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May 23, 2018

Thinking About Early Retirement? Here’s Why You Might Want to Rethink Your Plans

“Every single person needs to find the place and the things that makes them feel whole, that makes them feel valued, that makes them feel engaged. Many people find that in the workplace.” —GetOld.com

Yes, for many people, retirement is something to look forward to, an opportunity to free up time to do what they really want to do. And, as the quote above points out, for some people, what they really want to do is work. The article also points out how retirement, for some people, won’t feel like a blessing. Rather it might feel like an “empty hole of time and space.”

So, what should you do? Well, it depends upon your financial situation, your health and your retirement goals, among other factors.

Early Retirement: Pros and Cons

Investopedia.com shares a survey taken in early 2014 that reveals how 37 percent of people in the United States plan to retire before the age of 65. Not all of them will be able to do so, of course, with unexpected job losses and other challenges often impacting even the most carefully laid-out retirement plans. But, if you have the choice, does it make sense to become one of the early retirees?

Advantages include some health benefits (although other studies show the opposite effect), more time to travel and the ability to start a second “encore” career. Disadvantages include financial ones, including smaller Social Security benefits, the need to stretch out retirement savings for a longer period of time—and the need to obtain health insurance until you quality for Medicare at age 65. Plus, let’s face it. You might get bored—and, once you leave the workplace, it can be significantly more challenging to re-enter. This article suggests that you at least explore a middle-ground option, perhaps reducing your work schedule as you take a phased retirement —and perhaps fitting in some traveling while still working.

More About Mortality

Studies that examine the correlation between retirement and health have mixed results, as mentioned above. But, one new study from 2017, conducted at the University of Melbourne and reported on by Bloomberg.com, “shows a striking correlation between Social Security claims for early takers and a jump in mortality.”

The study found that early retirees may suffer an “immediate, negative impact” when they start claiming Social Security benefits in their first month of eligibility at age 62. Men are more significantly affected, with an increase in mortality risk of approximately 20 percent. It should be noted, though, that people who have health problems are more likely to take advantage of retirement benefits as soon as they are available, which skews these findings.

More Reasons not to Take Early Retirement

Another article in Investopedia.com shares additional reasons why you might not want to join the ranks of early retirees—and here’s a big one: you might not be able to fund your retirement goals, hopes and dreams. “The more you put away,” the article notes, “the more you can pamper yourself in your retirement years. Sure, Cape Cod is nice, but what about going on safari in Tanzania? Taking a Caribbean cruise or sailing the Mediterranean? If you stay in the workforce, you could grow your 401(k) savings significantly—and then live out your dreams.” 

Modern Retirement | Kendal at Home

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