The early bird gets the worm — advice that might seem pointless to early retirees (unless they plan to go fishing). But they do get more time to enjoy hobbies, travel, or any other activity they didn’t have time for while working.
Here’s a closer look at that reason — and two others — to consider retiring early. See if any of them make sense for you.
1. You only live once
It may be a trite saying — appearing on hats and T-shirts as YOLO — but that doesn’t make it any less true. Working as long as possible can leave you with a relatively short retirement, which can be good if you’re woefully behind in your retirement savings or if you simply love to work. But it’s not what many of us would like.
Check out this life expectancy information from the Social Security Administration:
- A 65-year-old man can expect to live, on average, to 84.
- A 65-year-old woman can expect to live to 86 1/2.
While it’s good news to know that you have a 50/50 chance to reach 84 and beyond, remember that those are averages, meaning that about half of men won’t reach 84, and more than half of women won’t hit 87. So it’s worth trying to make the most of the time you have.
Retiring while you’re still relatively young means you’ll likely be able to enjoy a more active lifestyle for some years. It will probably be easier to travel, to take up tennis or golf, and to garden. And better still, if you’re active in retirement, it can help you stay in better health, keeping healthcare costs lower and your mood higher.
2. You can afford to
Of course, it’s easy to imagine how nice an early retirement would be, but can you actually afford it? Many people can’t, but maybe you can!
Spend a little time estimating how much income you’ll need in retirement. Then use that number to figure out how much you have to save by retirement. Here’s how you might do it: If you figure you’ll need $65,000 annually in retirement, you might see that you will have $25,000 coming to you from Social Security, so you’ll need to come up with the difference: $40,000. Using the 4% rule as a rough guide, multiply that by 25 (the inverse of 4%) and you’ll arrive at a required nest egg of $1 million. Do you have that much now? You probably don’t, but you might be able to amass that sum sooner than you think. Here’s how regular investments can grow:
| Growing at 8% for | $10,000 invested annually | $15,000 invested annually | $20,000 invested annually |
|---|---|---|---|
| 5 years | $63,359 | $95,039 | $126,718 |
| 10 years | $156,455 | $234,683 | $312,910 |
| 15 years | $293,243 | $439,865 | $586,486 |
| 20 years | $494,229 | $741,344 | $988,458 |
| 25 years | $789,544 | $1,184,316 | $1,579,088 |
| 30 years | $1,223,459 | $1,835,189 | $2,446,918 |
Give some thought to how much you’ve already saved, how much more you might accumulate, and when it will be enough to generate sufficient income to support you in retirement.
3. You want to do different work
If you dislike your current job or are burned out by it, there are lots of other ways you could earn money. They may or may not pay as much, but they could offer greater satisfaction and less stress.
Living with less stress is reason enough to consider retiring early and figuring out whether you can make that work. Stress has been found to hurt our health and even shorten our lives. If you can retire early from your current job, you can still work a little or a lot at a different job. That’s not a bad way to start your retirement — many retirees are restless or unhappy when jobless, as they suddenly have no structure to their lives and have lost the regular socializing they engaged in at work.
There are myriad ways to make extra money. About 25% of Americans are already engaging in a side business, and those businesses can become great primary occupations in retirement. For example, you might tutor kids, knit and sell sweaters, sell photographs, or become a petsitter.
Plenty of people simply can’t, or shouldn’t, retire early. But after a careful consideration of your finances — perhaps along with consulting a financial adviser — you might find that you can indeed leave your job early.
