With the COVID-19 pandemic making workplaces more dangerous, along with new technology demands and opportunities, more and more workers are opting to take early retirement, or at least retire “on time” and not delay ending their careers.
Understanding the advantages and disadvantages of being retired will help you decide when and how you want to stop working. This will help you prepare well in advance to make your golden years ideal.
Improved Quality Of Life
The most obvious advantage of retirement is an improved quality of life – unless your job is the most important thing in your life. When you retire, you can try new things you’ve never had the time for. You can spend more time doing the things you love but couldn’t squeeze in before. You have less pressure and don’t have to deal with a bad boss, coworkers or customers.
If you’ve always wanted to take up a hobby, volunteer or start a small business, you can do so now.
Reduced Annual Income
Retirement means stopping work and ending your job-related income. If you have an investment portfolio, Social Security, IRA, 401(k) or pension, your annual retirement income might be equal to or more than what you earned working.
However, when you stop working, you not only lose your income, but you also lose your company-provided benefits, such as health insurance, which can be a huge cost for seniors.
Working with a certified financial planner, you can set up the right types of retirement accounts during your work career to make sure you have enough income when you retire. For example, for tax purposes, you might want to roll over a traditional IRA to a Roth IRA at one point in your life.
New Career Opportunities
Just because you’ve retired doesn’t mean you can’t work part-time. Whether you need the extra income or just want to fulfill a desire to try a certain career, your retirement years let you explore trying new business ventures.
If you love animals, you can try dog walking or pet sitting. If you love kids, you can hire out as a tutor, specializing in one or more subjects. You can earn professional diplomas and certificates that take as little as three months to complete, with others only requiring a six-month or one-year commitment. You can serve your community as an emergency medical technician by completing a course at your local community college.
Increased Travel Options
Once you no longer have a regular work schedule, you can travel more. Whether it’s buying or renting a mobile home or RV or flying to different countries, you can see the places you’ve always dreamed of. With more and more remote work opportunities, you can still earn income while you’re traveling.
Possible Reduced Social Security and Pension
The earlier you retire, the less monthly Social Security and pension income you’ll receive. If you can wait to take these sources of retirement income, you’ll have more to live on each year.
Work with a financial planner who can let you know what your income from Social Security and your pension will be if you start drawing at the minimum age, and what you’ll have if you wait. If you start drawing Social Security early, you’ll also be limited as to how much other income you can earn from working before you start paying penalties.
Possible Emotional Problems
If you are retiring alone, have not planned post-retirement hobbies or work activities and don’t have many friends or family members, you might become lonely. This can increase your levels of depression, anxiety, anger and despair. In addition to your lack of intellectual and emotional stimulation causing you mental health issues, you can begin damaging your health by putting on weight, not getting adequate sleep, not doing any exercise and becoming more dependent on dangerous substances.
Volunteering during retirement is one way to stay active, develop friendships and feel your quality of life is where you want it. Your volunteer work can start out as simple as walking dogs for your local animal shelter and progress to serving on local nonprofit committees or boards.
Steve Milano has written more than 1,000 pieces of personal finance and frugal living articles for dozens of websites, including Motley Fool, Zacks, Bankrate, Quickbooks, SmartyCents, Knew Money, Don't Waste Your Money and Credit Card Ideas, as well as his own websites.