Some people may have retired when they become eligible for the age pension, while others do so once they can access their super. While some retire soon—or sooner than preservation age—and dream of just living and sitting all day at home. There are, however, several factors that come into play when we think of early retirement. Is it worth it?
Aged Care Weekly provides insights on it to help you decide whether you think it’s worth taking or not.
Is retiring early a good idea?
There are financial reasons not to step down too soon, particularly when you consider the gap years between when you leave work and when you get full Social Security benefits and Medicare at year 67. So why would it be worth the money trouble?
Pros and cons of early retirement
There’s always going to be pros and cons when making decisions, especially a big one like a retirement. Here are the pros and cons if you resign too soon, that should help you decide.
Some Pros of Retiring Early
- It could be good for your health.
With all the free time you now have, you can sleep late, get fresh air, and no longer slouch at your desk.
- You’ll enjoy more time to travel.
You’ll get to travel more once you’re no longer limited to the two weeks a year vacation.
- You’ll have more time with your family.
This is a big reason why people choose to resign soon. You have more time with family and friends.
Some Cons of Retiring Early
- Your Social Security benefits will be smaller.
If you take Social Security too soon, your benefits are lower. If you take services at age 62, your monthly benefits will be 30%.
- What you save will have to last way longer.
If you retire at 62 and live to reach 90, your retirement money and other savings will have to cover you for 28 years. If you leave work at 70 and live until 90, however, your bank account savings will only have to stretch for 20 years. The earlier you retire, the more money you’ll need over time.
- You’ll need to find health insurance.
In Australia, you are only eligible for Medicare starting year 67, so you’ll have to pay for your health insurance until then.
Lies about early retirement
There are many myths and lies about retirement, and it could discourage you. However, these are only lies, and this is a list of them to help you in your choice to stop working soon.
- When you retire younger, there is more risk running out of money.
While you should always prepare for the worst, this is an irrational fear for one reason: You will do everything you can to make sure that you will go without money.
- You will feel permanently happier.
Being happy isn’t exactly a downside, but being permanently happy is a myth. If you’re looking for long-term happiness, retiring too soon is not the answer. Like most new things in life, the excitement will only be there at first.
How can I retire early?
If you want to be retired in the near future, the following top financial tips and information might help that.
- Have a financial plan
It’s a good idea to have a personal finance roadmap that shows your future income goals, your super, and debts. A comprehensive plan can also help you stay on track, as you can check in to find how much you need and how any significant cost will set you back.
- Increase your savings goal and lower your expenses
You could spend less and save more by accepting the FIRE (Financial Independence, Retire Early) philosophy of living thriftily, saving hard, and investing wisely. It means decreasing your current spending to save for your retirement, so you may be able to enjoy those work-free years better.
- Pay off your home loan
A mortgage is something you don’t want to have in retirement, so you need to prioritise paying it off. Interest from loans will only set you back.
- Build the right investment portfolio
Ensure you’re investing in the right business to build your wealth share. You could consider talking to a consultant to find new investment business strategies for annual passive income and cash flow.
So is it worth it? On a purely financial level, retirement at a young age doesn’t make much sense, as many financial tools work best if you wait until your late 60s. However, once you consider how it can reshape your life and bring profound meaning, it becomes a much more powerful life goal. It depends on whether you think it’s worth your time.