The thought of enjoying leisurely mornings on your back porch may be more appealing than heading to the office every day during rush hour. Many workers aim to stop working before the traditionally regarded retirement age of 65. If you step away from work sooner, such as at age 50, you’ll likely have many years of freedom ahead. However, the financial logistics of early retirement aren’t always straightforward.
Before sending in a resignation letter, you’ll want to have a clear idea of what to expect from retirement at age 50. It’s also wise to think through the financial repercussions of an early retirement. Here experts weigh in with the perks and drawbacks to keep in mind when retiring at age 50.
Pros of Retiring at Age 50:
Time to Enjoy Life
Many people in their 50s have days full of work deadlines, family commitments and household duties. “Freedom is typically not an option for most,” says Chris Keller, partner at Kingman Financial Group in San Antonio, Texas. “If you can afford to retire early, the rewards will be plentiful if you don’t put too much stress on your budget.” You will have extra hours to pursue a hobby, help with a charity, attend your children’s events or take on house projects.
If you regularly drove or took public transportation to work, retiring early allows you to avoid everyday traffic. “If you are no longer commuting, then you will potentially be saving on gas money and the expenses of wear and tear on your vehicle,” says Chris Berkel, founder of AXIS Financial in Edmond, Oklahoma. Your current vehicle might last longer if it gets less use during your retirement years.
A Chance to Reinvent Yourself
Finishing one career means you are able to put your energy toward something you find interesting or rewarding. “Many individuals may want to retire early so they can pursue another career, business or fulfill a lifelong dream,” Berkel says. At the age of 50, you may still have energy to pursue a meaningful goal. You might decide to allocate a portion of your savings toward this new pursuit.
A Healthier Lifestyle
Rather than grabbing meals on the go or shorting yourself on sleep, an early retirement can give you the chance to focus on health. You might find time to start walking, join a nearby gym or participate in a local sports league. The focus on nutrition, sufficient sleep and exercise could improve your health and result in lower medical costs.
Lower Stress Levels
If you have a rocky relationship with your boss or often sit through grueling meetings, early retirement can seem like a breath of fresh air. “Working in an office brings various forms of stress into your life,” Keller says. “By retiring early, much of that stress can be avoided.”
Cons of Retiring at Age 50:
Difficulties Accessing Retirement Accounts
Many retirement plans are designed for individuals to begin making withdrawals later in life. “Traditional IRAs and 401(k)s may have penalties to access funds prior to age 59 1/2,” says Nicole Strbich, director of financial planning for Buckingham Advisors in Dayton, Ohio. You’ll want to have other sources of income or accounts established to draw on during your initial years of retirement.
Expenses Could Catch Up With You
If you frequently travel, purchase another home or go out to eat more often in retirement, your monthly expenses could increase quickly. In addition, it can be easy to overlook inflation rates. “Inflation today is at an all-time low, but don’t expect it to stay that way,” Keller says. If living expenses rise and your monthly budget can’t keep up, you may have to downgrade your lifestyle to avoid going into debt.
Feelings of Boredom
While having free time may initially be exhilarating, the extra hours could become monotonous. If your acquaintances and family members are involved in other activities such as work and school, you might end up with more time alone than you anticipated. Loneliness can set in if you don’t set up a schedule or fill your days with activities you’re passionate about.
Expensive Health Insurance
After leaving the workforce, you will need to set up your own health coverage. “Usually a person retires at age 65 from their employer and rolls into Medicare, but now we have a 15-year gap that must be accounted for,” says Randa Hoffman, a financial planner and owner of Radiant Wealth Planning in Newport Beach, California. A portion of your monthly budget may need to be dedicated to health insurance premiums until you reach age 65 and qualify for Medicare.
Having to Return to Work
If your savings can’t keep up with your retirement lifestyle or if unexpected expenses arise, you may find yourself looking for another job. “Getting back into a work routine is tough and technology can change things drastically,” Keller says. You may need to take a refresher course or learn new skills before re-entering the workforce.