5 Downsides to Retiring Too Early
Retiring early often feels like a dream come true, especially for working professionals who are financially stable and ready to explore the next chapter of their lives. However, early retirement is not for everyone. Let’s take a look at some of the downsides associated with retiring too early.
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You may not be financially ready yet
Comfortable retirement requires financial planning and saving. Retirees need a diversified retirement portfolio, significant savings, and a thorough examination of their financial assets as well as the duration of these sources.
It is a common mistake for a potential retiree to assume that they will be OK in retirement. Rather than making assumptions, you should know and understand the numbers well before planning for retirement. If you do not have enough savings or assets, it is better to postpone early retirement plans. Use these years to maximize your retirement contributions, keep saving and pay off any debt.
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You won’t have much money coming in to pay off debt
The general recommendation is to pay off any outstanding debts, such as student loans, mortgages and/or credit cards, before entering retirement. This is especially true of high-interest debt. Retiring early with high interest debt means that you will be paying that interest into retirement and may struggle to change retirement as a result.
Those with a large amount of high-interest debt may wish to postpone early retirement. Focus on paying off the debt or paying it off first. Most retirees who enter their retirement years without taking on a lot of debt cite this as a good adjective.
You may have left a fulfilling career
Working professionals with satisfying jobs may be reluctant to leave their roles, even if it means enjoying an early retirement.
While those who retire early always have the option not to retire and return to the workforce, it can be difficult to return to a competitive field. Individuals who enjoy their jobs may decide not to retire early. They may retire at age 62 when they can start claiming Social Security, age 65 to get Medicare benefits or delay their retirement to age 70 to get the maximum payment and to ensure they enjoy additional fixed paychecks and job recognition.
You will live on a stable income
Moving into retirement means switching from a salary or sustainable income to living on a stable income. This income becomes more stable for those who retire early, as no one under 62 can begin to claim Social Security.
You can be successful in making this transition if you have a thorough understanding of your income, expenses, and any other financial resources. However, if you’re already struggling financially and aren’t sure if you have any alternative sources of income (or how long those sources might last), consider deferring early retirement.
Health care coverage can be difficult
Health care is one of the single largest expenses in retirement. Retiring early, especially if you decide to retire before age 65 when you qualify for Medicare, may not be in your best interest if you are not healthy or have pre-existing immunodeficiencies. This also applies to individuals who are unsure of how to cover health care expenses without insurance coverage. Life expectancy continues to increase, which means your retirement fund and your health should be prepared for longevity.
The bright side is that early retirement may be possible for financially stable individuals who care about their physical and mental health. Retiring early can also be beneficial in the long run, as it helps relieve stressors that lead to burnout and exhaustion. Talk to your financial advisor and doctor to determine if early retirement is right for you based on your health and well-being.
Discuss everything with a financial advisor first
Don’t decide to retire early without first discussing it with your financial advisor.
These professionals know what’s best for you and want to help you reach the retirement lifestyle of your dreams. If your retirement plan and financial plan don’t add up to early retirement, it’s best to defer and continue working for a few more years. Reconsider these plans afterward and see if there is an opportunity for early retirement.
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This article originally appeared on GOBankingRates.com: 5 Downsides to Retiring Too Early
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