Four Downsides of Early Retirement That No One Talks About
Taking retirement early in life might seem to be a great thing. But would it be the right choice? Quitting from your workplace before you step into your 60s can prove to be disadvantageous in the long run and might pose mental as well as financial challenges that you might not be able to overcome. Thus, your entire retirement might become a rough ride if you don’t take ample preparations before time. Don’t submit your notice in haste. Keep the following four major disadvantages in mind before you become too excited to retire.
Healthcare Might Be Too Big A Challenge To Handle
Healthcare in your period of retirement can burn a hole in your pocket as Medicare doesn’t tend to cover many aspects. You will be entitled to Medicare if you have attained the age of 65, and in case you are an early retiree, try to imagine how much you would have to shell out for your healthcare. You simply can’t do without a health insurance plan since you will soon find yourself in a financial quagmire. Seek out a plan that would provide coverage suitable for your pocket. Aside from that, you need to have ample savings under your belt in order to cover the costs during your retirement.
Your Retirement Funds Might Be Beyond Your Reach
When you are saving to ensure a comfortable retirement, you can put your money aside in a 401(k) provided by your employer or in that case, an IRA, since you can get tax advantages if you invest in these retirement accounts. Now, if you want to opt for early retirement, you could very well be in a fix. If you want to withdraw your money from a 401(k) or an IRA before you are 59 and a half, you might have to shell out a penalty of 10%. If you don’t want to lose out on government help that comes with your retirement savings, it is advisable to continue working until you turn 59 and a half.
You Need To Ensure That Your Savings Last Longer Than Usual
If you are aiming to retire before 65, you wouldn’t have much time to save money before you go into retirement. Moreover, you have to keep withdrawing your savings for a much longer time. If you start withdrawing money at an early stage, your investment accounts will soon be depleted of cash. This will pose a huge problem because you wouldn’t have control over your savings in the early phases of retirement. If you shell out cash at the drop of a hat after you take early retirement, you would have little cash in your hand when you encounter any health hazard. In all probability, you will be dispensing huge bucks for your healthcare as well as long-term care.
You Could Miss Out On The Benefits Of Social Security
If you are making plans to take early retirement, you are bound to claim on the benefits that Social Security provides. In case you retire before the FRA or the Full Retirement Age, you will be liable to reduced benefits as compared to those who retire between 62 and 65. A 32% reduction will surely bother you as time goes by. Aside from that, survivors benefits will also be not as per your satisfaction.
Look before you leap. Wait until your actual retirement age arrives. Even if you do decide to quit your job much before you should, keep your eyes open and make proper plans to deal with the disadvantages and ward off the downsides.
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