Consider the Downsides of Early Retirement
Early retirement can be a great opportunity to spend more time with family, travel, and pursue hobbies, but it’s not without significant drawbacks. At retirement, there is a significant financial adjustment. As a retiree, you shift from contributing to your retirement portfolio to steadily pulling money from your nest egg. The typical retirement age is around 65, and the average life expectancy is 85. According to the Social Security Administration, a quarter of those who reach 65 will live beyond age 90. If you retire at 65, your retirement nest egg will need to cover expenses for at least 20 to 25 years, increasing to 30–35 years if you retire at 55.
Understandably, one of the biggest concerns in retirement is outliving your money. Before considering early retirement, calculate how much will be needed to meet your desired lifestyle, including inflation and unexpected expenses. Keep in mind that early retirement results in a double whammy—you both start drawing from your portfolio and stop saving and contributing sooner.