5 Downsides of Retiring Too Early

Early retirement often sounds like a dream come true, especially for working professionals who are financially stable and ready to explore the next chapter of their lives.

However, an early retirement isn’t for everyone. Let’s take a look at some downsides associated with retiring too early.

A comfortable retirement requires careful financial planning and saving. Retirees need a diversified retirement portfolio, substantial savings and a thorough examination of their financial assets as well as the duration of these sources.

It’s a common mistake for a potential retiree to assume they will be OK in retirement. Rather than make assumptions, you should know and understand the numbers well before planning to retire. If you don’t have enough savings or assets, it’s best to hold off on plans for an early retirement. Use these years to max out your retirement contributions, continue saving, and pay down any debt.

The general recommendation is to pay off any outstanding debt, like student loans, mortgages and/or credit cards, before entering into retirement. This is especially true of high-interest debt. Retiring early with high-interest debt means you’ll be paying this interest into retirement and may struggle to make the retirement shift as a result.

Those with a significant amount of high-interest debt may want to hold off on an early retirement. Focus on paying down or paying off the debt first. Most retirees who enter their retirement years without carrying a lot of debt cite this as an attribute they did well.

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Working professionals with fulfilling careers may be hesitant to leave their roles, even if it means enjoying an early retirement. 

While those who retire early always have the option of un-retiring and returning to the workforce, it may be tricky to break back into a competitive field. Individuals who enjoy their careers may decide not to retire early. They might retire at age 62 when they can start claiming Social Security, age 65 for Medicare benefits or delay their retirement to age 70 for the maximum payout and to ensure they can enjoy the additional steady paychecks and career recognition.

Transitioning into retirement means shifting from a salary or sustainable income to living on a fixed income. This income becomes all the more fixed for those who retire early, as anyone under age 62 is unable to begin claiming Social Security. 

It is possible to succeed in making this shift if you have a thorough understanding of your income, expenses and any other financial resources. However, if you’re already struggling financially and are unsure if you have any replacement income sources (or how long these sources may last), consider holding off on an early retirement.

Healthcare is one of the single greatest 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’re not in good health or have preexisting immunocompromised conditions. This is also true of individuals uncertain as to how they’ll cover healthcare expenses without insurance coverage. Life expectancies continue to increase, which means your retirement fund and health must be prepared for longevity.

The silver lining is an early retirement may be possible for individuals who are financially stable and take good care of their physical and mental health. Retiring early can also be beneficial in the long run, helping alleviate stressors leading to burnout and exhaustion. Talk to your financial advisor and doctor to determine if an early retirement is right for you based on your health and well-being.

Don’t decide to retire early without discussing it with your financial advisor first. 

These professionals know what’s best for you and want to help you reach your dream retirement lifestyle. If your retirement plan and financial plan doesn’t add up to an early retirement, it’s best to hold off and continue working for a few more years. Revisit these plans then and see if there’s an opportunity for an early retirement.