Retirement is often depicted as the ultimate career achievement, the perfect opportunity for relaxation and enjoyment. You’ve probably envisioned an elderly couple leisurely sitting on their porch, sipping sweet tea. Maybe the image involves golfing or social luncheons. Simply put, it’s the epitome of ease.
Retirement is the finale of the American Dream many people strive for after a lengthy and fruitful career. It’s seen as the time to indulge in hobbies, travel to previously unvisited places, or even devote oneself to volunteer work. However, the reality is that not everyone can afford to retire, and for those who can, the age at which they do so is critical. Here are six reasons you might want to consider not retiring too early.
1. A GAP IN INSURANCE
Healthcare costs are ever-increasing, ranging from medications to specific treatments and even regular doctor check-ups. Without the support from an insurance company, you might end up spending a significant amount from your own pockets. When you’re employed, the company provides insurance, but post-retirement, Medicaid is generally the primary source of insurance, which only becomes available at the age of 65. If you retire earlier, you might have to bear steep health insurance premiums.
2. THE OPPORTUNITY TO SAVE MORE
Retiring early may be tempting, especially if you start saving for it at a young age. However, by retiring before time, you would lose a considerable amount of compound interest. The required savings each year before retirement would be exorbitantly high to afford an early retirement.
3. LESS TIME TO CLEAR DEBTS
Debts like student loans, mortgages, or a car loan often take substantial years to repay. An early retirement means living on a fixed income, with these debts creating financial stress and possibly draining your retirement fund.
4. POTENTIAL REDUCTION IN SOCIAL SECURITY BENEFITS
Social security is determined by one’s earnings during their top-earning 35 years. Therefore, claiming it prematurely could lead to reduced benefits affecting your future financial stability.
5. RISK OF BOREDOM
Jobs often give individuals a purpose. Suddenly stopping work after decades can be jarring. Initially, the extra leisure time might seem exciting but after a while, without a routine, boredom might set in, leading to a potential decline in mental health.
6. PENALTIES FOR EARLY ACCESS
Investment portfolios like your IRAs and 401(k) are excellent for retirement savings. However, withdrawing prior to the designated age of 59.5 involves a penalty fee of 10%.
Retirement sounds alluring, especially after a career spanning decades. But, retiring too early can come with significant hurdles. Hence, consider these negatives carefully before deciding to leave the workforce respectively. When are you planning to retire? Despite these issues, would you consider an early retirement?
