Many people still hold onto thoughts of early retirement despite the harsh economic damage done by the 2007-2009 recession. There are both pros and cons of early retirement. And according to a survey 37% of people living in America still plan to have an early retirement.
With job losses, health care issues and responsibilities in the family some people are having to leave the working world sooner than anticipated, and that sidetracks even the most detailed retirement plans.
If you are one of the fortunate ones who has a say over when you will retire, it is important to go through the pros and cons of early retirement. Having the financial stability to retire early should not be your only considering factor.
The Pros of Early Retirement
- Health Benefits: A study on British civil workers completed in 2002 showed that those who retired at age 60 had no health effects and that the individuals that were in the higher level of jobs had an improvement in their mental health, perhaps due to no longer having work related stress. And those in higher level jobs also had better pensions. It is noted that there have been other investigations that pointed out the retiring early could be aversive to health.
- Travel Time: Retiring early carries the benefit of giving individuals more time to travel before the health issues that begin to set in as a person ages. Many choose to use their retirement years to travel, and the younger you are the easier travelling is.
- New Career Aspirations: By retiring from one profession earlier, an individual has the potential to start a new career. Possible employers would be appreciative of you having more years to dedicate to your job, and if you go into business for yourself, you can be mentally and physically challenged for at least another 20 years. By continuing on a different path you are keeping your mind challenged.
These are the pros of early retirement, now let’s talk about the cons.
A Few Cons of Early Retirement
- Bad for Your Health: in 2008 an analysis suggested that mental health declines in people who have retired. Additionally mobility, heart disease, stroke, and other health ailments were noted. Of course in the list of pros and cons of early retirement, those who continue to be social and physically active have less health issues reported.
- Smaller Social Security Benefits: a big con on the pros and cons list of early retirement is smaller social security benefits. Retiring early means that your benefits have to carry you through more years. An example is retiring at the earliest age of eligibility, which is 62, you lose 30% of benefits on a monthly basis. Reality is that the longer you put off retirement the more benefits you can get, in fact it goes up by 8% for every year you wait.
- Retirement Savings: Retiring early and living longer means that whatever type of retirement savings you have has to last you longer. By staying in the workforce longer, you have more time to contribute to your retirement fund. The more you can save the better your retirement will be.
- Health Insurance: Without employment that covers health insurance you will have to find your own, unless your previous employer is providing you with health coverage until 65 when Medicare is available.
- Boredom: the pros and cons of early retirement include boredom from not working. Going from full time employment to nothing but free days for some is a tough transition. Some find that they miss their work, their colleagues, and even the challenges of the work. And it is not as easy to return back to work force as you might think.
There is a middle ground of the pros and cons of early retirement.
If you are unsure of retiring early, worried you will miss working, or not sure you want to put off the great parts of retiring early then it is perhaps beneficial to look at compromises. Changing to part time hours, or working while travelling. These types of arrangements are known as phased retirement.
In the End
The pros and cons of early retirement clearly indicate that it isn’t an easy decision to make. There are many more factors to consider other than just relaxing and having carefree days. It is essential that you plan ahead, so you are prepared for the future. Know how you want to spend your retirement years. Do you want to travel? Stay home with family? Are you going to take up a new hobby? And what is your health like? Do you have family obligations that will keep you busy? All of these questions and more are crucial factors to deciding on when to retire. A common retirement phrase is “not just to retire from something but to do something.