Do This If You Are Considering Early Retirement

The pandemic’s upending of our routines and the focus on the fragility of life has spurred many of us to rethink our priorities and goals.

A recent survey by Fidelity found that more than 1 in 5 people are considering retiring sooner. Among those who are now more eager to stop working, 80% are under the age of 65.

While I understand the emotional urge behind this, I hope that anyone who is in this mindset slows down and seriously considers if earlier is indeed better.

While the pandemic reminded all of us that tomorrow is not guaranteed, I need to point out that someone who is 65 today has a 50% probability of still being very much alive into their mid and late 80s.

So let me ask you: If you retire at 60 or 62, are you confident you have the financial footing to enjoy what could be a 25 to 30 year retirement? Yes, there is a chance you will die much sooner. But there is also the risk you will live a very long time. I want those years to be wonderful, not stressful.

Are you thinking of starting to collect your Social Security benefit before age 70? Or before you reach your Full Retirement Age (somewhere between 66 and 67). If you do either, you are locking in a permanent reduction in your benefit. If you are in good health, the goal should be to delay collecting Social Security so you can collect a bigger benefit. If you can’t manage to wait because you want to retire early, I am here to tell you that working longer is probably the smarter move right now.

And please, please, please be sure to carefully think through your health insurance options if you retire before you are eligible for Medicare at age 65. If you will need to purchase individual health insurance, be sure to research the cost and coverage of an Affordable Care Act (ACA) healthcare plan before you retire. (Go to healthcare.gov to get started.) If you qualify for premium assistance, that’s going to be a great help. But what’s the annual deductible? And the maximum out-of-pocket (OOP) costs for any plan you are considering? The maximum OOP can be thousands of dollars a year with ACA plans. Do you have that much set aside, without depleting your emergency savings?

I am all for rethinking what matters most to you in life. If the pandemic has triggered that process, all I ask is that you consider the financial comfort you will have if you retire earlier. You know me well: money is not the end goal. But nor can it be cast aside. It is the means by which you can live the life you so deserve. All I ask is that you carefully consider if an earlier retirement will leave you financially vulnerable. You don’t deserve that.