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Early Retirement

Is it a good idea?

Golf player at the course looking where he hit the ball

When you've been working hard for many years, the idea of early retirement can be very appealing. For some people, retiring early is absolutely the right choice. But for others, it's a foolish move. How do you know whether retiring early is a smart choice for your future? Here are a few pros and cons to consider as you come to your own decision.

Pro: You can pursue another career or aspiration.

Is there something you have always dreamed of doing, but have been unable to do because your current job is so demanding? Perhaps, for example, you've always dreamed of opening a bakery, but you can't because you work as an accountant full-time. Early retirement can give you the chance to pursue a second career while you're still young and energetic enough to make it happen. Earning some income after retirement makes early retirement more realistic, too.

Con: Money might be tight.

Unless you've been planning for early retirement all along, retiring early can mean you have less money to live on. Assuming you live to age 90, if you retire at 65, your savings will have to fund your lifestyle for 25 years. If you retire early at 55, then your savings will have to cover an additional 10 years of expenses. This can get pretty tight unless you've been over-saving all along. You may not have the option of working in retirement; you might have to work.

Pro: Your health may improve.

If you work a very high-stress job and feel that the stress is impacting your mental and physical health, then retiring early may be a smart choice. If you keep working for another 5 or 10 years, you could be looking at a heart attack or other major health event that reduces your quality of life in retirement. Some people are happy to live on less in retirement if it means they can retire early and focus on their health.

Con: A lack of set schedule can be hard for some people.

Some people really benefit from having an open schedule. But for other people, the loss of structure that comes with retirement is really hard to adapt to. Some people really struggle when they don't have a job to go to each morning. They may feel a lack of purpose or direction. If you are someone who really thrives with structure and a set schedule, then early retirement may not be best for you.

Pro: You can spend more time with children and grandchildren.

While everyone's life happens on a slightly different timeline, many people do start to welcome grandchildren in their 50s—which is before the typical retirement age. If you retire early, you will have more opportunities to spend time with your children and grandchildren while they are younger and while you are younger. Your children may welcome your help when their own kids are young and in need of more care!

Con: You may not be able to collect social security right away.

Those born in the year 1960 or later cannot start collecting social security benefits until age 62, and they have to wait until age 67 to collect "full benefits." So, if you retire early, you will have to live without social security payments for a few years, which can be difficult for some people.

Early retirement can give you the chance to start a second career, focus on health, and spend more time with family. However, it is not without its downfalls and challenges, either. Make sure you consider both the pros and cons before deciding whether to retire early.

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