Should You Take Early Retirement?
Retiring early is a serious decision. It is something that should not be undertaken lightly as it has far-reaching implications.
Since the COVID-19 pandemic, we have seen a change in retirement patterns. Before the global lockdowns, the average retirement age of Americans had been going up since the mid-80s. The virus struck and life changed.
People re-prioritized their lives and reassessed the time they had left to enjoy doing things the way they wanted. Many folks saved money during the pandemic and by the end, many were retiring earlier than expected.
The research found that the proportion of people aged 55 and over who are retired has increased remarkably. According to the Federal Reserve Bank of New York close to half of Americans (49.9 percent) now expect to retire before they turn 62. And According to a report by consumer research firm Hearts & Wallets, 65 is too long to wait to retire for over 17 percent of Americans.
For some folks, early retirement may be a choice they are given at work. “Companies who want to trim down the size of the staff or restructure their organization often offer their employees a package of incentives to retire early,” says Richard Eden senior vice president of David Lerner associates, “If you find yourself in this position you would have to weigh all the pros and cons before deciding whether to accept an early retirement package. Get professional advice if you need to but make sure you don’t make a rash decision. Create or revisit a financial plan. Look at what the impact of accepting the offer on both income and expenses will be.”
Taking an early retirement will leave you with a long time without very much to do unless you have a plan. No two people are alike and so no two retirements will be the same. Some people sit and watch TV or read books while others might go off on exotic adventures. Some folks love to spend time with grandchildren. Whatever you choose to do with your time make sure that you don’t run out of money.
Here are some factors to consider:
- How many years is retirement likely to be?
- How will you fill in the hours each day?
- Healthcare costs over the retirement period
- The cost of early withdrawals from your retirement fund
- Is it likely that you could run out of money in retirement?
While you are doing your math and working out how much you’ll need, it is important to remember that inflation is at a record 40-year high. The cost of living is going up and won’t be coming down anytime soon.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
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Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.
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