Many people have the dream of retiring early. It is a great dream, I mean who would not want to stop working a good ten, fifteen or more years before your friends? Retirement might not be everything that you think it is though.
Problems With Early Retirement
There are a lot of unexpected problems with early retirement. Things that you should address before you take the plunge.Here are some things to consider when you start planning for that early retirement.
It Requires A Lot Of Planning
The last thing that you would want to do is retire at 50 only to have to start working again at 65. Retiring early requires a lot of good planning and stability. You need to know that you have enough money and that the money that you do have is secure.
You would not, for example, want to retire at 50 counting on investments you have in the stock market to keep on producing. You need to have enough money to maintain your lifestyle and it needs to be secure. This means no risky investments so you should also not count on your money increasing much after retirement.
If you end up having to go back to work later in life, you would have given up many years of much more profitable income.
Insurance Is Expensive
Once you retire, you leave that wonderful group insurance plan behind and medicare will not kick in until you hit 65.
If you retire at 50, you will need to pay for fifteen years of insurance coverage by yourself. Making things worse, you are going to be in a higher risk category. Higher risks mean much larger premiums.
Premiums rise sharply when you hit 50 and keep going up. By the time you hit 50, you will be paying twice of what a 20 year old would pay. Hit 60 and that rate will more than triple.
Currently, you could expect to pay 600 dollars a month or more for health insurance as you get older. And that is for a policy that would be nowhere near as comprehensive as your old group plan.
At $600 a month, your cost of insurance would be $7200 a year or $108,000 in a 15 year period. Have you accounted for this?
You Will Get Bored
You might be tired of working but have you thought of the alternative? For the first few months, it will probably seem like a dream but after that it can get bit boring. Even travel will get boring after some time.
Think about it, you have been in your career for probably 30 years, maybe more. All of that time you had a purpose and a drive. Good or bad, much of your sense of identity has been wrapped up in your career.
Once you retire, all of that is gone. This is a reason that so many people tend to deteriorate a bit mentally after retirement. You stop challenging your brain and functions just start going away.
You Will Not Live As Well
Less years spent savings will mean less money that you can spend on yourself. If you retire early, you might be able to support yourself but you might not be able to pamper yourself as much.
Would you like to travel extensively and when you do, would you like to go first class? A few more years working can help you do that.
You Sacrifice The Now
In order to save for early retirement, you might have to significantly sacrifice the here and now. It is healthy to save but you might have to go to extremes to secure that super early retirement. You will find yourself questioning every simple 200 dollar purchase and doing without a great deal. Is it worth making yourself suffer for twenty years in order to retire five years early?
An Alternative To Early Retirement
Instead of early retirement perhaps a better thing to work for would be semi retirement.
Once you have a sufficient savings in place, you have the perfect environment to literally choose whatever job you want to do. You have the time to get training and the money to pay for it. In addition, switching to a job that you like solves a lot of the problems of early retirement.
- It provides additional income.
You will not have to choose a job based on pay anymore but any extra income that comes in is always a bonus. The extra money could be a nice little buffer that keeps you financially secure.
- It provides insurance.
Do not underestimate the value of the group plan. Employer subsidized health care will give you better benefits at a fraction of the cost of insurance that you could get yourself.
- It is relief from boredom.
Switching careers can give you relief from boredom and because you will be in a job that you like, you might just love going in to work each day.
- It gives you a better quality of life.
Obviously, if you have more money, even a little bit, you can afford to live a better life. Having money coming in can also give you the security to open up the wallet and treat yourself.
- It will allow you to live now.
Knowing that you will still have some money being earned int eh future can help you live in the here and now a little better.
Tina’s Last Word
Early retirement is a great goal but it is one that usually ends u not being what you imagined.
Planning instead on a career shift later in life can be much more rewarding. Instead of dreaming of doing nothing, dream of doing some work that you really like.