By Lee Sherman
Most people retire at age 65. That’s when you become eligible for Medicare benefits. And it’s an age at which you have hopefully reached a place in your career development where you feel you have done what you set out to do and are now ready to enjoy the fruits of your labor. But keep in mind that you are eligible for social security at 62 and retiring early is an option that for many has a lot of appeal. If you retire early, you’ll be more likely to be in good health and able to travel the world, run a marathon, or even just spend more time with the grand kids. It’s an idea that seems to have gained a lot of currency. This 2019 survey by American Advisors Group found that 52% of Americans plan to retire before age 65. Even millennial’s are starting to look at early retirement as a way to lead a more rewarding lifestyle.
But, if you’re considering early retirement, and can afford it, you need to know about the pros and cons that come from this decision.
The Pros
There may be health benefits. As you age, getting a good night’s sleep becomes even more important than when you are younger. Just eliminating a morning commute can add years to your life. And reducing the number of times you swing through In and Out Burger and replacing fast food with a good home cooked meal can lead to a healthier diet. Eliminating work-related stress can do wonders for your mental health too.
You’ll have more time for the things you love. Whether that’s travel, playing with model trains, participating in sports, living out your rockstar fantasies in a band of similarly inclined weekend warriors, or really any other hobby. What you do with the extra time on your hands is your decision and that can be liberating in itself.
The Cons
Early retirement sounds great. But, unless you’ve planned for it, you may find you don’t have enough money in your retirement account to cover the extra years you won’t be working. While early retirement doesn’t have to mean that you’ve completely stopped working, it usually means that your income may be less than it used to be. You’ll also need to plan for the fact that you will probably live longer than earlier generations. That means your savings will have to last longer too.
Your health could decline. While eliminating work-related stress can be like replacing a dark cloud with a rainbow, you may face other kinds of stress such as not having enough money to pay your bills. You may find you actual miss the office, perhaps due to a lack of companionship or a sense of being needed and this could have a negative impact on your mental health. Your physical self may also suffer because many retirees find that they have gotten out of the routine of regular exercise.
You’ll receive less in the way of social security benefits. Because you are no longer paying into the system, your benefits will naturally be lower. But did you know that if you retire at age 62, the earliest age you are eligible for social security, your benefits will be a full 30% lower than if you wait until 66 or 67 (considered full retirement age).
The decision to retire early is a significant one and you may want to discuss this with an objective professional such as a financial advisor. In any case, you will want to thoughtfully weigh all these factors before making a final decision.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.
