The Surprising Benefits Of Early Retirement

Early retirement is a dream for many Americans. The thought of finally having the chance to “take things slow” and enjoy the world around them sounds very appealing, and there are some pros and cons you may not have considered. We’ll be looking at these pros and cons, as well as some surprising benefits to […]...
David Roberts
October 5, 2022

Early retirement is a dream for many Americans. The thought of finally having the chance to “take things slow” and enjoy the world around them sounds very appealing, and there are some pros and cons you may not have considered. We’ll be looking at these pros and cons, as well as some surprising benefits to being able to retire early. 

What is an early retirement?

The definition of early retirement depends some on when you expect to be able to retire. Many Americans expect to retire around the age of 67, though that number may vary depending on factors such as Social Security, 40(1)k status (for eligible employees), and personal investments. In discussing the benefits of early retirement, we’ll be looking at retirement before 67 years old. 

Surprising Benefits of Retiring Early

1. Health Benefits

By retiring early, you may notice various improvements to your health. This can especially be the case if you experience high levels of work-related stress. By retiring early, you may experience less stress and improved mental health. You may also find yourself to be more active than you were when sitting at your 9-5 job, improving your physical health.

2. New Opportunities 

By retiring early, you can take the opportunity to do what you want with your time. This may include starting that business you’ve always dreamed of, or pursuing that career you were passionate about in your 20s. In any case, retiring early provides the flexibility to follow your dreams. 

3. Free Time

Having free time is one benefit that draws many people to early retirement. It can give you the opportunity to discover new hobbies or interests, or perfect skills you already have. Who knows? You may even discover a new passion.

Early retirement also gives you the chance to socialize with new people. By having free time from 9 to 5, you will be able to meet new people that you otherwise wouldn’t see during the work day. This can lead you to develop lifelong friendships and new memories.

4. Traveling

In many careers, employees are restricted to two-week vacations. By retiring early, you will be able to break away from that restriction and travel to the destination of your dreams. Plus, since you’re traveling at a younger age you may have better mobility to enjoy your adventure even more!

5. Learning to Manage Spending

While the need to manage spending during retirement may be looked at as a con, there is also a benefit to it. With your time freed up in early retirement, you can take the time to coupon and look for the best deals. Some of these deals may only be available to you since you are retired! For instance, you can go during weekdays to attractions or in off-peak seasons on trips, which may save you a good bit of money!

Cons of Early Retirement

When looking at the benefits of early retirement, it is important to weigh the cons as well.

1. Financial Management

One important consideration for early retirement is your financial situation. Early retirement means that your savings will need to last longer. While having a passive income and investments can help with this, it is important to use financial retirement planning to ensure that you are prepared to take this step. You also won’t be able to draw full Social Security benefits, meaning that you will want to take this into account when creating your retirement plans. Creating a plan for anticipated expenses (such as paying for health care benefits and groceries) can help prevent surprises that might harm your financial state.

2. Health Insurance Plan

Since you are not eligible for Medicare until you reach 65 years old, you’ll need to find out of your ex-employer provides a health insurance plan for eligible employees (or former employees) and what health care benefits are included. If they do not, you will want to find what health care benefits and health care options you need. This may include health insurance, disability insurance, and dental insurance. Paying for your own health plans can become expensive, so it is important to have health savings and weigh what health care options are available to you.

3. Missing Work

Making the transition from working every day to having free time can be difficult for new retirees. You may find that you miss the structure and routine of your job, or that you miss your former coworkers. You might even feel a renewed excitement for your career, and desire to reenter the workforce.

What to You Need to Retire Early

What you need to reach early retirement is different for every person. After setting goals for your retirement, you will have a better understanding of how much of a nest egg you need to retire. In general, here are some tips for retiring early: 

  • Reinvest extra money received from tax refunds, bonuses, etc.
  • Cut expenses
  • Be diligent about saving
  • Utilize a 40(1)k (for eligible employees)
  • Build a passive income stream

Final thoughts

While early retirement has important cons to consider, there are many surprising benefits to it as well. Overall, it is important to plan ahead and ensure that you make the decision that best meets the long-term needs of you and your family. If early retirement is part of that plan, you have many exciting benefits to look forward to such as more free time and new opportunities. 

Using Home Equity As An Income Source For Retirement

Using Home Equity As An Income Source For Retirement

Our home is the emotional hub of our lives, going beyond the basic provision of comfort and shelter. They are where we build memories and a place which gives us nearness to family, friends, and community. Retirees will need to live where they can continue to be connected socially after leaving the workforce and children have left the home. Transportation options, quality health care, and long-term care services will also become increasingly important during the later years of life. As such, it is vital that our retirement income strategies account for where we’ll need to live, how long we should stay, and whether we’ll need to move later in retirement.

How to Make Your Cash Flow Plan Work

How to Make Your Cash Flow Plan Work

Your cash flow can be described as the way money moves into, out of, or between your financial accounts on a monthly and annual basis. A healthy financial plan will include a cash flow plan which drives your money habits into alignment with your values and goals. Most folks know this cash flow plan by the more familiar term, “budget.” It may help to think on it this way: a budget is the plan, but cash flow is the reality of what’s going on with your money.

Tax Loss Harvesting: Is It Right For You?

Tax Loss Harvesting: Is It Right For You?

Maximizing the after-tax return rate of your portfolio is an important, long-term objective which involves reducing the impact of taxes on the portfolio when possible. Tax loss harvesting helps you meet this objective by either reducing or eliminating the taxes on capital gains in a given year.

Get in Touch

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Many have no financial plan for retirement. At Plan For Your Goals, my mission is to help both the newly retired and the nearly retired take control of their finances with an evidence-based plan so they can retire with confidence.

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david@planforyourgoals.com

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