A Small Part of The Article for The Introduction of "Early Retirement: Retirement Planning Roadmap for You: 26 Things You Need to Achieve" (ebook)
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Early Retirement: Retirement Planning Roadmap for you: 26 Things you Need to Achieve
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Index
Why you should reconsider retiring early.......2
1. The Risk of outliving your savings......7
2. Less social security.......10
3. Health care.......12
4. Lower standard of living.........15
5. Difficulty re-entering the workforce.........17
6. Boredom.......20
2. The 9 Scariest Things About Retiring Early (Things You Must Know)....22
7. Health Insurance is expensive......25
8. You sacrifice the power of compounding interest...28
9. You'll have to make your savings last longer...31
10.You'll spend more money than you think.......33
11. Housing expenses don't go away Another thing...35
12. Part-time work can be a challenge.....37
13. Do you have a plan to pass the time?.....40
14. You may need to make new friends.........43
15. Retirement can be tough on couples Lastly.........45
2. 10 Money Goals You Must Achieve Before You Retire....48
16. Take Stock of Your Assets & Liabilities While.....49
17. Set Your Retirement Budget...............52
18. Crunch the Numbers............................55
19. Understand Your Social Security Benefits....57
20. Keep adding to retirement savings........60
21. Review Your Estate Plan...............62
22. Evaluate Your Health Before Retirement....65
23. Consider Your Housing Needs Before........67
24. Schedule Your Retirement with Your Partner......69
25. Map Out Your Travel Plans Early Lastly.......72
26. Start Investing for Retirement (NOT Saving) to Avoid THIS!......76
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Why you should reconsider retiring early
As soon as they hit the job market, many people start thinking and desire early retirement. Probably some time in their forties and fifties, but early retirement might not be as fulfilling as you’d think. As much as many people retire because they want to pursue their interests, some do it for completely different reasons. Some people don’t have a choice, and older workers are often the first to receive their layoff notices. They generally have more seniority and get paid more, so it’s an effective way for companies to cut costs.
Related: Is Early Retirement Right for You? Weighing the Pros and Cons
As you age, finding another job with comparable compensation also gets more difficult. Older workers spend more time unemployed and it’s much harder for them to bounce back from a layoff as compared to young workers. If you’re close to retirement, retiring early becomes tempting instead of having to go through a whole stream of unsuccessful interviews. Some people want to pursue their interests. Many of us have dreams and goals that can’t be satisfied while holding down a full-time job.
You might want to try self-employment and start a business, travel more. Retiring leaves a lot of free time to focus on your passion. When we’re still young and energetic, we tend to think we’ll stay healthy forever. But we find out eventually, that isn’t the case. Many workers retire early due to health complications. A sedentary job can contribute to several long-term illnesses like diabetes and heart disease and for these health complications, many workers retire early. Many people also leave their careers early to care for their loved ones.
As we get older, our parents need more help. Some chronic health issues require a lot of support, and hiring full-time help may not be feasible. Our spouses or children could develop health issues as well. Some people feel it is wise to leave the workforce to care for a loved one instead of paying someone else to do it.
Quite a number are unsatisfied with their jobs. If you feel this way and can’t tolerate it anymore, then it might be time to retire. If the main motivation for retiring is to get away from a toxic work environment, then retirement can be difficult. A better alternative would be to find a more satisfying career, and then retire when you’re ready. This will give you time to figure out how to have a satisfying retirement. So, as you probably know, early retirement is a common ambition among today’s workforce, but few are prepared for it. Thanks to the popularity of FIRE, an acronym that stands for (Financial Independence Retire Early), many people are choosing to leave the workforce well before their sixties.
FIRE is a movement devoted to a program of extreme savings and investment that aims to allow them to retire far earlier than traditional budgets and retirement plans would allow. By dedicating a majority of their income to savings, followers of the FIRE movement hope to be able to quit their jobs and live solely off small withdrawals from their portfolios before they reach the typical retirement age of sixty-five. As good as this all feels, it isn’t a guaranteed thing. And for that reason, I’ll be discussing some of the reasons you should reconsider your decision to retire early.
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1. The Risk of outliving your savings
Running out of money in retirement implies someone has tapped all their retirement savings and home equity. This is usually one of the biggest fears people have after they retire. The average lifespan in the US in 2020 is just shy of eighty years. So if you retire in your fifties or earlier, your savings may need to last for more than three decades. The impact on your savings and their earning potential may be the biggest reason to keep working. If you retire at fifty-five instead of sixty-five, for example, your savings have to support you for an extra
ten years and you lower your income potential as soon as you start taking withdrawals. Each time you pull money from your savings, you’re reducing the amount of invested funds that are growing and generating income for you. Because you’ve spent many years accumulating your retirement nest egg and when you do retire, you will need a strategy for withdrawing from that nest egg. Even if you knew for sure how long your retirement will last, it’s still likely that you don’t have enough money to make it through. If you retire too early and start drawing down on your savings, you face the possibility of running out of money sooner than you thought.
2. Less social security
income Americans can rely on at least one source of guaranteed income in their later years, - social security. About ninety percent of American retirees receive Social Security benefits, which often serve as a stopgap to elder indigence. As a matter of fact, Social Security lifts more Americans above the poverty line than any other program, according to the Center on Budget and Policy Priorities. The earlier you retire the thinner your checks will be. The Social Security admin reduces the percentage of monthly payments to early retirees since checks will be issued for a longer period. The best way to get the most out of social security
is to retire at your full retirement age, not before. And if you’re wondering how much you’ll get from social security, you can always use a social security calculator. It estimates how much you’ll earn depending on your annual income, the year you were born, and when you choose to start receiving benefits. The calculations for benefits come from your highest thirty-five years of earnings. If you retire too early, you’ll receive less social security. That’s one of the downsides of early retirement. By retiring early you also miss out on the chance to claim delayed retirement credits.
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3. Health care
It’s so easy to assume that we’ll stay young and healthy forever, but sadly this isn’t true. Many seniors rely on Medicare for their healthcare needs. If you have employer-based insurance that disappears when you hand in your two weeks’ notice the costs of healthcare are expected to rise and retiring early means you have to make do until Medicare kicks in.
Those who retire early are more likely to be both physically and mentally unwell than those who extend their earning years. Without an employer to foot part of your bill, your out-of-pocket healthcare costs will increase substantially, particularly if you retire before Medicare eligibility at sixty-five.
Not all employers offer retirees benefits, but it’s worth asking about if you’re set on early retirement. You could also purchase a healthcare plan through the health insurance marketplace, but it will be much more expensive without your employer pitching in to pay part of the cost.
If you retire early you’ll need to find health insurance from another source. If your spouse still works he or she may have a plan that will cover you. Otherwise, you may have to purchase a policy through the health insurance marketplace, which could lead to much higher premiums and out-of-pocket costs than you had to pay during your working years.
4. Lower standard of living
You may be eager to walk away from your overbearing boss, but your work-free life will have a new set of challenges. More than two-thirds of retirees say they have a lower standard of living compared to their working years, according to a survey. And unless you win the lottery, the earlier you retire, the simpler your life will be. Strict adherence to your retirement budget can be stressful, maybe
more so than your former work responsibilities. And future expenses are hard to predict. But the closer you are to retirement, the better idea you probably have for how much money you’ll need to sustain your current standard of living or support a different one. If you use this as a base, take out any expenses you expect will go away after you retire and add in new ones. This will give you a rough figure to work with.
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5. Difficulty re-entering the workforce
It’s not unheard of for someone to retire from the workforce and then start looking for another job a year later. A common reason for returning to work after retirement is usually a lack of financial security. Many retirees have a hard time making the transition from the daily routines of a full-time job to the unstructured life of retirement. You begin to miss your former colleagues and feel like getting back. But sadly getting back to the workforce isn’t as easy once you’ve left. One survey, in particular, revealed that more than forty percent of people who return to work after
early retirement cited boredom as one of the reasons why they unretired. Having an extra forty hours free every week may sound amazing, but you might think otherwise very quickly when on a tight budget. Returning to the workforce is not for everyone. Many seniors are perfectly happy in retirement doing the things they couldn’t do while working. But some have no other choice but to go back out of financial necessity. If you’re someone who’s thinking of returning to the workforce, it will be both challenging and rewarding, and if you’re lucky you might get an employer who considers your age and experience a great asset.
6. Boredom
Retirement can be challenging because it leaves us with a lot of time on our hands. While the original thought is you’ll have the time to do whatever you want, things don’t turn out as planned, and doing nothing all day gets boring fast. Give a lot of thought to what you want to do with your time and money. If you have expensive hobbies, think about those extra costs when planning. If you want to travel, decide whether to maintain a home or choose to rent, so you won’t be tied down.
The lifestyle change after retirement makes it tough for retirees to come to terms with their new lifestyle. Many people see retirement as a great gift for their many years of work and service. However, things often turn out to be quite different when the time to retire finally comes. Losing their once daily routine, friends, family contact and their contribution to society begins to take a toll on their health.
So, if you’re lucky enough to have control over when you retire, it’s worth thinking about the pros and cons before making up your mind. You might not want to retire early even if you could afford to. Deciding when to retire isn’t just about the money. You also have to factor in your family, your health, and your temperament. The important thing is that you’ve thought through what you plan to do with your retirement years, however many they may be.
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