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Retiring Early - Finding the Right Path for You

Why work when you can travel, play, sleep in, and …

Umm …

Sleep some more?

That’s both the promise and the dilemma of early retirement. People focused on early retirement tend to spend minimally and save and invest maximally in order to turbocharge their retirement timelines, trying to retire much earlier than the "traditional" retirement age of 65.

Living within your means and avoiding too much debt are admirable goals that can, indeed, lead to financial independence. However, many 65 year olds struggle to fill their time during a traditional 20 or 30-year retirement. It’s going to be really challenging to make a 40 or 50-year retirement fulfilling, especially for folks who think retirement is just about having enough money to stop working.

Are you living your best life?

Early retirement enthusiasts often wear their spartan spending like a badge of honor. It’s common to see social media posts about the joys of eating microwave ramen every night and cancelling cable TV in the pursuit of a higher savings rate.   

Older folks who want to retire early might not be quite so extreme ... or at least, they might not THINK they’re that extreme.

A person who’s so focused on paying off a fixed-rate mortgage that he never takes his family on a vacation might consider himself frugal, not stingy. But responsible financial planning isn’t about sacrificing your present quality of life so that you’re comfortable later. It’s about living the best life possible with the money you have, always. If you neglect your health, your relationships, and your hobbies now, a long retirement might not be long enough to make up for lost time. Don't make your life miserable now to move up your retirement deadline by a few years.

Why are you retiring?

A common motivation for early retirement is dissatisfaction with work. Endless vacation time certainly sounds appealing when you’re staring at another week of deadlines, long meetings, and cranky customers.

But new retirees of any age often find that their empty calendar is harder to fill than they’d imagined. This can be even harder for early retirees whose friends and family members are on a more traditional retirement timeline. Are you going to travel by yourself? Play golf solo? Putter around the house driving your spouse up the wall?

Very few people love everything about their jobs. But if you don’t derive a sense of meaning from what you do, you’re not going to find meaning doing nothing in retirement.

Exploring more fulfilling career options is almost always a better plan for your emotional and financial health than abandoning work altogether. Work provides us with purpose, connection to other people, and structure. Oftentimes, retirees will suffer from depression and cognitive decline if they haven't spent enough time planning out what they want their life to look like after retirement. On the other side, many of today’s most successful "retirees" volunteer or work part-time jobs at companies and non-profits that they love. Others start their own companies. 

When you look at retirement, ask yourself: What am I retiring TO? not What am I retiring FROM? You should be building the life you want before quitting work completely. 

Retirement can be expensive

As medicine, nutrition, and technology improve, life expectancy will continue to go up. That means a person who retires at 65 is, most likely, going to live longer in retirement than previous generations of retirees did.

Don't underestimate the price tag associated with retiring well before 65, even if you do manage to pay off major debts like home and auto loans. “Doing nothing” still costs something, especially if you’re planning a life of travel and leisure. Fancy restaurants and plane tickets add up when you’re not depositing a paycheck every month.

Health care is maybe the biggest concern with early retirement plans. Some of these folks are going to spend out of pocket on insurance and medical expenses for a decade or more before they’re eligible for Medicare. Will they have enough left for the end of their retirement, when they might need to pay for assisted living? What about end-of-life legal costs, such as estate planning and health care directives? There are options like Health Savings Accounts that can help you reach your early retirement goals, but you should be setting up your plans long before you decide to quit working completely.

Don't retire too late

On the flip side, many people stay in their jobs far too long out of inertia. Maybe you've never thought about when you should retire, or maybe you are unsure about your financial security, asking yourself "Will I have enough to retire?" If you plan on working part time in retirement, this can shift your whole timeline - you may be able to retire 5, 10, or 15 years earlier than "traditional" retirement age. That's where we come in, to make sure that your early retirement plan is sound and that you are on track for the life you want.

Early retirement is definitely a viable goal, if you’re retiring for the right reasons. We believe that this is the most meaningful part of our work as financial planners: to help you build a firm foundation that will make every stage of your life as fulfilling as it can be.