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5 Reasons You Shouldn’t Retire Early

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Image Point Fr / Shutterstock.com

It’s tempting to consider an early retirement, especially if you have experienced enough financial success in your career to position yourself to exit the workforce earlier than anticipated. 

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Before making any sudden moves, take a moment to consider the bigger financial picture. Here are some valid reasons why you should not retire early.

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You Haven’t Reached the Full Retirement Age

The full retirement age, according to the Social Security Administration (SSA), is the age when you can start receiving your full retirement benefit amount.

The year you were born factors into full retirement age and when you can start receiving your full retirement benefits. For example, if a person was born between 1943 to 1954, age 66 is their full retirement age. For individuals born from 1955 to 1960, the full retirement age gradually increases from 66 until it reaches 67. Anyone born in 1960 or later receives full retirement benefits at age 67.

Technically, you can retire earlier than age 66 or 67. Social Security benefits are available to individuals as early as age 62. However, because you have not reached your full retirement age, the SSA reduces these benefits. This means you won’t receive the same amount afforded to someone at their full retirement age.

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You Need Healthcare Coverage

While Americans can start claiming Social Security benefits as early as age 62, they will not be able to receive Medicare at this age. Most Americans need to work to at least age 65 when they qualify for Medicare coverage.

If you have pre-existing medical conditions or have concerns about being without health insurance for a few years, it is highly recommended you do not retire without healthcare. Consider waiting until age 65, 67 for your full retirement age or even age 70 if you plan to delay your retirement.

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You Want the Maximum Social Security Payout

Individuals who retire at their full retirement age will receive full Social Security benefits. However, many retirees often decide to delay their retirement to age 70. 

Retirees who wait until age 70 to retire will receive the maximum payout available through Social Security. Individuals who need a few more working years to keep saving may decide to delay retirement. As they keep putting aside more money into savings, they’ll receive peace of mind in knowing they have extra time to financially catch up. These years may be spent maxing out contributions on employer-sponsored retirement plans and diversifying retirement income buckets culminating with the maximum Social Security payout.

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You Enjoy Your Career

One of the most common challenges of retirement is a loss of identity. Retirees who have spent a significant amount of their lives working and carved out a name for themselves within their industry may be reluctant or even afraid to transition away from their professional self. If you enjoy your career, consider delaying retirement to age 70 and staying in your current role.

An added bonus of delaying retirement until age 70 is an increase in your annual income. If you continue working between age 62 and age 70, this is eight additional years of steady paychecks and merit increases or raises from your employer. Each year gives retirees the chance to significantly increase their annual income before retiring.

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You Don’t Have Enough Money To Retire

Social Security is not designed to pay for all of your retirement expenses. Further, it can be much more expensive to transition into retirement than retirees may realize. If retirees don’t have enough money in savings, they may live on a fixed income and struggle to make ends meet.

While it often sounds nice to stop working early, the reality is without a retirement plan and significant savings and investments you may not be able to afford to do it. Consider touching base with a trusted financial professional. They will help review your financial situation with you and determine if you are able to retire early or if you need to wait it out a few years to reach your financial comfort level.

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