Should I retire early? Pros and cons
The following contribution is from The Times Money Mentor and is written by Katherine Denham, who is an award-winning personal finance journalist. She was assistant editor at Times Money Mentor and is a consumer advocate for The Times, helping to solve readers’ financial dilemmas through her weekly Troubleshooter column. Katherine was named Consumer Pensions Journalist of the Year at the Headlinemoney Awards 2021.
If you’re dreaming of retiring early, there are many things you need to consider first.
While retiring early may be something you aspire to, there are pros and cons to stopping work before you reach state pension age.
This article looks at:
– At what age can you retire early?
– What is the FIRE method?
– Pros and cons of early retirement
– Should you retire early if you’re in debt?
– How does early retirement affect your pension?
At what age can you retire early?
Many people decide to retire once they start receiving their state pension. The current state pension age for both men and women is 66, but this is gradually increasing.
In the UK, the average retirement age for women is 64, while for men it is 65.
However, you can start withdrawing money from your personal or workplace pension pot from the age of 55 (rising to 57 in 2028).
For many people, this could be seen as an opportunity to stop working early.
If you want to retire before that age, you will need to have money in other savings or investment accounts where withdrawals are allowed before age 55.
For example, fans of the Financial Independence, Retire Early (FIRE) movement tend to use stocks and shares ISAs.
What is the FIRE method?
The Financial Independence, Retire Early (FIRE) movement has become increasingly popular. By cutting living costs and investing aggressively, enthusiasts aim to retire as early as their thirties or forties.
In practice, however, FIRE can involve tough decisions. Retiring early can also affect your relationships, health, and motivation.
There’s a simple calculation that many FIRE savers use to figure out how much money they need for retirement and how much to withdraw. Here’s how the FIRE method works.
Is it a good idea to retire early?
It’s important to plan your new lifestyle ahead of time and consider the reality of what will happen when you retire early.
Work provides many of us with structure to our lives, which you might end up losing if you retire early. You might even miss the social aspect of work.
If you leave the workforce in your fifties or earlier, you may have decades without much to do.
Some people retire early only to find that they’re mind-numbingly bored.
To alleviate boredom, you may find that you start overspending and put at risk what you have managed to save for your retirement.
That’s why it’s usually important to plan how you will spend your time and money in early retirement
Would you like to spend your time on low-cost activities or would you like to go on adventures? If the latter, you’ll need more money than if you spend your retirement reading books and watching TV.
To figure out if retiring early is the right decision, be realistic
Try to imagine a normal week without work.
Stick to a budget while you work can help you accumulate the cash you need to retire early, but it can be harder to maintain an economical life once you have more free time.
You may want to ask yourself these questions:
– Will I have a partner to spend early retirement with?
– Do my retirement plans align with my partner’s?
– How do I plan to spend my time?
– How much money am I likely to spend each month?
– Will I have enough income to cover my expenses?
– Am I likely to run out of money in retirement?
– What if I need to earn more money after I retire?
You may decide that it’s better to wait until you’re a little older, when your friends are also ready to retire, so you can socialize with them. Or instead of quitting your job, you may want to reduce your hours until you can retire completely.
Deciding to retire early is not a bad idea
But if you’re not careful, you may end up regretting not working longer. So make sure you think your decision through and plan ahead.
What to consider before retiring early
If you’re determined to retire early, it’s important to make sure you’ll have enough money to cover the lifestyle you want.
It’s not just a question of whether you’re happy to live on the cheap or whether you’d prefer a more comfortable retirement – you also need to consider factors that aren’t under your control.
Here are some things to consider:
Inflation
The Bank of England’s inflation target is 2%, but even when it’s hit, it still means the cost of living rises.
This means that every pound of your pension money will buy you less in the long term, making it harder to have the kind of retirement you might have imagined. We explain how inflation affects your money.
Even with inflation close to 2%, the purchasing power of your cash will reduce over time. That’s why it’s a good idea to make sure a portion of your pension is invested rather than sitting in a savings account paying a low interest rate.
You might want to consider investing in assets like stocks to give your retirement fund the best chance of outlasting the ravages of inflation.
Longer life expectancy
Many of us also constantly underestimate how long we might live and don’t ask ourselves whether we might need money for care costs when we’re older.
But, given that some people live to a ripe old age, would your savings and investments last if you survived into your eighties or nineties?
Unforeseen life events
Life can throw you a curveball that could change everything.
A good example of this was the pandemic that turned our lives upside down. For some people, lockdown encouraged them to retire earlier than expected.
Typically, this was because:
– From money saved during the
– Or because they had re-evaluated their lives because they no longer enjoyed their job while working from home, they found it stressful and mentally draining
But for workers who lost their jobs, this pushed their retirement age forward as they needed to rebuild their income.
We can’t know what will happen in the future
So it’s good to keep an open mind about when you plan to retire
Pros and cons of early retirement
As with many financial decisions, retiring early has pros and cons.
We’ve listed them below.
– Advantages of early retirement
– Say goodbye to deadlines, office politics and difficult bosses
– Time to travel, explore hobbies and take on new projects
– You are young enough to enjoy travel and activities
– Less stress and more time for exercise and sleep
– You have more time with loved ones, plus the chance to meet new people
– Avoid commuting and other work-related costs
– Opportunity to try something else, such as consulting, volunteering, part-time work or study
The disadvantages of early retirement
You have to make sacrifices to save enough to retire, either by reducing living costs or working harder for extra income
If you retire before 55, you may have to fill an income gap before you are allowed to access your pension
You may have lost the sense of status associated with your previous job
There will be less time for some of your retirement savings to benefit from investment growth
You could become bored and less active
The Lack of structure, stimulation and social interactions can be detrimental to health
Having lots of free time means your expenses could skyrocket
If you run out of money, you may find that It may be difficult to return to work when you are older and have a job gap
You may underestimate how long you will live and the cost of care in old age
Your savings need to last longer and will be at the mercy of inflation, unexpected expenses and stock market storms.
Remember that without income from a job to provide a buffer against these eventualities, your savings will be all you have.
Should I Retire Early If I Have Debt?
Retiring early if you have debt is like boxing with one hand tied behind your back: it is possible, but why make life more complicated?
Debt payments increase your living costs, meaning you will have to come up with a larger sum to cover early retirement. Some people retire early and can still budget for low-interest mortgage payments. However, if you have high-interest debts, such as credit card or overdraft debts, it makes sense to pay off those balances before they further drain your resources.
This way, you not only reduce your living costs in the future, but you also free up more cash to save for early retirement as soon as those debts are paid off.
Of course, this assumes that early retirement is an option, rather than being forced into it by health issues, caregiving responsibilities, or job loss.
Early Retirement: What Are the Options?
Early retirement doesn’t have to be an all-or-nothing choice between working and lying on a couch, or a full-time salary versus living entirely off your savings.
Instead, you need to weigh up the different early retirement options.
You can always keep working, but make less by moving to part-time work or becoming self-employed so you can choose when you work.
This will allow you to maintain some income and avoid boredom, while leaving you free time for travel, your hobbies and your relationships.
You can also generate “passive income” such as renting out rooms in your house or investing in a rental property. We outline 13 ways to increase your income.
While you may not want to keep working for a long time, the extra money could give you more time before you start to dip into your retirement savings.
Reducing your living costs and expanding your savings will also improve your finances when you stop working
Saving for retirement for as long as possible gives your money more time to grow, helping you enjoy your later years.
How does early retirement affect your pension?
If you stop working earlier, you will have less time to pay into a pension.
How much of your pension do you lose if you retire early? Well, you’ll have:
– Fewer years of making pension contributions
– Fewer contributions from your employer
– And less free money in government tax relief
Unless you’ve been able to contribute substantial sums to your pension early in your career, retiring early means you’re likely to end up with a reduced pension pot.
If you retire early, you may not get a full state pension either.
Pensioners usually need to build up national insurance contributions (NICs) or claim NIC credits if they had time off work to raise children. You need at least ten years to get a state pension and 35 years to get the full amount.
If you retire before making all the required NICs, you’ll need to make voluntary contributions to get the full state pension amount or accept lower payments.
If you retire early, you may also need to budget for the gap before you can get your hands on your pension money. Withdrawals from workplace and private pensions can usually only be made from the age of 55, and will be raised to 57 from 2028.
The current state pension age is higher at 66, although this age is gradually increasing. You can check your own expected state pension age.
When wondering whether you should withdraw your pension earlier, remember that the earlier you access your pension cash, the longer it will take to stretch and the more likely it is to be used up.
If you are lucky enough to be in a workplace scheme that pays a guaranteed sum, known as a defined benefit or final salary pension, your options for withdrawing money are more limited. Many defined benefit schemes only allow withdrawals from the age of 60.
If you can start receiving income earlier, from the age of 55, you are likely to get a lower income.
The pros and cons of working in retirement
The following contribution is from the TPT portal which defines itself: “our mission is to make pension plans work better for everyone. Thanks to our track record of over 75 years and our experience in pensions, we know exactly what it takes to make that mission a reality.”
The word “retirement” may conjure up images of leaving the world of work to devote oneself to gardening full-time, but more and more people are continuing to work beyond retirement age.
There are a number of reasons why people continue to work beyond retirement age. But what are the pros and cons of working in retirement and what could they mean for you?
There are a number of reasons why people choose to do so, both personal and financial, but what are the pros and cons of working in retirement and what could they mean for you?
Advantages
Keep doing what you enjoy
The most obvious reason to keep working beyond retirement age is that you enjoy your job and want to keep doing it.
There is nothing that forces you to hand in your P45 when you reach retirement age and, although many people choose this time to stop working, if you enjoy what you do, there is no reason to stop.
The extra income you receive from your pension may allow you to reduce your hours or work more flexibly if you wish, but you are under no obligation to do so.
It may be that you have a specific project or contract that you would like to carry out before you step back, or it may be that you simply have no immediate intention of retiring and would like to continue working in the near future. Either way, you are free to continue working if you wish.
Boost your income
Not everyone can afford to stop working immediately when they reach retirement age and a common reason to keep working in retirement is to boost your income beyond what your pension alone would provide.
This may involve working full-time, or perhaps taking on a part-time job to supplement your finances while giving you more time to do what you want.
Enjoy a bigger pension in the future
Alternatively, if you continue working and postpone the time you start drawing your pension, you can continue to invest in it to be better off financially in the future. This way, when you decide to stop working and draw your pension, the pension income you have to live on could be higher than it would have been if you had started drawing it straight away.
No need to pay National Security
An important, and often overlooked, aspect to bear in mind is that you stop paying National Security when you reach retirement age. This means that if you continue working, you will take home a little more each month, which you can spend or save as you wish.
Stay active and social
Another aspect to consider is the sense of purpose and satisfaction, not to mention the social benefits, that work can bring. Retirement can bring big lifestyle changes and some people will miss the regular interaction with their colleagues or the sense of structure that work brings to their week.
For this reason, many people take on part-time jobs or even volunteer when they retire. This way, they can get out of the house and exercise their grey matter without the demands of full-time work.
Cons
Time you could be spending doing other things
Of course, the biggest downside to working in retirement is the impact it has on your free time. Retirement could give you the opportunity to pursue your hobbies and passions, or simply take it easy and live life at your own pace without the pressures of full-time work.
Working after reaching retirement age has potential benefits, even if it is only part-time, but this needs to be weighed against the potentially life-changing impact that leaving work could have on your personal life and the freedom this can bring.
If your financial situation means that leaving work altogether is not a realistic prospect, it is worth considering the benefits that reducing your work commitments could bring and weighing these against the financial costs.
It is also important to remember that if you take money from one pension and continue to contribute to another, you may be entitled to less tax relief on the money you contribute to your pension.
Commuting and expenses can reduce your income
If you decide to work part-time to increase your income in retirement, it is worth considering the costs of commuting and the disproportionate impact this could have on your income.
Many of us do not find it a big deal to pay for a bus or train ticket, or to drive for 30 minutes or more to get to our workplace when we work full-time. But if you do a similar commute for just a few hours a day, you may suddenly find that the part-time income boost is less effective than anticipated.
If a costly commute is unavoidable, it may be worth consolidating your working hours into one or two days, rather than spreading them out over a full week to minimise your travel expenses.
Of course, if you are looking at part-time work as something you do to keep active
Rather than something that is important to support your retired lifestyle, then this may not matter as much to you, but it is definitely something to consider.
An increase in income could move you up a tax bracket
If you continue to work full-time while collecting your pension, you will receive an increase in your monthly income above what you were previously earning.
Obviously, this can be very positive, but depending on your income it could have the unexpected effect of moving you up a tax bracket. In this situation, your extra income would suddenly have a much smaller impact than it would otherwise.
More income, more tax
If you are considering continuing to work while receiving a work-based pension, it is worth paying close attention to what your new income might be and whether this would bring with it an increase in your tax bill.
Depending on your situation, it might be preferable to delay retirement or reduce your hours so that you can enjoy the full benefits of your pension without paying more to the taxman.
If you are approaching retirement and are unsure which approach is right for you, it might be worth considering getting financial guidance or advice.
Is it better to retire or continue working even if one has enough savings to last a lifetime after retirement?
The following contribution is from the Quora portal, which, as is its style, asks questions for citizens from different places, activities, training, etc. to answer, which gives us an idea of what citizens of any country think about the topic in question.
The answers suggest that the decision to retire or continue working depends on individual circumstances and preferences.
Many respondents highlight the importance of having a purpose, staying mentally stimulated, and maintaining social connections beyond financial considerations.
«Today I work for a company that pays me a salary. At some point in life, the nature of work becomes mundane. That’s when we realize that we must explore and work towards something that is not so mundane.»
«Lots of money, lots of time, total lack of people. What would have worked better is if I could have reduced the load slowly. Easier work, easier commute, fewer hours.» Read more
«Generally speaking, if you can honestly say I’m retiring to do… rather than I’m retiring from…, I say go for it.» Read more
«Before you retire, there are two issues you need to address. The first is having enough income to maintain your lifestyle… The second is what you’re going to do with your time.» Read more»If you’re simply trying to get away from a job you hate, you may find retirement even more frustrating. People can get bored if they’re sitting at home with nothing to do.
Rethinking the hustle: Should we really “work hard and retire early”?
The following contribution is from Mat Bennett, Agency Advisor and Mentor who defines herself as follows: “I work with agency founders to help them grow, improve, improve resilience and achieve better balance with the agencies they created. Drawing on my own 25 years of experience as an agency leader, I now work as an agency advisor, providing my knowledge and experience to other agency leaders looking for guidance, support, accountability or even a sounding board.”
“My favorite outcome is helping founders better align their business with what they want out of life. Too many of us are building a business to fit someone else’s idea of success and I believe that time spent clarifying strategy and keeping focus aligned with that can make an incredible difference in the lives of agency founders. My core offering is practical, sensible, individualized support, tailored to each agency leader I work with. You can learn more about this, including my transparent pricing, at the link below”
This is the question asked on the portal.
Is it better to retire or to keep working even if one has enough savings to last a lifetime after retirement?
Rethinking the Hustle: Should We Really “Work Hard and Retire Early”?
Working ridiculously long hours and not taking vacations are almost badges of honor for many business owners. Whenever I ask someone who wears those badges why they do it, I tend to get a combination of three common answers:
– I do it because I love my job
– That’s what it takes to run a business
– I work hard now so I can retire early
It’s the last of those points I really want to address, as it’s the most common answer and the one based on very shaky logic. First, let’s get the other two points out of the way, which are easily dismissed.
“I do it because I love my job”
I love my job too, but it’s not the only thing I love. It’s not even the thing I love the most (that would be my cat… luckily my wife and kids don’t read my blogs).
Doing just one thing, even something you love, is boring. It also makes the thing become boring and you like it less over time. That aside, I don’t believe this answer anyway.
People who say they work 70 hours a week, 51 weeks a year because they “love their job” keep talking about their dream vacations and bucket list that they never get to do. They just do it while repeating this phrase over and over to themselves trying to convince themselves that it’s true.
“That’s what it takes to run a company”
I hate to contradict the LinkedIn hustle, but this isn’t true and there are thousands upon thousands of people running their companies in ways that prove it isn’t.
Sure, there are times when you should pull out all the stops, but those should be exceptions, not the norm. If “working every hour I can” is your long-term plan, then I strongly urge you to reevaluate that plan.
There are definitely better options. Running a company is not like front-line work. It is not an hourly job and what you get in return should not have a direct correlation to the hours you work. If so, you are working hard, not leading, and you probably already know that.
“I work hard now so I can retire early”
The reason I wanted to focus more on this answer is because, unlike the previous two answers, I think people actually believe in this one.
If I am going to be completely honest, it is also partly because I used to believe in this idea myself. However, I was wrong.
In most cases, it is simply a bad strategy for making the most of life and I will prove this point with three arguments and an optional spreadsheet (there is always a spreadsheet):
Counterattack 1: The math doesn’t add up
Let’s consider two entrepreneurs in their 30s. They are both young enough to make any plan they choose work for them.
Entrepreneur A has studied the lessons of all the LinkedIn influencers and knows that the answer is to work a minimum of 12 hours a day, 6 days a week.
If they go on vacation, they will take their laptop and only have 7 real days off work a year, plus the one-day weekend. They do this so that they can retire in 20 years, on their 50th birthday.
Entrepreneur B is what our first entrepreneur calls “lazy.” He only works 40 hours a week, and he often packs those hours into 4 days so he can travel, see his friends, and waste time on his hobbies.
He takes an enviable 6 weeks a year off work and barely communicates with the team when he does. However, this comes at a cost: it will take him 50% longer to be able to afford retirement. He will work until he is 60, 10 years later than his more “motivated” colleague.
At first glance it seems like Entrepreneur A was right, but if we look at how many hours each worked between turning 30 and retiring, we get a clearer picture.
Entrepreneur A: 66,300 hours
Entrepreneur B: 55,200 hours. Over 20% fewer hours!
OK, the numbers themselves are a bit arbitrary, but they make the point. In fact, even if Entrepreneur B had to work at the same rate until he received the state pension at 65, he would have worked 2,000 fewer hours than A. He would probably also be a lot happier, healthier and a much more interesting person.
The older you are before you make a change, the less impact it will have, of course, but the same applies to increasing work (the later you leave, the less impact it will have on your retirement age).
Accountant 2: The Impact of Risk
In the example above, Entrepreneur A is effectively investing his time in the hope of getting a return of more time in return later.
As with other investments, we need to consider the risks and the potential reward. When I invest money, I am content with modest returns when the risk is low, but I expect higher returns when there is a greater chance of losing some of that money. The same is true when I invest time.
One of our fictional entrepreneurs above is working 80% more hours for each of the next 20 years. That is time invested.
The expected return is more time for himself (or perhaps good things sooner), which our analysis of the math already shows is questionable.
However, there is also the risk that the plan will be disrupted. The worst version of this is that something happens to Entrepreneur A between the ages of 50 and 65 that prevents him from using that time in a quality manner (not an unlikely scenario for those who don’t take time off from the business).
Chances are that that 80% of extra hours each year won’t turn into the expected early retirement because more hours don’t guarantee success.
In fact, there is a growing body of evidence supporting the fact that we become less effective at work when we work more than 35 hours per week and that effectiveness continues to decline as hours increase. This would mean that Entrepreneur A would be more effective for the hours he worked than his tired colleague.
When it comes to time or money, a bird in the hand is definitely a bird in the bush (two birds would depend on timelines and target returns!) and that should be reflected in potential returns.
Youth is a waste for the young
I retired at 50. Personally, I think it sucked and I started a new business a few weeks later and I’m happier for it.
My kids were in school, my wife enjoys her job (mostly) and possibly didn’t seem all that enthused by the idea of being with me 24/7 anyway.
My friends are spread out all over the world and doing their own things, and many of the activities I once enjoyed doing in my free time now hurt like hell.
I’m not saying retirement is bad, even though I’m not ready for it. I’m just saying that 24 hours at 50 is not the same as 24 hours at 20, 30, or 40.
I don’t know many early retirees who wouldn’t gladly trade a little free time now for a little more time when their kids were young, when their parents were around, or when their then-stronger social group did much more interesting things together.
We need to be careful not to trade more valuable hours for less valuable ones later on – they aren’t worth the same.
Figure out what you really want
I think “retire at 50” is one of those goals that other people set for us. Business owners tend to be more motivated people, and motivated people respond well to clear goals.
Knowing this, we set goals based on common ideas of success rather than taking the time to understand what’s really important to us and set goals aligned with that.
Retiring at 50 is a common goal because most people aren’t entrepreneurs. They have limited control over the work they do, the hours they work, or the business they do it in.
They are passengers, and the only option they have is to change ships they’re on. As entrepreneurs, we are not passengers. We are not only captains of our own ships, but also owners of them.
If we feel like we’re stuck on a particular route, we can turn the helm and sail in the direction we choose. We have the option to build the business that gives us our dream job and optimize it for whatever it is we want out of life.
Maybe early retirement is essential to your life plans.
Who knows, you might have a dream of living off-grid in Borneo for a decade and refuse to be a Starlink customer.
If so, great – optimize for that. My point is, though, that “work harder, retire early” shouldn’t be the default answer. Don’t do it if it’s not what you really want deep down, and definitely don’t do it if you’re going to end up worse off for doing it!
12 Reasons to Retire Early – Why You Should Do It at 62 (or Sooner)
The following contribution is from boldin.com, which is the #1 online retirement planning tool. Go beyond saving and investing with the best and most comprehensive financial planning software.
Author is Kathleen Coxwell from the boldin team
Early retirement (retiring at 62 or sooner) seems like a wonderful dream for many people. You have worked for decades and focused on work with the goal of enjoying the rest of your life on your own terms. But is it too early to get out of the rut? Retiring at 62 is quite different (for better or worse) than retiring later.
If you are wondering if it is the right thing for you, this article is not intended to hold you back.
Reasons to Retire Early
Is It Time to Quit Work and Retire?
Here are 12 reasons why you really should retire at 62 or earlier. (And, if you want tips on how to get there, here are 37 tips for retiring early.)
Or, start planning for your retirement early now with Boldin Retirement Planner, the best online retirement planning tool! Forbes magazine calls it “a new approach.”
Reason to Retire Early #1: You’ll Stay Healthier Longer
There’s no doubt that working and being active can help you stay healthy for much longer than sitting with your feet up. But not all work is good for you—sometimes it’s bad for your health.
Retiring at 62 from a grueling or disproportionately high-stress job can help you maintain or regain your good health and maintain it for longer.
Just make sure you have a plan to stay mentally, socially, and physically active after retirement. Jobs are good for keeping you engaged. But work isn’t the only way to stay vital.
#2: Retire at 62 (or earlier) if you know what else you want to do
Do you have a dream you’ve always wanted to pursue, but never had the time for? Maybe you want to write a novel.
Have you considered the idea of joining community theater? Or maybe you’ve always wanted to grow your own food on a farm. Maybe you want to raise sheep, harvest the wool, and open a yarn store.
If you have a real goal and know you’re passionate about it, you have a good, if not GREAT, reason to retire early
(Still not sure what you want to do? Here are 120 ideas for what to do in retirement.)
They say that no one ever reaches a very old age regretting the things they did. What they regret are the things that weren’t attempted, the opportunities that weren’t taken, the dreams that were left dusty and abandoned on a shelf. If you can, retiring at 62 can give you many years to pursue that dream and really enjoy it.
#3: Retire early if you can make trade-offs to ensure your security
For those considering retiring early, a crucial consideration is the willingness to make strategic trade-offs in pursuit of long-term financial stability.
Achieving lifelong financial security in early retirement requires a proactive approach and a realistic understanding of the potential trade-offs.
While embracing frugality can pave the way to financial freedom, it can also require adjustments and sacrifices along the way. Balancing short-term desires with long-term goals, such as traveling or purchasing luxury items, requires careful consideration and discipline.
Additionally, staying alert to changing market conditions and reevaluating financial plans periodically is essential to adapting to changing circumstances.
By embracing flexibility, discipline, and a willingness to compromise, people can navigate the complexities of early retirement and embark on a fulfilling journey toward lasting financial security.
#4: Plan to retire early if you’re ready to focus on the goal
Maybe you’re not quite financially prepared to retire early. Should this stop you from doing so? Absolutely not. Especially if you’re ready to focus on a financial goal.
Most Americans are not prepared for retirement and may need to continue working into their 60s or beyond. However, don’t let past mistakes of lack of planning and saving hold you back now!
Set a goal to retire early, start analyzing your finances, and design a plan to exit the workforce as soon as possible
The sooner you make the effort to retire early, the sooner you can do so. This may involve reimagining traditional notions of retirement and adopting alternative lifestyle choices to bolster financial security.
By adopting a frugal mindset and prioritizing needs over wants, individuals can stretch their retirement savings beyond their limits, ensuring they last a lifetime.
Downsizing your home to a more affordable location, cutting unnecessary expenses, and diligently managing investments are all viable strategies to safeguard financial resources.
Additionally, maintaining a diversified income stream through part-time work or entrepreneurial ventures can provide a supplemental source of income, bolstering financial resilience in the face of unexpected challenges.
Boldin’s Retirement Planner Makes Getting Started Easy
Try out different scenarios and find your path to retirement as soon as possible.
#5: Retire at 62 if you want to learn new things
If you’ve dedicated your education and life to a career, there may come a time when you want to try something completely new.
Retiring at 62 means you have time to continue studying in a different direction and still have time to take advantage of it and enjoy it.
Adult learners often outperform their younger counterparts
And even if you’re not seeking a new degree to use in the workforce, learning for personal edification can be rewarding. You might even pick up a new set of skills to use in creating your own business.
#6: Retire early if you’ve really thought it through
Early retirement isn’t something to be taken lightly. You may have your finances in order, but you also need a solid understanding of how your life will change.
For example, it can be more stressful than you might imagine to spend every hour of every day with your spouse, especially if you’ve only spent a few hours a day together in the past.
For someone who is used to working Monday through Friday, the sudden change of not having a schedule and all that comes with it can be difficult to cope with. If this is the case for you, you may want to try a sabbatical instead of early retirement.
However, if you’ve already done your homework and are looking forward to 62, then there’s nothing stopping you.
#7: Retire early if you don’t need to start collecting Social Security early
The earliest age you can start collecting Social Security benefits is age 62. However, just because you can start collecting benefits doesn’t mean you should.
Your monthly Social Security pay increases significantly for every month and year you delay starting, until your full retirement age (around age 67).
Depending on your work history, waiting to start collecting Social Security can mean something like $100,000 or more in extra money over your lifetime.
So, if you’re planning to retire early, it’s best to do so without starting to collect Social Security. Start planning for your retirement early…
#8: Retire early if you’re ready to simplify
Living more frugally isn’t a necessity in retirement, but if you think you can simplify your spending, then you can probably retire at age 62 or earlier if you really want to. When you retire, you’ll have the opportunity to prioritize what’s important to you and let the rest slip away. Prioritizing can help you lower your spending levels. And this can be incredibly liberating.
#9: Retire early if you have a health insurance plan
When you retire at 62, you still have a 3-year wait before you qualify for Medicare, unless you qualify for disability. You’ll need health coverage to survive until you turn 65.
Being healthy doesn’t mean it’s okay to go without health coverage. If you can get a private policy to cover the gap, then you’re all set. If not, you may want to wait a little longer to retire.
Here are some ideas on how to pay for health care before you’re eligible for Medicare.
#10: Retire Early If You’re Debt-Free (or Nearly So)
Probably the biggest indicator that it’s okay to retire early is that your debts are paid off or very close to it. Living debt-free, financially free, or whatever you want to call it, means you’ve met all or most of your obligations and will be under much less pressure in the years ahead.
If you’re debt-free and your retirement income is in line, there’s little reason to keep working if you don’t want to. This is the stage of life you’ve worked hard to reach. So get out there and enjoy it.
Boldin’s Planner is an easy way to help you decide if you can retire early. It only takes a few minutes, and what you’ll learn can help you chart your new course.
#11: Retire Early: Time is More Important Than Money
By retiring early, people get back their most precious resource, allowing them to devote it to activities that align with their passions, values, and personal growth. Rather than being tied down to a demanding career, early retirees have the freedom to explore new interests, spend quality time with loved ones, and prioritize experiences that enrich their lives.
However, adopting this philosophy requires a fundamental shift in mindset. Early retirees understand that true wealth lies not in financial assets alone, but in the freedom to live life on their own terms.
This may involve making intentional compromises, such as opting for a simpler lifestyle or prioritizing experiences over material possessions.
By reframing the concept of wealth to encompass time, early retirees find satisfaction in moments of connection, creativity, and personal fulfillment.
Ultimately, by recognizing that time is the most precious commodity, people can embark on a path to early retirement that prioritizes a meaningful life over wealth accumulation.
#12: Retire Early If You Suspect You’ve Saved Too Much
Surprisingly, it is possible to over-prepare for retirement and accumulate more savings than you’ll actually need. If you find yourself in this fortunate position (you probably know who you are), early retirement may be an attractive option.
Rather than continuing to accumulate wealth unnecessarily, retiring early allows you to begin enjoying the fruits of your labor and living life on your own terms.
By retiring early, you can escape the grind and spend your time on activities that bring you joy and fulfillment. Embrace your abundance. Create a retirement that is not only financially secure, but also rich in meaning and purpose.
Jobs without benefits are better than retiring early
The following contribution is from the Center for Retirement Research at Boston College and is written by Kimberly Blanton, a writer and editor. She joined the Center’s staff in 2010. She writes the blog Squared Away. She earned bachelor’s and master’s degrees in economics from Indiana University in Bloomington and a research fellowship in journalism from the University of Maryland.
Many workers in their 60s lose some of their stamina. Either their bodies begin to show signs of wear and tear or they can’t tolerate job stress as they once did.
People who find themselves in this situation but can’t afford to retire will appreciate the findings of a recent study: Older workers who transition to a new job, and perhaps a less demanding one, have greatly improved their retirement finances, even if the new job lacks health and retirement benefits.
The starting point for the analysis was to identify 61- and 62-year-olds employed in career jobs
and track changes in their retirement finances over time, as they fell into three groups. Some retired, some stayed in long-term jobs with benefits, and others found jobs without benefits, either with an employer or as independent contractors.
Matt Rutledge and Gal Wettstein of the Center for Retirement Research compared each group’s retirement prospects in their early 60s with those they had years later, when most of them had already retired.
The focus was on people who, at age 62, fell short of what they would need to retire comfortably.
The financial assessments were based on so-called replacement rates — estimated retirement income as a percentage of employment income. The average goal needed for financial security in old age is about 75 percent of previous income, though the precise figure depends on how much the person earned.
The researchers calculated replacement rates for people aged 62 who did not meet the targets and recalculated them when they were 67 or 68.
Retirement security improved over time for low-skilled people who continued to work, in contrast to an erosion of security for people who, despite not meeting the targets, had retired at age 62 and secured a small Social Security check.
The most interesting finding concerned older workers who had extended their employment by switching to jobs without benefits
Their retirement incomes in their late 60s replaced 68 percent of their previous income, on average — still less than they need, but dramatically higher than the 52 percent if they had retired early.
This 16-percentage-point improvement is about the same as the 14-point improvement for retirees who had stayed in their career jobs and kept their benefits.
For workers who extend their careers, much of the increase in retirement income comes from delaying Social Security, which increases the amount they receive in their monthly checks.
Not everyone is healthy enough to work well into their 60s
But extending one’s career (even in a job that lacks benefits) is “economically beneficial for those who are healthy enough to do so,” they said.
Why working longer is a bad retirement plan
The following contribution is from the CNBC portal and its author is Greg Iacurcique is a journalist who covers personal finance at CNBC.com, with a focus on travel, retirement, investments, labor market trends and the economy. He lives in New York.
According to the Employee Benefit Research Institute, nearly half (46%) of retirees in 2023 said they stopped working earlier than planned.
This usually happens due to unforeseen circumstances, such as job loss or health complications.
Retiring early can have negative financial effects, such as withdrawing savings and applying for Social Security before the optimal time.
Working longer is one of the best ways to ensure you don’t exhaust your retirement savings
The problem is that you can’t count on it as a strategy.
When it comes to retirement age, there is a huge gap between expectations and reality. Americans typically retire earlier than planned, often because of factors beyond their control, such as poor health or job loss, research shows.
In 2022, the average expected retirement age was 66, according to a Gallup poll
But the actual retirement age was 62, on average. While averages have varied somewhat over the years, there has been a consistent gap of about five years between expected and actual retirement ages since 2002, Gallup said.
Nearly half — 46% — of retirees said they left the workforce earlier than planned, according to the Employee Benefit Research Institute’s 2023 Retirement Confidence Survey.
That share has been similar for the past two decades, largely hovering between 40% and 50%.
«I think a lot of people who aren’t on track [to retire], maybe in their 40s or 50s, are saying,
‘I want to retire at 65, but I’ll work until I’m 70,'» said David Blanchett, a certified financial planner and director of retirement research at PGIM, the asset management division of Prudential Financial.
«But they probably won’t make it to 70,» he added.
Why retiring later can have a “dramatic” impact
Delaying retirement by a few years can have a “dramatic” positive financial effect, Blanchett said.
These people are still drawing a regular salary, so they don’t have to live off their savings. In the meantime, they have extra time to save and for their assets to (hopefully) grow. Plus, they can likely delay claiming Social Security benefits, ensuring a higher monthly payment for the rest of their lives.
But retiring earlier than planned can have the opposite impact, experts said.
To a large extent, this disproportionately affects people who plan to retire in their early 60s or older, according to Blanchett’s research.
A typical Gen X household only has $40,000 in retirement savings in private accounts
Those who aim for a later retirement age than 61 end up achieving about half as much as expected, she found. For example, someone who aims to retire at age 69 would actually retire around age 65.
However, countertrends are pushing workers to retire later.
The full Social Security retirement age has been gradually pushed back, to age 67 for anyone born in 1960 or later. Americans are living longer, meaning they need to accumulate more savings to fund their lifestyle in old age.
The shift from pensions to 401(k)-type plans is also a factor, said Richard Johnson, a senior fellow at the Urban Institute. Pensions typically offer an incentive to start collecting benefits at a certain age, while there is no such trigger in 401(k) plans, he said.
Early retirement largely driven by unforeseen events
A third of workers expect to retire at age 70 or older, or not at all, according to EBRI. But only 6% of retirees said they retired at 70.
In 2023, 35% of people who said they retired earlier than planned did so because of a hardship such as a health problem or disability, according to EBRI. Another 31% did so because of changes at their company.
“The key is that these are things you won’t be able to control,” Blanchett said.
Of course, a large share — 35 percent — also said they could afford to retire early, EBRI found. And nearly half of retirees said they were able to stop working around the time they had planned.
Job loss “really matters” for older adults
More than half — 56 percent — of full-time workers in their 50s find themselves out of work (due to circumstances like a layoff) before they are ready to retire, according to a 2018 paper published by the Urban Institute.
“Job loss at older ages is really important,” said Johnson, a co-author of the report. He attributes much of that workplace dynamic to ageism.
Only 10 percent of those who suffered an involuntary job separation in their early 50s earn as much per week after their separation as they did before it, according to the Urban Institute paper. In other words, 90% are making less — “often substantially less,” Johnson said.
Many may not be able to find a new job at all
Why Social Security won’t run out
Johnson’s research shows that after the Great Recession (from 2008 to 2012), workers ages 50 to 61 who lost a job were 20% less likely to return to work than workers in their 20s and 30s. Those 62 and older were 50% less likely to have a new job.
“Working longer is theoretically a good option to shore up retirement savings,” Johnson said. “But as workers prepare for retirement, they shouldn’t bet on being able to stay in their jobs as long as they want.”
The current strong labor market means it may be easier for older workers to find a new job, Johnson said. It’s unclear how long that strength will last, though. According to experts, it may also be easier for many retirees today, especially those who can work from home, to find part-time jobs that help mitigate the financial impact of retiring earlier than expected from full-time employment.