Early Retirement vs. Normal Retirement? In this article we will discuss the key differences, pros, and cons to help you decide which path aligns you should consider!
Understanding Early Retirement
Early retirement involves some form of leaving the workforce before a traditional retirement age, which is often around 65. What makes age 65 a traditional time to retire is typically the combination of Medicare eligibility and being able to initiate Social Security benefits.
By choosing early retirement, you are prioritizing financial freedom and lifestyle flexibility, aiming to enjoy your retirement while you are still relatively young and healthy.
Understanding Normal/Traditional Retirement
Traditional retirement typically means leaving the workforce around age 65. This retirement age is often associated with eligibility for Social Security benefits and Medicare coverage.
If you decide to retire at age 65 or later, you may be motivated by the cost of purchasing independent health insurance prior to being eligible for Medicare. You might also need more time to continue to accumulating your retirement savings.
Financial Considerations
Early Retirement
Early retirement requires careful financial planning to ensure that your investment savings can support a potentially longer period of time. You will need a game plan to provide income and insurance before Social Security and Medicare enrollment begins.
You will need a plan to access income given the tax penalties that exist with your tax deferred retirement accounts prior to age 55 and age 59.5. You will also want to figure out impact of retiring early on your projected monthly benefits from the Social Security Administration.
Traditional Retirement
With traditional retirement, your full retirement age with Social Security is typically between 66 and 67 based on the year you were born. Full retirement age is the point in time where your monthly benefits aren’t reduced. You won’t receive a Social Security penalty for earning too much employment income while drawing benefits.
Delaying your Social Security benefits beyond your full retirement age can provide delayed retirement credits, increasing what you receive in monthly income.
Medicare benefits also become available at age 65, give you access to affordable health insurance coverage.
Health and Well-Being
Early Retirement
Early retirement means that you have the potential to enjoy better health and vitality, allowing you to be active and travel. Some important factors to consider before you make the decision to retire early include:
- Planning for health insurance benefits prior to Medicare
- Needing to create income for a longer retirement without running out of money
- Potential long-term care needs later in life
Traditional Retirement
Health challenges tend to crop up as we get older. The longer you wait to retire, the more likely you will be dealing with adverse health conditions when work ends. Some important factors to consider before you make the decision to retire at a traditional age include:
- Having a plan to incorporate a healthy lifestyle including regular exercise and a solid diet
- Planning for extra medical costs and regular healthcare check-ins
- Potential lifestyle limitations by starting retirement at an older age
Work and Career Implications
Early Retirement
Early retirement can offer you the opportunity to escape the daily grind and explore new interests or start a second career. The easy part of retirement planning is dreaming about leaving your current job. The tricky part is figuring out how to find fulfillment and meaning when work ends.
Consider exploring post-retirement employment opportunities or volunteer work before you make the decision to retire. This may provide you with a greater sense of purpose and fulfillment when the time comes.
Traditional Retirement
The advantage of a traditional retirement scenario is that you get to spend more years connecting with your co-workers socially and more time to find meaning in your work. The sudden shift from daily work to independence can be mentally challenging.
Consider exploring continuing education, pursuing hobbies, and staying active in the community to help you maintain a fulfilling lifestyle in retirement.
Retirement Is Unique For Everyone
Ultimately, the decision to retire early or at a traditional age is personal and depends on your resources, goals, and priorities. You may prefer or need the financial security of working until a traditional retirement age, or you might crave the adventure of striving for an early retirement.
Regardless of your chosen path, proper planning and preparation are essential for success and fulfillment.
What Type of Retirement Is Right for You?
Whether you dream of retiring early to pursue your dream lifestyle or envision a more traditional retirement filled with leisure and relaxation, proper planning is essential.
Consulting with a financial advisor, tax professional to help you make the best decision and create a retirement plan that meets your goals.
Discover How You Can Retire When You Want to with Stage Ready Financial Planning
FAQs
Is it better to retire early or wait?
The answer really depends on your financial resources, your health, and your personal goals. Early retirement can offer freedom and flexibility but requires careful planning to ensure that you have long-term financial security.
Consulting with a financial advisor or financial planner can help you assess your retirement readiness and explore your options.
What is the best age to start retirement?
There is no one-size-fits-all approach to retirement. Factors such as financial readiness, your health, and your goals should be considered when determining your optimal retirement age.
Working with a financial planner can help you create a retirement plan that aligns with your goals and priorities.
How much money will I lose if I retire at 62 instead of 65?
Taking Social Security benefits prior to your full retirement age will result in a reduced Social Security benefit, as benefits are based on the age at which you begin receiving them.
Consult with a financial advisor or financial planner to help you understand your options and develop strategies to maximize your retirement income.
At what age do most people retire?
The average retirement age varies depending on factors including profession, health, and financial status. Some people retire in their late 50s or early 60s, while others may continue working into their late 60s or beyond.
Making a plan for retirement so that you can determine the best strategy based on your situation.
Are people happier after retirement?
Retirement can provide opportunities for relaxation and flexibility but it can also be mentally challenging. If you’ve spent your career identifying personally with your work and socializing with your colleagues, you might find retirement frustrating.
Your happiness in retirement depends on your financial situation, your health, and having a sense of purpose. Plan ahead for how you will find fulfillment and social connection before you retire!