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Should I Speak to My Retirement Advisor About Retiring Early: What Are the Pros and Cons?

The economy throughout the course of the pandemic has been a rollercoaster. During three months of COVID-19, the unemployment rate in the U.S. grew more than it did in two years of the Great Recession.1

For individuals nearing retirement, economic uncertainty is all the more unsettling. It raises the question: should you consider retiring earlier than you originally planned? Before making a decision, be aware of the special considerations that retiring early entails. 

Considerations of Retiring Early 

Retirement requires lifelong planning, in addition to adequate preparation in the years preceding your eventual retirement. If you’re thinking about pushing up your planned retirement even earlier, there are certain questions you need to ask. 

With the pandemic still not showing any signs of slowly down, the economy is continuing to take a hit. Not only are individuals, especially the elderly, still feeling the effects of the shutdowns. Now adding inflation to the mix, it can be unsettling. For those who are nearing retirement, economic uncertainty can cause them to worry if they should retire when originally planned or if it would be beneficial for them to retire early. Many of them are unaware of what early retirement entails as well as choosing not to work with a professional financial advisor to help guide them.

Retiring early has its pros and cons, just like with everything else. A knowledgeable retirement advisor would be the best asset to help you learn about the pros and cons of retiring early as well as communicating if early retirement would benefit you. Sage Investment Advisers LLC, located in Poughkeepsie, NY, meets with each client and reviews their individual financial situation to determine if early retirement is the right strategy.

Considerations of Retiring Early 

Retirement requires lifelong planning, in addition to adequate preparation in the years preceding your eventual retirement. If you’re thinking about pushing up your planned retirement even earlier, there are certain questions you need to ask. 

Consideration #1: Retirement Savings & Investments 

The foremost thing to consider is your retirement savings. Are you in a good place financially to retire, especially considering that you’re losing extra time to save and will need to stretch your savings over a longer period of time? The last thing you want is to retire early without adequate savings, forcing you to sacrifice the quality of your retirement.

Additionally, how are your investments looking? As you near retirement, it’s likely that you’ll need to adjust your assets to be more conservative. If you’ve already made these adjustments in preparation for retirement, you’re likely in a good spot. If you’re still investing more aggressively with more short-term losses due to the recession, you may want to reconsider. 

Consideration #2: Health Insurance 

If you’re looking at retiring before 65, there’s a chance you’ll need to acquire health insurance before you’re covered by Medicare. As you age, health insurance gets more and more expensive. This means you’ll need to factor this in as an extra expense to determine if you can afford to retire early. 

Consideration #3: Social Security 

Social Security benefits are available to you as early as 62 years old, but don’t let that fool you. If you start collecting benefits before your full retirement age, determined by your year of birth, your benefits will be smaller.2 If your early retirement plans also include collecting Social Security, this is another financial consideration to acknowledge. 

Consideration #4: Post-Retirement Plans 

Do you want to retire early only because you’re overwhelmed by the current state of affairs? While this certainly isn’t a trivial reason, it’s important to evaluate whether or not you’re actually ready to retire.

Do you have a plan for what you want to do with your retirement, and are you ready to get started on it? Are you ready to actually finalize your career, or is there a possibility you’ll quickly bore of your early retirement? 

Perks of Retiring Early

If you’ve considered all of the above and find yourself certain about your early retirement, there are a few perks. It could reduce your stress levels from work, giving you more time to explore recreational hobbies. You can spend more time with your family and spend more time traveling, or you can even get a head start a new business venture you’ve been looking forward to.

Early retirement is not as simple as many think it is. There are a number of factors that can either be advantages or disadvantages, such as not having enough retirement funds to support your intended retirement lifestyle; a retirement planner will determine if you have the ability to save enough in a specific period of time. An experienced and knowledgeable retirement planner will also analyze your current financial situation to advise you if early retirement will benefit you or if you should wait.  

  Published by Sage Investment Advisers, LLC in Poughkeepsie, NY 

  1. https://www.pewresearch.org/fact-tank/2020/06/11/unemployment-rose-higher-in-three-months-of-covid-19-than-it-did-in-two-years-of-the-great-recession/
  2. https://www.ssa.gov/benefits/retirement/planner/agereduction.html

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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