I'm a big proponent of early retirement, so much so that I've made several arguments for it in the past. But while leaving the workforce ahead of schedule is a move that can work out in many scenarios, it's not the right choice for everyone. Here are a few reasons not to retire as early as possible, and instead keep plugging away on the job.
1. You might live a longer life than expected
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The Social Security Administration (SSA) reports that the average 65-year-old man today will live until 84.3, while the average 65-year-old woman will live until 86.6. These are just averages, however, so if your health is great and you have a family history of longevity, there's a good chance you'll live even longer. In fact, 25% of today's 65-year-olds will live past 90, according to the SSA, while 10% will live past 95.
Now, living a long life is a good thing in theory, but it can pose a challenge from a savings perspective. Unless you've saved extensively, the earlier you retire, the greater your risk of running out of money during your golden years. Working longer can therefore help mitigate that risk by limiting the number of years during which you're making withdrawals from your nest egg.
Of course, if you've saved extremely well for retirement, this shouldn't be an issue. But if you haven't, it's certainly a good reason to hold off on retirement just a bit longer.
2. Your senior living costs might be higher than anticipated
Many people enter retirement with unfounded confidence in their nest eggs because they make one flawed assumption: that their living expenses will magically go down once they stop working. The reality, however, is that many living costs stay the same or even go up in retirement, particularly healthcare and leisure. In fact, according to the Employee Benefit Research Institute, 46% of households spend more money, not less during the initial stage of their golden years.
Now, once again, the extent to which this is a problem will depend on your nest egg. If it's extremely robust, you have a better chance of keeping up with your ongoing expenses. But if you're not as confident, take the time to map out a retirement budget and see what your living costs are likely to look like. Then, compare those to the income your savings will allow for and see where you stand. If you're not secure in your ability to cover your yearly bills for a longer period of time, then holding off on retirement makes a lot of sense.
3. You might get very bored very quickly
There's a reason retirees are more likely than workers to suffer from depression: Having too much free time can quickly lead to feelings of worthlessness and boredom. And while you run that risk no matter when you retire, the younger you are when you leave the workforce, the greater your chances of growing jaded early on.
Remember, it's one thing to bemoan that tedium when you're older and your body isn't equipped to get out and do things. But when you're young and still have plenty of energy, not having an outlet for it can result in a frustrating situation.
Now, if you go into retirement with a solid plan as to how you'll spend your newfound free time, you'll reduce your risk of falling victim to depression. But if you don't have a clue as to what you'll do with your days, or you don't have the money to do the things you want, then it pays to consider holding off on retirement and keeping your job. If anything, it'll give you someplace to be on a daily basis, and there's a lot to be said for that.
Early retirement can be a wonderful thing for those who can make it work. Just be sure to consider the repercussions of leaving the workforce ahead of your peers. If you're tired of your job but aren't quite ready for retirement, there's also another option to consider: a partial retirement. Scaling down your work schedule might end up giving you the best of both worlds, all the while minimizing some of the risks you'll encounter by fully retiring at a younger age than most.
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