financial cons to early retirement must be considered before moving forward. From reduced social security benefits to needing more money in your retirement savings, early retirement might not be the right option for everyone. It’s important to evaluate your circumstances before deciding on the right retirement strategy for you.