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Early Retirement: Pros, Cons, and Alternatives

Picture of Randall E. White

Randall E. White


The dream of early retirement is a common one, but is it really all it’s cracked up to be? Like anything else, there are pros and cons to this major life decision, as well as alternatives that may be worth considering. So, before you set your sites on saying sayonara to the working world, read on.

When You’re Forced to Retire Early

First, it bears mention that not everyone who retires early does so by choice. When most people think of retirement, they imagine the ideal scenario – making the conscious decision to stop working after a long career in order to spend more time with family, friends and leisure activities. In reality, though, that’s not what retirement looks like for everyone. Some people are forced to retire, whether due to poor health, lay-offs or employer buyouts. Sometimes, people must leave a job before they’re ready to in order to care for an ill family member. There are innumerable scenarios that may unfold, making retirement fraught with stress rather than the glamorous lifestyle change many of us dream of. This type of early retirement brings with it unique challenges and is different than the ensuing discussion of early retirement by choice.

Choosing Early Retirement

If you’re in a position to retire early by choice, there are a few considerations to make before taking the leap:

The Why

Early retirement isn’t something you should undertake on a whim, so you need to be very clear about why you’d like to stop working in order to make an educated choice. If you hate your job or are dissatisfied with your field, quitting work may not be your best option. In this case, you may want to consider a career change instead. Look for a job that’s more fulfilling, while still allowing you to save money and pay into Social Security. Conversely, if you feel that your career has run its natural course and you’re ready to leave work on a positive note and begin your retirement years, you might be a good candidate for early retirement. The bottom line is, if your ‘why’ is more about escaping something than it is about truly being ready to retire, you should think twice before cutting your working years short.

The Money

One of the most obvious questions about retiring early is whether you can afford to do it. Financial experts agree you should have somewhere in the ballpark of 10-16 times your salary in savings when you retire, and the earlier you retire the more you’ll need. Have you considered your day-to-day expenses? How will you pay for them? If you’re too young to qualify for penalty-free distributions from your retirement accounts, you’ll need to determine where your money will come from in the meantime. You should also be aware that the average American life expectancy stands at greater than 78 years, but if you’re 60 years old your life expectancy is age 84!. So, if you’d like to retire at age 45, you could be looking at 33 years (or more) of retirement. Let’s say you’re frugal by nature and planning to live on $50,000 per year; you would still need about $1.68 million in retirement savings. That doesn’t take into account any major purchases you may need to make, like a new home or the vacation of your dreams, or any unforeseen medical expenses. You also need to consider that a scenario like this doesn’t just mean more years of retirement to fund – it also means fewer years paying into Social Security or cashing in on benefits like an employer match to your 401(k) contributions.

The What

If you want to retire early for the right reasons and you’re financially able to swing it, the next consideration you need to make is how you’ll spend all your time. Many retirees assume that all leisure time all the time will be a welcome break from the 9-5 grind, and it can be for a while. However, the novelty soon wears off and many new retirees find themselves unprepared for the dearth of social life that can happen when they no longer see their coworkers every day. It’s important to ask yourself whether you have enough fulfillment outside of work to sustain you on a day-to-day basis. Do you have hobbies and personal interests that you plan to build into your days? Do you have social ties outside of work that will keep you connected to friends, family, and community? In short, once work is no longer an obligation, what will motivate you to get up each morning? If you aren’t sure how to answer that important question, you run the risk of becoming bored, isolated or even depressed by retiring early.

If your spouse is also planning to retire around the same time, there are some important conversations you’ll need to have around how you’ll both fill your days, too. How will this alter your household? Who will be responsible for which chores? Will you be financially stable enough to do things like assisting your adult children if they need it or care for your parents if they become ill? Before you and your spouse make the leap into early retirement, make sure you have these important conversations in order to understand what it will truly mean for your social and financial needs.

Early Retirement Alternative: Career Change

If you’ve considered the above and early retirement isn’t the best option for you, after all, it’s time to consider another possibility. Changing careers mid-way through your working years – or even near the end – can bring you a sense of purpose and contentment in your work that you may not be experiencing in your current job if you’re feeling dissatisfied or stagnant. Whether you make a lateral move into a somewhat different field or you start fresh in a completely new enterprise, changing career lanes can help you learn new skills, meet new people and open new doors for your future.

Final Thoughts

Retiring is always a major life decision. Even though most of us plan for it all our working lives, the reality of it can be a shock to the system, especially when choosing to retire early. Think hard about your motivations, your finances and what you see for your life ahead before making this important decision. Talk openly with your family about your options and seek advice from those you know who are happily retired. Remember to also have honest discussions with your financial advisor about your plans and goals so that you’ll have expert advice moving forward, regardless of what your next step will be.

Early retirement can – and does – work well for many people. If you’ve considered all of the above and are ready to make the move, best wishes for this new and exciting chapter in your life!

Securities offered through Triad Advisors, LLC, member FINRA/SPIC. Advisory services offered through TriCapital Wealth Management, Inc. TriCapital Wealth Management, Inc. is not affiliated with Triad Advisors, LLC.

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