"I'm a little young for retirement."
-- Joni Mitchell
Legendary singer and songwriter Joni Mitchell uttered those words a decade ago, when she was 63. Many, if not most, of us would be happy to retire at 63, though it can seem like an unreachable dream if our bank and brokerage accounts aren't as flush as we think they should be. Still, it's worth taking a little time to think harder about whether we might be able to retire sooner than originally anticipated.
Here are three reasons we might do well to retire as early as we can, even if that means retiring at 68 instead of 70 or 75.
Reason No. 1: The future is uncertain
None of us knows just how long we will live. Many people tend to assume that they have lots of years ahead of them, but some of those folks will be wrong. We may occasionally run across life expectancies in our reading and in our minds imagine living to our expected age or beyond -- but those are just averages. The reality is that while we may indeed live that long or longer, many of us will live shorter-than-average lives.
Retiring early will give you a greater chance of being able to enjoy as many work-free years as possible. You'll also be more able to enjoy being active in retirement. If you want to play some rounds of golf in Scotland or go snorkeling in Hawaii, it will be easier to do that when you're 65 than when you're 75. The longer you work, the more you're rolling the dice on how good a retirement you'll have.
Reason No. 2: You can make good use of your retirement years
Another reason to consider retiring early is that your retirement years can be much more active and fulfilling than you might be assuming. Retirement doesn't have to just mean reading all of the newspaper each morning instead of skimming headlines and going out to the movies more often.
A top goal for many people is getting healthier. You can work on improving your health much more effectively if you retire early. For starters, the stress of work will be gone. You'll no longer have to wake up early to go to work, so your body may get the longer sleep sessions that it needs. You'll have time to prepare nutritious meals and to go for long walks or regular visits to the gym. If you can lose any excess weight you're carrying, you'll likely benefit in many ways, such as being at less risk of developing diabetes or high blood pressure. The healthier you are, the longer you'll likely live, too -- making your retirement even longer!
You can also still work and make money in retirement. You can leave 40- or 60-hour work weeks behind and just work part-time -- at a job that's more enjoyable and less stressful, generating extra income that can help your nest egg last longer. Alternatively, if you like your current job, you might be able to stay there, working fewer hours. It's actually good for many people to work some in retirement. Jobs offer structure and socializing, which many people find they miss in retirement.
If you're financially secure, you can volunteer as many hours as you'd like for causes or organizations you believe in. Or if you have an entrepreneurial bent, you might try starting a new business. It can be something ambitious or something smaller scale, such as tutoring or doing freelance editing. If you work just 10 hours per week -- perhaps two five-hour shifts -- and earn $12 per hour, you're looking at about $500 per month in additional income, which might cover some big budget items, such as food and/or utilities.
Reason No. 3: Retiring early might actually be financially possible
Finally, another reason you might retire early (or earlier than planned) is simply because you can. You might not have enough socked away to retire right now, but if you get more aggressive about saving and you invest your money effectively, you can probably make your retirement happen sooner. Take some time to devise a plan, estimating how much income you'll need in retirement and how you'll get it.
You can amass a large sum of money if you start early, thanks to the magic of compound growth. Investing $8,000 each year for 30 years will grow to nearly $980,000 at 8% annually. Even if you're already 50, you have a dozen years left until you're 62. Socking away $12,000 that grows at 8% per year for 12 years will get you $246,000.
Social Security will be an important contributor to your retirement income. You probably know that you can start collecting benefits as early as age 62 and as late as age 70, and that by delaying, you can make your checks bigger. Well, that's true. For every year beyond your full retirement age that you delay, your benefits will grow by about 8%. Delay from age 67 to 70, and your benefits will be about 24% bigger. That can sure seem like a reason to work as long as you can. But hold on -- remember that while the delayed checks will be bigger, you'll receive fewer of them. The Social Security program is designed to be a wash for those who live average life spans. If you start collecting at 62, the earliest age that you can, instead of waiting until 70, you'll get 96 more checks!
Retiring earlier may be more possible than you thought -- and more enjoyable, too. Take some time to think through your situation and see how early you can start working less and enjoying your life more.