Pros and cons of early retirement

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Are you thinking about early retirement? Depending on your profession, early retirement may be as young as age 55. A healthy savings portfolio and debt-free living can provide a solid retirement platform. And the opportunity to pursue your own interests — travel, hobbies, time with family, volunteering — can be highly motivating.

Like any choice in life, early retirement involves trade-offs. For what you gain in me-time, you pay in opportunity costs. As you evaluate your financial readiness, here are some pros and cons to consider.

Pro: Making a fresh start

Pumping the brakes on your full-time career doesn’t mean slowing down completely. More retirees are working during retirement — some as consultants in their old profession while others pursue part-time work in new areas. Some start their own businesses. Early retirement enables you to work because you want to work, not because of financial obligations. Personal accomplishment becomes the motivator, not the compensation.

Pro: Deepening personal relationships

If you can afford to take an early retirement, chances are your hard work has cost you time away from loved ones and family. Retiring in your early fifties gives you more time to spend with your family now. For many early retirees, that’s the ultimate benefit. Time to reconnect with spouses, partners, and friends. Time to engage more actively with children during their teen years and early adulthood. Investing extra time in loved ones pays dividends for the entire household.

Pro: Traveling in good health

Most retirees look forward to some form of travel. Whether your vacation style involves calming beaches or active adventure, both time and opportunity abound. An early retirement often comes with good health, agility and stamina. Adventure-based vacations and bucket-list experiences such as rock climbing, long hikes and whitewater rafting are approachable — and potentially safer — at an earlier age.

It’s easy to dream about the opportunities an early retirement offers. But have you considered these costs?

Con: Paying for healthcare

You can’t enroll in a Medicare plan until you’re age 65 unless you have a disabling medical condition. If you retire at age 55, that leaves a 10-year gap during when you have to foot your own medical bills, typically without the protection of an employer-sponsored health plan. And self-insurance can be prohibitively expensive. One solution is to put money aside in a Health Savings Account (HSA) and allow the funds to roll over, year after year, until you retire. HSA assets can be invested: those funds grow tax-free and withdrawals are tax-exempt. Certain limits and qualifications apply, so get the facts.

Con: Incurring early withdrawal penalties

Using tax-advantaged accounts to save for retirement can be a smart move but tapping into those funds early can cost you. A 401(k) typically carries a 10% penalty for early withdrawals before the age of 59 ½. However, if you leave your company at age 55 or older, the IRS will allow you to make withdrawals penalty-free. Those with traditional IRAs face a 10% withdrawal tax on distributions taken before the age of 59 ½ unless they agree to adjusted periodic payments based upon life expectancy. Similar 10% early withdrawal penalties may be applied to funds converted into a Roth IRA depending on the composition of the account. Know the costs associated with accessing your own money and how they affect your early retirement budget.

Con: Leaving Social Security money on the table

You worked hard for your Social Security benefits, but the earlier you retire, you may receive a smaller monthly amount for the remainder of your life than waiting until 67 or even 70 when you maximize your monthly amount.  If you retire prior to age 67, you could lose as much as 30% of your benefits (or more if you’re drawing as a spouse). Employer-paid pensions aren’t immune either. Civil servants face a 2% reduction per year in retirement annuity payments drawn under the age of 55. Private pensions typically reduce payments for those retiring before age 65.

One way to supplement lost retirement benefits is to consider a whole life insurance policy. In addition to providing financial protection for loved ones through a death benefit, a whole life policy gives you access to cash throughout your lifetime to pay for unexpected expenses in retirement.1

An early retirement requires careful planning and professional help. Try out our retirement planner to evaluate some of the bigger financial responsibilities that can impact your retirement. Having a clear vision of your retirement needs can help you build a sturdy and personalized strategy.

Brought to you by The Guardian Network © 2022. The Guardian Life Insurance Company of America®, New York, NY

2022-147682 Exp. 12/2024

Only 22% of US workers know how they will pay for healthcare expenses in retirement.**,♢


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1 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.



This material is intended for general public use. By providing this content, The Guardian Life Insurance Company of America, and their affiliates and subsidiaries are not undertaking to provide advice or recommendations for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.