Thinking about retiring early? These six reasons could change your mind
Idea
Last week someone wrote me a letter asking if they were going to retire at 52. “I have savings to bridge the gap until age 60 and enough retirement to fund my life after that,” he wrote.
My first reaction would be to ignore the numbers. Instead, I want to ask what this person really means by retiring. Retirement means different things to different people. For some, this means stopping working altogether.
For some, it means leaving their first career behind and starting to work more flexibly or for the pleasure and meaning of it. Once you’re clear on what you mean by retirement, the next step is to seriously consider the consequences and risks.
On the surface, this reader Mark seems well prepared. He has the savings and a healthy super balance to close the gap to 60. From a purely mechanical perspective, retiring at 52 might be possible and sounds pretty sexy.
But the biggest risk at that age isn’t just running out of money. It’s locking yourself into a difficult-to-solve financial and lifestyle decision and then realizing that what you really need is not an exit, but change, flexibility, and reinvigoration.
In my experience, there are six things people often don’t consider when they consider retiring early. It’s much better for them to think about these things sooner and potentially reshape the decision.
1. Bridge years are longer and riskier than they seem. At age 52, most people are still years away from the point where retirement benefits can legally become their primary source of income.
Even if you voluntarily stop working, you usually won’t be able to reach retirement until age 60; This creates a long and inflexible period that must be funded entirely by money you have saved or sources of income you generate outside of retirement.
The decision to stop earning from work in your early 50s commits you to financing your daily living from a pool of capital that has no obvious source of renewal, year after year.
The longer this period goes on, the less room there is to adapt if something important changes: your marriage, your sources of income, your health, or even your goals.
This isn’t about whether the numbers add up in a spreadsheet today. It’s about realizing that an eight-year bridge is a huge financial commitment to make when you’re in your early fifties, when life is half over for many people.
2. It is rare for spending to fall as much as people think. At 52, life is still active and often expensive. Many people assume that stepping away from full-time work will automatically lead to lower expenses, but in the early years the opposite is often true.
Early retirement often begins with a high-energy phase of life filled with desire and excitement. This is generally a time when people are healthy, curious, and eager to make the most of the freedom they have worked so hard to gain.
Travel tends to be more ambitious, not less. Health and wellbeing spending often increases as people invest in staying active and healthy. Adult children may still need financial support, and aging parents often need time, money, or both. None of this sounds like the simple, idyllic lifestyle people imagine when they dream of retirement.
3. Flexibility has real financial value. For many people in their early fifties, money’s strongest move is not to stop work, but to change the way it works. Most people never stop using their ability to take paid leave or intentionally redesign the way they work, even if they have the financial buffer to do so.
I want you to become financially independent and then choose how you want to participate, paid or unpaid, at a pace that suits your life.
Using this buffer to restructure a more flexible work-life balance can be much more effective than cutting income completely.
In fact, flexibility is an asset that most people forget to value, but they should. This may mean moving from senior roles to project work, mentoring, consulting or teaching. He or she may even see you move up or down to a job that pays less but offers you more autonomy and enjoyment.
Or you may choose to combine small-paying work with little-to-no-paying pursuits to create a portfolio that better suits your passions and values.
And let’s be honest, it’s not just about lifestyle. Maintaining a certain income level reduces the pressure on your savings during the transition years and extends the life of your non-retirement assets.
4. Sorting risk is more important over a longer period of time. Sequence risk is the danger of having to tap into your savings during a market downturn in early retirement. If markets fall in the first few years and there’s no paycheck coming in to cushion the impact, you may be forced to sell your assets at the wrong time to cover your day-to-day expenses. Once that money is gone it is much harder to rebuild.
Time is what makes this risk more apparent in your early fifties. The earlier you retire, the longer you will be exposed to the pattern or sequence in which the markets perform. Because your capital is already diminished, an early downturn can have a much bigger impact even if markets recover later.
The risk increases even more when you add longevity to the mix. Retiring in your early fifties could mean funding a retirement that will last 40 or even 50 years.
5. Exhaustion often indicates the necessity of a reset, not an end. Many people who talk about retiring in their early fifties are exhausted. After decades of intensity, responsibility, and workplace pressure, retirement can begin to feel like the only way out. Retirement in middle age is often the only time we feel like things need to change.
But retirement isn’t the only solution to fatigue, boredom, or being completely fed up with your job. For some people, a sabbatical, a period of part-time work, or a deliberate career change can provide the relief or excitement they desire without being locked into a permanent financial decision.
Taking a break can renew your energy and perspective and, for many people, open the door to new types of work that are more sustainable and, importantly, more enjoyable.
From a money perspective, you may be able to afford retirement, but you might be better off using those savings to fund a reset, a sabbatical, or a year of education and training.
6. There is a social reality that most people overlook, such as retiring early. At 52, most people Mark’s age are still working. While the idea of free time may seem intoxicating, the reality can be much more complex.
Spending time without a clear purpose, meaning, or co-worker can lead to empty days and sometimes a lot of unexpected loneliness. There aren’t many places to find a peer group with a similar amount of free time to fill with lunch, sports, or entertainment.
Working can provide much more than income. It gives you routines, identity, and a built-in community. Letting go of this early means that you need to be prepared to change it consciously because community, social interaction, and common purpose are important.
I know this will disappoint some people who dream of becoming financially independent and retiring early. My goal is a little different. I want you to become financially independent and then choose how you want to participate, paid or unpaid, at a pace that suits your life, your health, and your energy.
Instead of wishing for retirement, I challenge you to reconsider working for flexibility in your fifties. We are living better for longer than generations before us, and for many people we are much better off than previous generations. However, our institutions, definitions and language could not keep up with this. Work, money and retirement are still largely designed around much shorter lives.
This longer life gives you options. The challenge is to resist the urge to view retirement as the only important option, rather than seeing it as one option among many.
Bec Wilson is the bestselling author How to Have an Epic Retirement and new releases Prime Time: 27 Lessons for the New Middle Life. Writes a weekly newsletter epicretirement.net and hosts prime time podcast.
- The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making financial decisions.
Expert tips on saving, investing and making the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.
Bec Wilson is the author of How to Have an Epic Retirement and writes a weekly newsletter for pre- and post-retirees at epicretirement.net.
