Paul Tarins, RICP®,WMCP®,CSRIC™
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 — for example, working from home rather than commuting every day. 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 other 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. The side-effect to this windfall is that it might make the daily grind a little less desirable. Perhaps even totally unnecessary. 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 just as 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 run these scenarios past your trusted financial professional. They can assist you in easing the transition and adjusting your financial strategy accordingly.
Paul Tarins is an investment adviser representative of and offers investment and advisory services through Portfolio Medics, a registered investment adviser. Nothing contained herein should be construed as a solicitation for investment advisory services. Sovereign Retirement Solutions and Portfolio Medics are not affiliated.