Many working people dream of early retirement. And it's easy to see why.
Retiring early means getting to reclaim your days and eliminate what could be a major source of stress -- your job -- from your life. It could also mean getting to do things like travel while your body is in better physical shape.
But while you may have your heart set on early retirement, it's not necessarily the best goal to pursue. Here's why you may want to reconsider your planned early workforce exit.
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1. You don't have so much savings
It may be that you have a decent amount of retirement savings -- enough money that, combined with Social Security, you're covered for your basic needs. But if you retire early on a modest retirement plan balance, you might end up depleting your cash reserves at some point in your lifetime, since that money will then need to last longer.
Also, if you have a nice amount of savings but not an exceptional amount, you may not have the leeway to spend on things like vacations, golf course outings, theater visits, and other forms of entertainment you may be looking forward to. So all told, you may end up disappointed with early retirement if you're not able to do the things you've always dreamed of due to a need to conserve funds.
2. You'll be the sole retired member of your social circle
It's one thing to retire early when a number of your friends, neighbors, and family members are in the post-career stage of their lives as well. But it's a very different thing to be the sole member of your social network to be retired.
If that's the case, you might quickly grow bored, restless, and lonely as an early retiree. This holds true even if you have the money to do the things you've always wanted.
Let's say your retirement budget allows for two really nice overseas trips a year. That's wonderful -- but do you really want to be touring through Italy or exploring Cambodia by yourself?
3. You don't want to spend a ton of money on health coverage
Early retirement can mean a different age for different people. But you should know that if you're retiring ahead of age 65, you'll need to come up with a plan for health coverage, since you won't be eligible for Medicare until you turn 65.
Now it may be that you're technically able to swing the cost of paying for insurance out of pocket. But that could amount to many thousands of dollars per year. Do you really want to spend that large a chunk of your hard-earned savings on health coverage alone? Doing so might leave you with less money left over for other goals.
Don't rush into early retirement
As much as you may be looking forward to early retirement, it's important to think about the drawbacks involved. In fact, one thing you may want to do, if possible, is scale down to part-time work rather than retire early in full.
Working part-time for a few years could offer a number of benefits. First, there's the income, which could mean leaving your nest egg untapped for longer, or limiting the extent to which you have to take withdrawals. It could also mean retaining health coverage through an employer, sparing you that expense until you're eligible for Medicare.
Just as importantly, you may find that part-time work makes it possible to keep busy while getting to reclaim many hours during the week for leisure and the things that are important to you. So while a full-fledged early retirement may be your preferred route, at least entertain the possibility of partial retirement as an alternate solution.
