“The question isn’t at what age I want to retire; it’s at what income – George Foreman.” If you are skeptical about early retirement this quote should motivate you.
Early retirement is a mathematics puzzle, where adding the numbers in your favor is critical. With 43% of Millennials expecting to retire before 65, early retirement is likely to be the trendsetter in the coming years.
Retiring a couple of years before the actual age doesn’t sound a daunting task until you use a retirement calculator to understand the money you should stash for retirement.
That said, early retirement is the ticket to long-term happiness because it offers a bouquet of advantages.
This guide talks about six unexpected benefits of early retirement and how it can be a life-changing decision.
Surprise #1: You Live Longer
According to research, people retiring early have a longer life than those retiring late. In the same research, people above 54 years who retired early were 42% less likely to die in the subsequent five years.
Isn’t it great?
For one, by retiring early, you spend more time on health because you no longer worry about the job. When you’re free, you sleep more, visit the doctor regularly, and give importance to exercise. All these events add to a healthier lifestyle leading to a longer life.
Second, work-life can be stressful, but retirement reduces stress, averting the possibility of hypertension – one of the leading causes of death. Another study found that seven years of retirement decreases the chances of getting diseases like diabetes or heart diseases by 20%.
Extra tip: If you plan to retire early for health benefits, start preparing for retirement from a young age. It provides a financial cushion for spending the golden years of life.
Surprise #2: You Save More Retirement Income
Early retirement means you have a shorter time-frame to save and a longer spend period. You need more money to support the extra years of early retirement. It works as a morale booster, and you start saving early. The investment returns will be your best friend for life.
How much is sufficient for your early retirement?
As a rule of thumb, to maintain the current lifestyle, every individual should achieve an income replacement rate of 75% of the preretirement income.
Start by contributing to the Roth IRA, HSA, or 401(k) plan. In Roth IRA, while the money is taxed on deposit, the withdrawals are tax-free, leaving you with more money at retirement. Another lucrative way to save money is by investing in stocks. To achieve the best results, you need a diversified portfolio, which mitigates the risk and elevates the return. If you’re short on time, you can adhere to high-risk, high return fundamental, and invest in low-cost index funds.
Whatever may be the investment method, early retirement motivates you to save more money to spend the best years of your life care-free.
Extra tip: Withdrawing from the 401(k) before the age of 59 ½ attracts penalties. Delaying the withdrawal will help you accrue wealth.
Surprise #3: You can Delay Social Security Benefits
With 97% of older Americans aged 60-89 receiving social security benefits – it’s the financial lifeline for most retirees.
Unlike other retirement funds, these benefits are progressive and increase every year with cost of living. The amount that accumulates over the years can potentially make or break your retirement, making it essential to maximize it.
But, what happens to these benefits on early retirement? Is it necessary to withdraw at the time of retirement? Can you retire early and delay the social security benefits?
Delaying the benefits is possible, and it comes with certain unexpected perks. For every month you delay the benefits post-retirement, the benefits increases by a certain percentage. If you wait till the age of 70, you receive 132% of your full monthly benefits.
96% of American lose $111,000 per household for not delaying social security benefits. If you don’t want to be among these people, delay the benefits and enjoy a greater return on your hard-earned money.
Extra tip: Delaying social security withdrawal elevates your spouse’s financial security benefits.
Surprise #4: You Spend More Time With Family
Does family night or family dinner brighten your dull and hectic day at the office?
You’re probably not the only one!
In the persuasive world of no work-life balance, loneliness creeps in and emotionally separates you from the family. Early retirement comes with a lucrative benefit of spending quality time with your loved ones.
After retirement, you don’t have the stress to clock 40 or 50 hours a week. You can simply place the otherwise non-stop ringing cell phone in silent mode and never fret over missing the boss’s call.
Retiring a few years early than average gives you the privilege to reconnect the lost bond with your spouse and give attention to your kids.You have all the time in the world for a leisure lunch or a hike to your favorite place. Use this virtually unlimited time to tick all the items in your to-do-list. Furthermore, household chores, which were usually shifted to weekends, can be done during the weekday.
With Americans aged 60 years and above spending seven hours a day in leisure activities and three hours on chores and errands, retiring early provides an opportunity to make memories with your family members.
Apart from these benefits, it encourages communication within the family, develops positive behavior, strengthens family bonds, and mitigates the risk of the behavioral problem in children and adults.
Extra tip: Use early retirement to change your house dynamics and spend quality time with your spouse and kids. Always remember the polish proverb, “You have a lifetime to earn, but children are young only once.”
Surprise #5: You Spend Less
No one wants to retire with significant expenses like mortgages or student loans, which creates a financial burden on retirement life. Once you have paid these, you have more money to spend. But, do retirees like you spend more after retirement?
As per the ERBI study, household spending reduces with age, and retirees easily adjust their consumption based on the market and economic downturn. It makes complete sense as with age, except for medical expenses, you have no significant expense.
For those who are spendthrift throughout their life, retirement is the best way to spend less without killing their dreams. Use free time to search for the best online deals. For example, you can travel during the off-peak season or purchase items during Thanksgiving or Christmas sale.
As you retire, you will not have to bear any work-related expenses, such as transportation, team lunches, formal clothing, shoes, etc. With age, you’re entitled to senior discounts on travel, grocery, or hotels, and you drop to a lower tax bracket in retirement. Some jurisdictions have property tax rebates or breaks for elderly homeowners.
Extra tip: Though this reduction in spending seems insignificant at first, in the long-run, it increases the saving.
Surprise #6: You Explore a New Area of Interest
A retiree aged 50 is likely to have more energy than a person aged 65. When you retire young, you’re filled with enthusiasm and zeal to channelize your energy to fulfill the long-pending hobbies.
Retirement is not the time to settle; it’s the time to pursue your passions.
You will have more physical strength to travel the world and try new adventures like hiking or camping. While the sky is the limit, early retirement opens new doors and lets you enjoy life to the fullest.
Furthermore, to support your family financially, you can even work part-time or on a freelance basis. That way, you’re generating a stable flow of income, even post-retirement. Pay attention to what hobby or activity catches your attention and what turns you cold to know your area of interest.
You can even socialize with a walking group in a nearby park or curl up with your favorite book or watch a Netflix movie.
Extra tip: Retiring early lets you explore your hidden talent because you’ve already done the hard part- spent a significant chunk of your life working, saving, and taking care of the family.
Early retirement is often a golden opportunity to restore proper life-balance by spending time on people and things that bring happiness. The retirement road is full of potholes and takes a great deal of discipline to reach the financial goals for a comfortable retirement.
The earlier you plan your early retirement, the merrier it will be because you’re never too young to start planning for your future.
Remember retiring early isn’t just the question of cents and dollars; it’s the gateway for leading a life free from restrictions. Meticulous planning is all it takes for a comfortable and financially independent post-retirement life.
Start planning and saving today to justify your early retirement decision.