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Tuesday, August 30, 2011


It would be nice to retire early, but it’s also important to have enough to survive on assuming you live to a ripe old age. So when is the best time to quit the job and enjoy life? This article explains some pros and cons of different times to retire so that you can make the best possible decision for you! recommends…

Right Time to Retire

Figuring out the right time to retire is not an easy decision.  We could make detailed retirement plans, and work those plans hard for 20 years, only to fall victim to health problems that might cut our retirement years short.  We’re going to take a more upbeat approach to retiring, and start out with a very simple assumption:  We’re all going to live a full and rewarding life in retirement.  So let’s figure out when is the right time to retire.

Retiring Early

One of the ways we can try to place boundaries around the early, on-time, and late retirement timeframes is by using Social Security retirement benefits as a guideline.  With that guide in mind, we’re going to define early retirement as retiring before age 62.  For many of us that will mean retiring from work between the ages of 55 and 62.

Pros and Cons of Retiring Early

The biggest benefit of retiring early is that it provides you with more time to pursue hobbies, and enjoy the “fruits of your labor.”  Even at age 55, many of us will have worked hard for 30 or more years.  It’s nice to be able to relax and enjoy ourselves after spending all of that stressful time in the workplace.
Unfortunately there is a big downside of retiring early.  If you go this route, then you need to consider the following:
  • Retiring early means having less time to accumulate retirement benefits.  You will need to save more each year to make this a reality.

  • Income will have to last longer if you retire early.  For example if you retire at age 55 instead of 65, then you’ll need ten more years of retirement income.

  • Pensions and Social Security may not be available right away.  Even if you have a pension plan at work, your employer may restrict or reduce benefits before what they consider “normal” retirement age.  In addition, Social Security benefits will not be available until age 62, and if you start collecting benefits right away, then they will also be reduced.

  • Finally, if you retire early, then you’ll need to find, and pay for, health insurance until you qualify for Medicare.

The challenge with retiring early is you need more money in your retirement accounts, and a shorter timeframe to accumulate that money.

Pros and Cons of Retiring “On Time”

We’re going to define “normal” or “traditional” retirement age as those years between age 62 and 67.  In general, these are the years when you will qualify for early or full Social Security benefits.  Most employees also seem to use the age of 62 as a guide for normal retirement age.
Perhaps the biggest benefit of retiring on time is that it allows you plenty of time to enjoy a healthy and fulfilling retirement.  Other benefits of retiring on time include:
  • More time to create a substantial retirement fund.  Putting money aside for retirement will be less painful as you watch the power of compounding interest grow your funds.

  • Paying for the expense of health care insurance is no longer a concern as you’ll qualify for Medicare right away.

  • By retiring in a more traditional timeframe, you’ll usually qualify for un-reduced pension benefits and Social Security.

On the downside, retiring on time means you’ll have less time to pursue a potentially rewarding second career.

Retiring Later in Life

For many of us, remaining in the workplace past age 67 is a choice we will make because we simply enjoy what we do for a living.  We will view maintaining a productive role in our companies and the daily interactions with our co-workers as a benefit that’s hard to resist.
The biggest advantage of retiring late in life is that we have more time to save for retirement, coupled with fewer years over which we need retirement income.  For example, if you decide to retire at age 70 instead of age 65, then you have five more years to save money, and five fewer years that you’re using retirement income.
Other benefits of retiring late include:
  • Immediately qualifying for Medicare – although you might want to consider signing up at age 65.

  • By retiring late, you’ll also continue to build up your pension plan, and in some cases qualify for higher Social Security benefits.

The down side of retiring later in life is simply that you’ll have fewer retirement years.  You’ll want to take into consideration “quality of life” issues if you decide to go this route.
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