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.
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.
With everything going on, it’s tempting just to go ahead and retire early if you’re nearing the age. However, there are more factors to consider than you may realize. Genuinely reflect on your motivations for wanting to retire in order to make the most informed decision possible.
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