The Independent Advisor's
Succession Plan

Pros and Cons of Early Retirement


Many people dream of retiring early, and it isn’t hard to understand why. How could you not look forward to the free time to spend how you like, and doing so when you are young enough to enjoy your freedom for decades to come makes sense. However, early retirement is not a realistic option for many people, particularly if they did not start contributing to an IRA from a young age, and even when it is, there are some potential disadvantages. If you are considering retiring early, here are some pros and cons that may help you make your decision.


Early retirement may be good for your health.

There is conflicting research on this topic. While some studies show that early retirement is good for your mental health, others have found the opposite. However, when you consider it for yourself, you can understand why some people would argue that it is better for your health. Most obviously, when you retire, you are no longer under work-related stress. This could have a powerfully positive impact on both your mental and physical health. Additionally, with more time on your hands, you may be able to dedicate more time to exercise and healthy eating, which could help you become healthier. With the time and lack of stress retirement affords, it could be healthier for you to retire early.

You will have time to travel and pursue hobbies.

One of the aspects of retirement that appeals most to people is the ability to travel. Once you are retired, you are not limited by how much time you can take off of work. You have the freedom to travel where you want, whenever you want. Because you are not limited as to when you can travel, you can take advantage of the less busy and less expensive off-seasons of a variety of destinations. This is particularly advantageous when you retire early because you are not limited by any physical ailments that can impede your travels. With your mobility unencumbered and time at your disposal, retirement is the perfect time of life to travel, whether it is across the country or around the world.

You could start a new career.

If you have ever wondered how you would have done had you chosen a different career path, early retirement allows you the opportunity to try something completely new. When you retire on-time or late, it is unlikely that you will be an appealing candidate for many businesses because you don’t have that much time to dedicate to your new job. However, when you retire early, you still have years left to give to a new career. Even if you wanted to start your own business, if you were to do it at age 60, you could still have a rich and stimulating new career for 20 years or more.


Early retirement may be bad for your health.

On the flip side, there is some research to suggest that early retirement is not good for your health. The National Bureau of Economic Research performed an analysis in 2008 that indicated that retirement is associated with a decline in mobility and mental health, and an increase in poor health conditions like heart disease. However, this report also found that retirees who were active and social during their retirement were less likely to suffer this ill-effects. Additionally, it could be argued that these negative effects are simply inevitable with age, so retirement is not necessarily causing these issues, so much as retirement happens to occur as people are getting older and starting to have these health problems.

Your social security benefits will be lower.

The sooner you take your social security, the lower the benefits. For example, if you were born in 1960 and you retired at age 62, the earliest you can start taking social security benefits, they will be 30 percent less than they would have been if you had waited until age 67, the age Social Security considers your full retirement age. For each year from 67 to 70 that you postpone your retirement, you receive eight percent more monthly benefits. There are no additional benefits for retiring after 70, however.

You will have to stretch your retirement savings.

If you retire early, your IRA and other savings will have to last you a lot longer than it would if you had retired on time or late. For example, if you retire at age 60 and live to age 90, your savings have to last you 30 years. In contrast, if you retire at 70, your savings only needs to last for 20 years and you will have had more time to accumulate more savings because you will have contributed more and it will have more time to compound. If you want your retirement to be more comfortable, it makes more sense to retire later rather than earlier.

Now that you know the pros and cons of retiring early, you can determine for yourself what the best course of action is for your particular needs. Regardless of whether or not you plan to retire early, it is important to have a succession plan in place if you are a financial advisor. If you are an independent financial advisor who is planning for retirement, it is imperative that you have a succession plan in place. You may feel intimidated by this process, but don’t fear. Financial advisor succession plans are our specialty at advisorRETIRE™! Don’t put off this important task any longer; count on us to help you create and execute a successful succession plan. Contact us today!

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