We can't all be lucky enough to love what we do for a living; but for those approaching retirement, job dissatisfaction can rear its ugly head in more ways than one. According to the American College of Occupational and Environmental Medicine, while poor health is the greatest contributor to U.S. workers taking early retirement, low job satisfaction is also a major factor in the decision to stop working sooner than planned.
While hating your job is an understandable reason for retiring early, pulling the plug on your career prematurely can have serious consequences in the long run.
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Less opportunity to save
Many people put off saving for retirement for a number of reasons. When you're young and new to the workforce, it's hard to find extra money when you're bringing home an entry-level salary.
When you're in your 30s and 40s, you have children and a mortgage to contend with. And when you're in your 50s, those kids need to go to college, and that home needs maintenance and repairs. Add in the fact that many folks' earnings don't peak until late in their careers, and it's no wonder those last few working years are crucial when it comes to saving money. In fact, retiring even just two years early can stunt your savings, and negatively impact your long-term financial well-being.
Imagine you're finally at a point where you're saving $10,000 a year for retirement. If you leave your job two years early because you just can't stand it any longer, you're losing out on not just an extra $20,000, but whatever earnings that money can make. Don't forget that your investments have the ability to generate a return, albeit a modest one, in retirement.
So let's say you retire early, and instead of saving a total of $120,000, you only manage to amass $100,000. Let's also assume that your investments bring in a conservative 3% average annual return. With $100,000 as your starting balance, you'd have the opportunity to withdraw about $550 a month, or $6,600 a year, over the course of a 20-year retirement.
However, if you work those extra two years and reach that $120,000 target, you'd be able to withdraw just over $650 a month and close to $8,000 per year. And when you're retired and living on a fixed income, an extra $100 a month means a lot.
Lower Social Security benefits
Here's another downside to leaving the workforce sooner than planned. Retiring early could mean shortchanging yourself on a lifetime of Social Security benefits. If your full retirement age for Social Security is 66, and you opt to start taking benefits at 62 (the earliest age you're allowed to claim), you'll reduce your monthly benefit amount by 25%, and that reduction will remain in effect for as long as you continue to collect Social Security.
Let's say you're eligible for $1,500 in monthly Social Security benefits provided you wait until age 66. Claim those benefits at 62, and you'll lower your monthly payment to just $1,125. And if you think you won't miss that extra $375 a month in retirement, think again.
From healthcare costs to housing and other living expenses, once you're no longer working, you'll probably need just about every penny you can get your hands on. Taking Social Security early means cheating yourself out of money you're otherwise entitled to; but unless you have a sizable retirement nest egg, you'll probably need those benefits to get by once you're no longer working.
There may be a better solution
Hating your job can be disheartening at any age, but it stands to reason that the older you get, the less motivated you'll be to stick it out. But before you up and leave, you could try airing your grievances, and seeing if your company is willing to make some changes. If you're at a point where you're willing to retire rather than deal with a job that's making you miserable, you really have nothing to lose by speaking up.
Another option? Consider scaling back your hours to give yourself a break from the constant grind. This will allow you to amass a little extra savings, and avoid lowering your Social Security benefits by claiming them early. Finally, you might consider looking for a new job altogether -- one that you might find less stressful and more fulfilling. And don't assume that nobody wants to hire a near-retiree: If you have expertise in a specific industry, you may be a more-attractive candidate than you think.
No matter what steps you take, you owe it to yourself to explore different options before you permanently call it quits. If you retire early when you're not financially ready for it, you'll only wind up hurting yourself in the long run.
