5 Reasons why early retirement is not a sensible decision for you

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By: tiarajoseph11
on 23rd Jun,2015

According to the facts, it is clearly seen that a part of our society is really interested for early retirement.
5 Reasons why early retirement is not a sensible decision for you


According to the facts, it is clearly seen that a part of our society is really interested for early retirement. Most of the time people consider “early retirement” just to have some benefits in advance. Getting full pension, (401)k plan, tax benefits, traditional pension plans are among those lucrative things which a retired person can avail. People working in federal occupations like military, police or firefighting department may don't need early retirement as they are already having full pension and additional benefits.

So, practically a normal person must need to work for another couple of years to gather enough money for a comfortable retirement. By having this idea, you might find retirement at the age of 62 is quite early. You might want to work a decade more. For this, you'll need to prepare your body and mind to carry out the responsibilities and workload when you are 62.

But still, if the idea of early retirement is coming in your daydreams, check out the practical reasons why you must think thrice not to avail this plan.

1. Not enough savings

It is possible that you have started your career late and just need more time to settle with your family. It can be possible that you are now closing in to your retirement while you still don't have enough saving to maintain your future life, your family, your child's education etc.

Think again, you might encounter hardships while paying your parent's medical bills or paying down the credit cards as well as monthly mortgage installments. It will be very hard to maintain your living standard with so many costs on your head. So, you should elongate your working period to a certain level to balance your savings with your future expenses.

2. Social Security benefits

You must know that if you are retiring at 62, you'll not be getting the optimum benefits which you might have entitled for. If you retire at 66 or 67, you'll be getting 32% more than what you will be getting at 62. If you can wait till your 70's, it could earn you 50% more than what you would get at 62.

Besides, taking early retirement will affect the dollar value of the social security benefits. Your Social Security statement will be taken into consideration while determining the amount of your benefits. That amount will depend on the 35 highest-earning years of your work life. So, if you decide to leave your work earlier or at 62, your benefit amount might be changed. Generally, our income rises gradually through the course of the working years. So, last years will be the top earning period of your entire work-cycle. If you do not work in those years, you'll get low as usual. This also applicable on some instances when you had your break from work. It's better to have a chat with the Social Security Administration for a detailed analysis of your case.

3. Spouse's benefits

Suppose you are the highest earning member of your family where your wife is also self sufficient. If in case, you die before your spouse, he or she will be entitled for Social Security benefits for the rest of life. This benefit will come into effect after your 60's, unless your child is under 16 or your spouse is disabled.

So, if you retire early and start availing your benefits, your spouse will be getting much less than what he or she would have later.

4. Your requirements and wish-list

Till now, it is proved that the more you will sacrifice today, the bigger your reward will be in retirement years. You can live your life with all your dreams, if you increase the amount of your retirement benefits. Staying longer in workforce, can be very helpful to increase your 401(k) savings. The more your (401)k grows, your future retirement days will be more peaceful.

But, if you choose to retire early, the amount you'll be getting will not be sufficient to manage all expenses. So, if you need to use funds from your 401(k) before your actual retirement age, be prepared for getting huge tax penalties. Retired individuals are bound to get medicare. As you are retiring early, you'll not get this facility easily before time. So, instead of medicare you'll have to buy COBRA insurance which is not cheap at all.

5. It's hard to change your mind

It won't be easy to leave your workforce once and rejoin it later. When you are in your 50's, it would be very difficult to find a new job according to your need. In last year December, it has been declared by the federal Department of Labor that average job seekers who are aged 55 and over can only be eligible for a new job. But, only if they were unemployed for maximum last eight weeks. So, whether you left your job, retired early or you have been fired from your duties, chances of getting a new income source is quite tough.

Finally, it is clearly seen the taking an early retirement will cost you a lot. So, before taking any serious decision about this problem, you must take advice from experts and do whatever is needed.

Check out some retirement mistakes you must avoid so as to have a peaceful retired life.

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