Many ambitious people prioritize retiring early, so they’re willing to work harder in their earlier years to enjoy an easier adult life. However, not everything is as it may seem, so if you are planning on retiring early, here are 17 crucial things no one is telling you.
You’ll need more money than you think
When considering your savings, you may think you have enough funds to live comfortably for the rest of your life. However, you are guaranteed to spend more money than you think. It’s so easy to underestimate how much money you need, especially if you want to enjoy retirement to the max.
You’ll miss working
Regardless of how dissatisfied you may be with your job, you will undoubtedly miss working. Retirement is a beautiful novelty at first, but unless you have an active social life, you’ll miss the social side of going to work every day and the routine that this once gave you.
You’ll be expected for childcare
If you have grandchildren, expect to be pestered to provide free childcare. Daycare is expensive, and your family will think you have nothing better to do than to help out. According to Child Care Aware, 30% of children are partially cared for by their grandparents, whether the grandparents like it or not!
You’ll need a hobby
With all of this time at your disposal, what will you do with it? We spend our entire lives having something to focus on, whether it is school or work. When we hit retirement, we’re suddenly met with an abundance of time, so make sure you consider picking up some hobbies.
You sacrifice additional compound interest
Compound interest is what makes our retirement fund flourish, and the longer our money is invested, the longer it will grow. Those extra 5-10 years of investments and growth will add thousands to your retirement pot. You need to consider your current position and whether stopping contributions early is a wise decision.
It may cost you
The average pension, such as traditional IRAs and 401k plans, has an early withdrawal penalty. For many, you sacrifice 10% of your tax-deferred account if you withdraw before the age of 59.5. This is in addition to income taxes you will have to pay on any plans other than a Roth IRA.
You may experience relationship struggles
Retirement may look like sunshine and rainbows, but it often comes with relationship struggles. Even couples who enjoy long, happy marriages may find the relationship difficult when they have an extra 40 hours together a week. The American Bar says that this problem is so severe that post-retirement divorces are on the rise.
You’ll need to create a retirement budget
Your retirement fund is not an endless pot of income that you can just throw away. Just as a budget is important for monthly spending while working, it’s also essential once you retire. If you don’t consider this carefully, you might return to work after overestimating your savings.
You’ll need to find new ways to cut expenses
Unless you’re loaded with cash, cutting expenses will be important to ensure your retirement can last. Otherwise, your nest egg will deplete too quickly. Think of the bright side, though; the more money you save on expenses, the more you have to enjoy your retirement.
You need to plan for the unexpected
Not only should you ensure you have a large enough retirement pot to fund the rest of your life, but you also need to make sure you have enough money for the unexpected. Unplanned expenses such as medical emergencies are very common after retirement, so don’t overlook this huge cost.
You may have a long life ahead of you
Many of us plan our retirement fund based on life expectancy, but what if you dramatically exceed this? As time passes, humans are living longer and longer. WHO says that since the year 2000, life expectancy has increased by six years. You don’t want to run out of money when you live to 100!
You may need extra income
As mentioned earlier, many early retirees return to work to make ends meet. It’s an undeniably depressing situation, so to avoid this disappointment, prepare for the fact that no matter how much money you save up, you may still have to start earning again.
You will need to consider health insurance options
Many Americans don’t realize that if you retire early, you still need health insurance, as Medicare does not activate until you’re 65. You will need to consider your health insurance options in advance, particularly if yours was through work because otherwise, you could end up spending all your savings on medical costs.
You will have to wait to claim Social Security
Much like Medicare, Social Security benefits for retirees cannot be claimed until you are 62, and even those are reduced by 30% until you’re 67. Until you reach these two ages, you will have to fund your retirement entirely through your own retirement savings.
You’ll still have housing expenses
Many early retirees forget to factor housing expenses into their retirement plans. Even if you’ve paid off your mortgage, you’ll still have maintenance costs and fees to pay. While AARP advises that some states offer lower rates for over-65s, those property taxes can be a real burden.
You still need credit
You may think your credit rating is irrelevant once you retire, but you still need to keep it in top condition. You may still rely on credit after retirement for many reasons, such as purchasing a new home to downsize, co-signing a loan for your children, or leasing a new car.
You may get bored
Finally, it’s important to consider whether you will even enjoy your retirement. In the modern world, our lives are so fast-paced that we don’t have an opportunity to be bored, but you certainly will be once retired. You may think your retirement diary will be jam-packed with social events, but it may be quite the opposite.
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