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6 Financial and Emotional Considerations Before You Retire Early

reasons to retire earlyThink you have some good reasons to retire early? It is exciting…the thought of leaving your career and setting aside the accompanying stress that it produces. In fact, you may already have begun to plan how you might be able to do that 10 or 20 years before your retirement benefits are available.

It’s a lofty goal to retire early. But it’s a decision you must be sure about. You can’t just wave a magic wand to make it happen.  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 issues 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.

Money Considerations Before You Retire Early

If you are going to retire early, there are several money related issues to consider. They deal with your net worth, your hopes for future employment and maybe the biggest of all issues for retirees – healthcare.

1. The size of your nest egg

How much money are you going to need to retire? No other issue deserves more consideration than this one. That is because, depending at what early age you want to retire, you could have 40-50 years left to live. Will your current nest egg fund all that you will need for that length of time?

To start answering that question, you need to determine what will be your 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 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 some 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 for a few more 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. The future of health care costs seems to be going nowhere but up.

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 just celebrated his 105th birthday this past February. He’s been retired for 35 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 could be looking at 30-50 years of healthcare costs to cover. How will you do that? You will no longer have access to your employer’s healthcare plan. So 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. Some studies suggest that workers in their 50s were nearly 20% less likely to be rehired than workers in the 25-34 range.

This is 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 it is a factor to consider.

Some people see older workers not being rehired because of their age as age discrimination. This would be very difficult to prove unless an 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.

There are jobs to find for older workers. 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 in the field you are trained in.

Emotional Considerations Before You Retire Early

There is more than just money to worry about when analyzing reasons to retire early. These three emotional/personal matters 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, school, 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.

So ask yourself, “How will you fill the void?” Do you have enough of a support system in place to 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.” While that may be true and a potential relief, 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 for those connections.

I experienced this first hand when I took some time off to be a stay at home dad. Even though I thoroughly enjoyed it, there was a disconnected from the people I’d built relationships with at work. Athletes experience this all the time. That’s the one thing they say they miss most about the game – being around their teammates.

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 in other ways after retirement. It will simply take more effort and intentionality because one natural way it happened before – through your work – is gone.

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. And for the CEO, it’s a main factor in seeing his or her 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?

6. Boredom

Boredom? “Why is this on the list?” you might ask. “Won’t I 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 seem mundane?

The issue here is to live intentionally. 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 for a time to be a stay at home dad, this is the approach I took. I lived my life each day with the focus of taking care of the household responsibilities. I had specific targets I was moving towards that kept me alert and aware of my purpose for that time period of my life.

If I didn’t have that, I’d be pursuing one activity after another. Eventually I would have found myself tired 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.

However, without those factors in place, it would probably be better to continue working. That may be frustrating and not what you want. However, it’s a better scenario than being broke and directionless.

Questions for Discussion: 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 to retire early are important to consider?

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  1. Firstly, thanks for the fantastic article.

    In my experience as a nursing home administrator, I’ve seen people who retired without taking the necessary planning for their new stage in life. It sometimes takes less than 12 months for them to enter a nursing home for long term care.

    They find themselves bored, broke and depressed.

    One final point.

    Personally, I don’t plan to ever retire. By the time we are old enough to retire properly, we are either too weak or lose interest in the things we want to do now.

    Instead, we can live a life of mini-retirements and stop playing by the rules of the game. That means taking off time from work to do what matters to us now while we can.

    Tim Ferris discusses this at length in his famous work The Four Hour Workweek.

  2. Health care is a pressing issue that has been haunting people who are nearing retirement. This has been creating nightmares to people. To make things worse, another pressing need is arising nowadays and that is the high cost of long term care.

    It’s true that your expenses decreases when you retire but there are new expenses that will come your way. So thinking about retiring early is not a good idea for me. Well, that’s just my opinion. A lot of people are living much longer today. As a matter of fact, around 7 out of 10 of people who are 65 and above will require long term care at some point of their lives. It’s not wise to take the risk of retiring early without enough retirement income and insurance products.

    This is a very informative post for me which I’m sure will be highly appreciated by many. This can make people think twice about retiring early and will also help them prepare accordingly for their future. Thanks for sharing these important pointers.

  3. The thing that I miss most in my retirement is the camaraderie and interactions with fellow coworkers. I worked for 40+ years in a very social environment in retail and financial services, and my work involved talking and working with dozens of people each day. I have to say that it has been a struggle to fill that void, despite the fact that I have my wife here at home and I’ve taken up blogging. In some way, writing my blog has given me a feeling of purpose because I feel I’m using my experience to help others with financial issues which I experienced myself.

    • Thanks for sharing that Gary. Blogging has helped me fill the void as well but I’ve found it’s not a substitute for real life, face-to-face relationships.

  4. The lost connection with others is huge. I am an introvert and I still need to interact with others. Some days I will work from Panera or Starbucks and other days I go to the gym during the day. Anything to get me around others helps.

  5. The way I see it the ‘dream’ is to have enough passive income streams to be able to decide when you retire, so you don’t need to worry about making extra money each month to pay the bills. I’m looking at property.

    • Rental property can be a great source of passive income. At times it doesn’t seem very passive though. Tenants and property issues can take up a lot of the landlord’s time. But done properly it can be a cash generating machine.

  6. As of right now I could never retire early, so it’s hard to even think of that, although if by chance I could, meaning winning the lotto say tomorrow, I would easily not be bored and would be able to fill up my days with useful projects.

  7. Jayson @ Monster Piggy Bank says

    I agree with you Brian. That’s why when I reach in 30s, I should really know if the company I am working for is where I want to stay until the time I retire. Just to assure that I have a stable and fulfilling job. By the way, I would never like to get to a point where I might still look for a job when I am in 50s. The age of 55 is my ideal retirement age. However, if I can still enjoy working then, why not work for more years? You know the health risk when you’re not doing any thing active.

    • “…I would never like to get to a point where I might still look for a job when I am in 50s.” Agreed…me neither. Sadly though I think it’s happening for a lot of folks who have lost their job in the recent bad economy.

  8. Great post!! I’ve actually been thinking about this topic frequently. Our goal is to have my husband be able to retire at age 45, but honestly I don’t think either of us will stop working completely. We want to be financially independent then, but both of us are doing what we love and we like to work. I’m certain we’ll both have side jobs for as long as we can! It keeps the mind active, gives you a social life and just gives you more of a sense of purpose. Plus, if I’m working strictly because I WANT to, I’ll enjoy it that much more 🙂

  9. Many people assume their costs will go down when they retire but I see the opposite happening more than people realize. People want to have fun! 🙂 And fun is expensive, which is why it’s so important to actually plan how you want to spend your retirement, to ensure you save enough money to fund your retirement dreams. I see too many people latch on to a magic number, say $1M and assume it’s enough for them. Sometimes it’s more than enough and other times it’s not! And people also overlook long-term care, so don’t just consider your regular health insurance, but also want happens if you need long-term care assistance. Right now a nursing home costs roughly $80-90k per year with an average stay of 3-5 years.

    • “…$80-90k per year with an average stay of 3-5 years.” That’s rough. I know I’ll be looking at long-term care insurance around retirement age (probably sooner) for this very reason. Those numbers could eat away a healthy chunk (if not all) of one’s nest egg.

  10. If all continues to go as projected, DH and I should attain FI by age 50. It would be an early-quasi retirement situation as I will likely still work part-time because I enjoy being productive. It’s also about freeing up more time to do other projects that aren’t remunerated like volunteering and visiting with family and friends but that will enrich my life immensely.

    • “…I enjoy being productive.” That’s big for me as well. Even though I’m a stay at home dad, I still fill the need to produce something and keep pushing myself.

  11. Many people in the middle class will work just as hard as their parents or grandparents but will not be able to retire. By stripping away pensions and increasing the cost of health care, retirement simply cannot happen with the same level of comfort as had happened even 10-20 years ago. I had originally wanted to retire in my 50’s, now I am planning on working until I’m at least 65, and probably closer to 70.

    • I’m afraid that what you say is true. Of course there will be exceptions for some who make it big early but the vast majority of people will be following the pattern you outline. While it may not be an ideal scenario, you have to do what you have to do to make life work.

  12. Lance @ HWI says

    We are targeting 50 in our family. The greatest income potential is 35-50 and I don’t want to miss out on that time. There is much more that we can do with money other than taking care of our needs. Plus I have a whole bunch of employees that depend on me and frankly I enjoy my job and helping others do well in their careers. I’m more than happy to walk away, but there is plenty of time. I want to be more than confident in my decision rather than have to enter the market again after being out for an extended period of time. What is the rush if you enjoy what you do.

    • I would say that’s a wise plan to not miss out on those income earning years. I’d even contend that for some careers it’s 50-60. That’s the target maximum income decade for my wife’s career as a CPA. Plus by then, some of our kids will be gone from home, thus reducing expenses further.

  13. I’m so glad you mentioned the cost of healthcare as a factor here. That could very well be an enormous factor for all of us! I can’t believe your premiums are going up 70% in 2015-yikes! Unbelievable. In 2015 we are switching to a plan with a lower premium and higher deductible. It’s an employer-sponsored plan. Can’t imagine what the cost would be if hubby’s employer weren’t picking up part of the tab! This is a major factor that needs serious consideration from anyone considering retiring early.

    • Hopefully the healthcare issue gets resolved and the prices stabilize. I just don’t see that happening on our current trajectory. It’s going to take a lot of the American people standing up and saying “No more!” and that doesn’t seem to be happening yet.

  14. I am not worried about being bored in early retirement at all. There is so much stuff to do all the time- I can’t imagine what it would feel like to sit here with nothing to do =) Plus, I’ll likely always have some sort of side hustle or job.

    I have heard many people say they would be bored if they retired too early though. I just don’t get it.

    • Yeah…I don’t see you having this problem. I think the people that say they would be bored don’t have a plan and aren’t moving towards anything specific.

  15. I think that not seeing people everyday, like you would with a job, could be quite lonely at times and something I hadn’t thought of before. Also, I am quite competitive and so would only have myself to compete with! Not that it would necessarily be bad, as I’d win… 😉 I’d definitely need a plan as to what I’d be doing otherwise I’d probably waste a lot of time doing nothing.

    • Every person will think differently about these issues I guess. So much of it is based on our unique personality and what turns us on/off. Being an introvert, I’ve been more surprised than I thought I would about missing contact with people. I’m coping but it has been an adjustment.

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