Have some good reasons to retire early? The thought of leaving that career and setting aside the accompanying stress that it produces does sound exciting. In fact, you may already have begun to plan how you might be able to that 10 or 20 years before your retirement benefits are available.
It’s a lofty goal one that you must be sure about. You can’t just waive a magic wand and make it happen or ensure that it will be enjoyable. It takes planning and deep consideration of all the financial and emotional reasons to retire early before you pull the trigger.
To that end it would be wise to consider the following as they relate to early retirement. You may find after working through them that you want to hold onto that career for a few more years.
Financial Reasons to Retire Early
These first three reasons to retire early all focus on the financial side of the equation:
1. The size of your nest egg
How much are you going to need to retire? This may be the biggest of the reasons to retire early you need to consider. Depending at what age you retire you could have 40-50 years left to live. Will your nest egg fund that length of time?
The biggest determinate of that will be your intended style of living.
It would be logical to conclude that expenditures would decrease during retirement. With no kids in the house, a mortgage that is hopefully paid off and reduced expenses for transportation it should be entirely reasonable to spend less in the retirement years. However, other expenditures could easily take the place of those and you might find yourself spending more, not less.
Do you plan to travel extensively? What expensive hobbies are you going to take up? Will you be taking frequent trips to visit the grandchildren? Do you want to move into that upscale, gated retirement community? Will you be eating out more?
It could be tempting to live it up. After all, isn’t this what you’ve worked your whole life for – to be free to enjoy pleasures you couldn’t before?
There is no right answer as to how to live our life during retirement. It’s your choice. But you need to make sure that whatever money you’ve accumulated plus what you might be drawing in through Social Security, investment dividend checks, or a part-time job will be enough to cover that lifestyle. If not, you will have to cut the lifestyle back or work longer years to lessen the distance between retirement and your death.
2. Health Care Costs
Health care is becoming an enormous issue that cannot be ignored. With the new Affordable Care Act in place the future of health care costs seems to be going nowhere but up. Healthcare, once just a concern, has now been turned on its head and people are experiencing full-blown frustration and fear as to how this area of life will be managed.
We just received our premiums for 2015. If we choose to stay with our current policy the premium will increase by over 70%. Can you imagine premiums going up that much per year? It’s a staggering thought.
Couple the rising cost of healthcare with the positive development that life expectancy is increasing. The average life expectancy in the U.S. has almost reached 80 years of age. My grandfather will be celebrating his 101st birthday his February. He’s been retired for 30 years. That’s a long time frame to cover the increased medical costs that will come as the body ages.
If you plan to retire early say at age 50 you will be looking at a potential of 30-50 years of healthcare costs to cover. How will that happen? You will no longer have access to your employer’s healthcare plan. You will have to be prepared to cover the cost of that in some other way.
3. Being Rehired
Being rehired at an older age is becoming increasingly difficult. This study from the Urban Institute states that workers in their 50s were nearly 20% less likely to be rehired than workers in the 25-34 range.
This could be due to many factors. Employers may see you as not being up to date with technology. They may think an older worker is more difficult to train, will cost more in salary and benefits or may have declining health issues that will impact performance. Clearly this isn’t happening in all cases but is a factor to consider.
Some people see this as age discrimination – older workers not be rehired because of their age. While this may be a reality it would be very difficult to prove unless and employer came right out and told you that was the reason. In most cases, you wouldn’t know the real reason you hadn’t been hired.
It will most likely be possible to find some kind of job. But it may be difficult to reenter the specific career you had before. So if you think there might be a chance you’d need to work again, it might be best to just keep working now.
Emotional Reasons to Retire Early
There is more than just money to worry about when looking at early retirement. These emotional reasons to retire early need to be considered:
4. Loss of connection with people
We build our social interactions in three main ways – family and friends, our work setting and through social organizations (i.e. church, clubs, etc.). If we quit our job to retire early we will lose 1/3 of our potential daily interaction with people. That presents a potential gaping hole in your social life.
How will you fill the void? Do you have enough of a support system in place compensate for your social needs?
You might be thinking, “Well, I don’t like the people I work with. I’ll be glad to leave them behind.” That may be true but you will still be losing connection to people who might have been able to help you out from time to time. There is something built into our DNA that drives us to have relationships and the work setting is prime place where those can be built.
I experienced this first hand when I became a stay at home dad. Even though I thoroughly enjoy what I do now, there is sense of being disconnected a bit from people I’d built relationships from at work. Athletes experience this all the time. What’s the one thing they say they miss most about the game? It’s almost always being around the guys.
So think about whether you want to lose that camaraderie and connection with people at an earlier age. You can still be connected with people after retirement. It will simply take more effort and intentionality because one natural way it happened before – through your work – won’t be possible anymore.
5. Filling the competitive void
Everyone has a competitive side. Some have it more than others. It’s what pushes us to excel. It drives us to accomplish great things. It’s what gets us frustrated when we lose a simple board game.
We have this innate, strong desire to be more successful than others or at the very least to be excellent ourselves in what we do. For the entrepreneur a competitive spirit helps them best other businesses. For the mid-level manager, their ambitious nature helps them get noticed by their superior. For the CEO, it’s a main factor in seeing their business rise to the top.
Again I turn to retired athletes who have been competing all their lives. What do we find them engaging in post-retirement? Business ventures. Golf. Broadcasting. Even gambling. They are attracted to activities that fuel their competitive juices and keep them around that type of environment. They can’t let it go because it’s all they’ve known.
So what’s going to drive you for the next 20-30 years when you step away from your career early? Will your competitive spirit die because you are not engaged in something purposeful? Will you be OK with that?
“Boredom? Why is this on the list? Now I’m going to have time to do all the things I never could do when I was working.”
That’s true. But how much tinkering can you really do around the house? How much TV can you absorb before it just becomes noise? How many vacations can you take before even those become mundane?
The issue here is to live with intentionality. Don’t retire early to simply “get away from work.” Have a plan and be moving towards something. Have a target to shoot for that will have real meaning for your life.
When I quit my job to be a stay at home dad and personal finance writer this is the approach I took. I live my life each day with the focus of taking care of the household responsibilities and running this blog. I have specific targets I’m moving towards that keep me alert and aware of my life purpose.
If I didn’t have those I’d be pursuing one activity after another and eventually find myself bored with all of it.
Is Early Retirement For Me?
Early retirement is not for everyone. If you can pull it off great! That means you are financially stable, have a good support system and have thought through what direction your life will head next.
Without those factors in place it would probably be better to continue working. That may be frustrating but it’s a better scenario than being broke and directionless.
Questions: Are you considering retiring early? What do you have to do to make that happen? Does work bring out the competitive nature in you? How would you fill the social void left from leaving your job? What other reasons t