5 Reasons Why You Might Retire Earlier than You Planned
For many of us, retirement can feel further away than it actually is. Whether you are starting a career, in the middle of your most productive years, or approaching the end of your working years, retirement is a transition that should be strategized from a number of different perspectives. The purpose of this article is to examine different scenarios that might lead to an unexpected change in your plans — maybe a year or two early, or perhaps much earlier than you might have anticipated. Some of the circumstances are good and some are difficult, but all of them amount to an important decision you must make in terms of your career and your finances.
Although people work with ongoing medical conditions all the time, not everyone is the same. There may come a point where your body simply cannot handle the same activity every day. This is not limited to your physical health either. As more people attend to their mental wellness, some may discover that their jobs are an obstacle to feeling at ease. Whatever the health factor may be for you, it is possible to transition into early retirement over a period of time rather than leaving work immediately. In fact, we see this as the preferred scenario in clients we do planning work for. The idea of ceasing to work at a single point in the future no longer holds the same appeal it once had as many have transitioned into career paths that align with their passions and bring fulfillment. With recent widespread technological adaption, working from home one day or more per week rather than commuting every day is expected to become the norm for knowledge-based workers. Transitioning may make things easier and allow for continued savings rather than an abrupt cut-off of your working income, facilitating a more comfortable retirement when it is time to finally retire fully.1
It may not be your own health that is a factor in your early retirement. Taking care of a parent, child, spouse or another family member who needs your attention can be a reason. Although care professionals may be a big part of meeting your family member’s needs, it is likely that you will want to be a bigger presence in their daily life. Here, too, transitioning to working from home might be a financial stopgap to help you enhance your eventual full retirement.2
A Sudden Windfall
Not all of the circumstances that might lead to early retirement are negative. You might enjoy a sudden windfall in terms of investments, inheritance, or some other unexpected financial benefit. A side-effect of this windfall might make the daily grind a little less desirable. Perhaps even totally unnecessary. A client recently experienced this and took sufficient time to process his own grief, determine the optimal use of the new wealth in perspective of his plan, and opted to continue working, but in a reduced capacity. He was somewhat hesitatnt to discuss this with his employer, but they were willing to adjust his role in a way that allowed him to do less of the laborious parts of his role and focus on new business development. Something to think about before you retire to enjoy your new lifestyle — you may find life without work a little too idle for your taste. If this isn’t a case where you’re transitioning to working fewer hours before full retirement, you might want to consider a new pursuit for your newly-discovered free time.
Of course, there are many transitional situations where the decision is more or less out of your hands. If the company you are working for is going through some sort of change, such as an acquisition, it may be in their interest to make some staffing decisions. Other situations may be something like a financial crunch for the company, where they can no longer afford to pay you. Although you might find that you need to seek other employment, it is possible that this dovetails with the “windfall scenario,” where the company parts ways with you via a “golden parachute.” In some situations, this parting gift may be a financial bridge to early retirement.3
A New Opportunity
It is also possible that your career is a means to an end for you and that you have been looking to build a new opportunity for yourself. Maybe it is to start a small business, such as a coffee shop or a bed and breakfast. Maybe it is to create a charitable organization, one that allows you to focus your energies on matters that are meaningful to you. Whatever opportunity you might have in mind for a way to use your retirement years to satisfy yourself, a new opportunity with built-in income for you may be a path worth contemplating.
Whatever your path to early retirement, it is always a good idea to invited your trusted financial professional into the conversation early and often. They can assist you in easing the transition and adjusting your financial strategy accordingly.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten and Verity Wealth Partners. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.