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Instead of Retiring, Consider a Mid-Life Career Change

The Pros, Cons, and Alternatives to Retiring Early

Photo by Jean-Frederic Fortier on Unsplash

Ah… Early Retirement. Even the words early retirement probably brings to mind some middle-aged business wiz sipping a fruity drink on a beach somewhere. Like most things though, the fantasy of early retirement and the reality can be markedly different. In this article, we will discuss some aspects of early retirement that may change your mind on if it's really all that it's cracked up to be.

Some Have to Retire Early

People retire early for many reasons. For some, it may not be as glamorous, but because their health made it impossible to continue working. For others, they may have been laid-off or opted to take a buyout by their employer. Others may leave the workforce early to care for an ailing family member. In all the above cases, financial long-term health to last through retirement will be an obstacle. Leaving full-time work early means less saved for retirement, less earned toward Social Security, and being too young and therefore ineligible to take advantage of pensions, certain IRAs, or Medicare. People in these categories are forced to retire, for whatever reason, and so have a different set of challenges going forward than someone who chooses to retire early.

Early Retirement: Why?

For those that are thinking of retiring early, the first question you should ask yourself is why? Understanding why you want to leave the rat race will help to make an informed choice. A lot of people who retire early were dissatisfied with their careers. Retiring was less about the start to decades of leisure and more the end of working. If the answer to early retirement is that you hate work, then it may behoove you before you make the leap, to entertain the idea of career change instead. The benefit of a career shift mid-career instead of leaving work cold turkey is that you may find something more fulfilling and you are still able to save money and pay into Social Security along the way.

Early Retirement: How Will You Pay For It?

One good reason to prolong retiring is simply that its expensive. Experts say you’ll want to have 10-16 times your salary saved up by the time you retire.[i] The earlier you retire, the more money you’ll need. If you wanted to retire at age 45 and the current average American can expect to live to 78.6 years old (or longer) as of 2017[ii], that’s 33 years. If you planned to live frugally on $50,000 a year, for example, that totals to $1.68 million. That is not considering any big additional expenses or purchases like new houses, cars etc. Granted, you would get some financial relief in the form of 401(k)s, IRAs, Social Security and the like, but most of those have age minimums to start drawing from without steep penalty. On top of that, the less time in the workforce, the lower the Social Security payout.

[i] https://money.cnn.com/retirement/guide/investing_basics.moneymag/index8.htm

[ii] http://time.com/5464607/us-life-expectancy-2017/

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About the Author

Craig Cavicchia

Craig Cavicchia

As a Co-Founder, Craig brings years of hands on experience helping clients make informed investment and financial planning decisions. Craig takes great care in understanding his clients near and long term goals and implements an investment strategy around those goals.

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