Most people look forward to retirement with great anticipation, early retirement is only a dream. It offers the opportunity to do things that are hard to manage when you are working full time. Early retirement is a dream but what are the realities of the situation? People are living longer and the cost of living is accelerating at an alarming rate. There are many things that have to be considered before coming to the decision to leave a steady job and make the decision to retire early.
Pros
The main pro of early retirement is being able to do the things you have dreamed about, anytime you feel like it. No matter how much you may love your job, for the average worker, you just can’t decide to jaunt off somewhere on a whim or not go to work today because you prefer to do something else.
With the ability to do whatever you want comes the responsibility to be able to financially afford to be independent. Not everyone is in a financial position to give up what are likely the best earning years of your working career in order to fulfill your dream of early retirement.
By retiring early, say at age 55, you will still be young and healthy enough to fully enjoy all the benefits that the extra time that you have can offer. This is the time when you can travel, volunteer, spend time with your significant other and perhaps even your grandchildren. Without the stress of a full-time job, chances are very good that you will as many Americans do, live into your 80’s and even beyond.
Cons
The fact that you will no longer be receiving a paycheck is a big con. One reason that many people opt for early retirement is that they are offered incentive packages to do so. If this package includes health benefits and a lump sum of money, this can help you to bridge the financial gap that may occur until your pension kicks in, if you have one.
How will you provide health care benefits for yourself and your spouse? This is a large burden to carry on your own without the benefit of your employer. If you have been providing your own health care prior to retirement then this will be a non-issue but for many, this can be a deciding factor.
You cannot use your 401(k) or IRA money until you are 59 1/2 without penalty unless you take a loan. You also are not eligible for Social Security until you are 62 years old unless you are disabled. You need to have other means of supporting your lifestyle such as investments and savings. It might be that you have planned to downsize your home, which many retirees do and if much of your worth is tied up in your home, this may provide you the means to live until all your benefits are available to you.
Retiring early is a great goal but you must combine that goal with a solid plan to provide for your needs. Retirees are living longer and more active lives and if you want to be able to enjoy that retirement in financial security for the rest of your life, you need to be accumulating the wealth that can get you there. In this present world, if you have nothing to provide for you except for Social Security, it is likely that you will not only not be retiring early, you will need to work long after you retire to make ends meet.
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