About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C., area who works with clients virtually across the country. Dream Financial Planning is a Fiduciary Financial Planning firm specifically designed to help individuals in their 30s and 40s take control of their finances and fulfill their dreams. Feel free to schedule a Free Consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals.
The traditional retirement age in the United States is 65, the age at which most people are eligible to begin receiving full Social Security benefits. But many people feel the allure of leaving the workforce much sooner. Many Americans are deciding to retire earlier than planned, whether by choice or because of other circumstances. According to the 2023 Retirement Confidence Study, workers report retiring at a median age of 62 years.1
Let’s examine why many Americans retire earlier than planned and explain some of the benefits (and considerations) of retiring early.
Do you know how much you need to make work optional? If not, we can help.
- Learn how we use the Elements® Financial Monitoring App to give our clients confidence they’re making the right financial decisions to achieve their Dreams.
- We start with a One Page Financial Plan to help you quickly identify areas that require a closer look.
- Next, we'll review your Financial Independence Presentation to show you the magic number you need to make work optional and how much you should aim to grow your net worth per year to reach Financial Independence.
Why Do People Retire Early?
The decision to retire early is often made through a mix of personal choice and external factors. Let’s dive into why some people may retire sooner than anticipated.
A significant reason for people to opt for early retirement is that they experience health-related issues. If health conditions make it challenging to continue working, or a person desires more time to focus on their health, early retirement may be a viable option.
Job Loss or Job Dissatisfaction
Sometimes, the decision to retire early is a result of the job. Job loss, particularly later in life, can lead to early retirement, especially when finding new employment becomes challenging. Similarly, feelings of burnout, stress, or dissatisfaction with a job can make early retirement more appealing.
Many people choose (or are forced) to retire early to care for loved ones. They may need to care for an aging parent, spouse, or family member with health issues. The desire to invest more time in family life can also be a strong pull toward early retirement.
For some, diligent saving and wise investments may provide the financial security to retire early. People who have saved enough to support themselves without needing to work may have the luxury of retiring on their own terms.
Pursuit of Passions
Lastly, many retire early to pursue passions, hobbies, or personal projects they couldn't focus on during their working years. This could range from traveling around the world to starting a business, returning to school, or simply enjoying a leisurely lifestyle.
The Benefits of Retiring Early
Retiring early brings with it a wealth of benefits. The most obvious is giving people more time to do the things they love. These extra years of freedom can lead to a rich, fulfilling life that might not be possible when a full-time job dominates their days.
In addition, retiring early can be good for people’s health. Retirement means less stress, more time for physical activity, and the ability to focus on a healthy diet. Numerous studies have shown that retirement can lead to improvements in both mental and physical health.2
Considerations of Retiring Early
As enticing as early retirement sounds, it is not without its drawbacks. One significant consideration is the financial aspect. When people retire before the full retirement age, they may not be able to receive full Social Security benefits.3 This means a potential reduction in monthly income, which can impact retirement income planning.
Health care is another crucial consideration. Most Americans become eligible for Medicare at age 65. People who retire before this age will need to consider how to cover their healthcare costs. This can be an additional burden on their retirement savings if not appropriately planned.
Early retirement is a goal for many and can be possible with diligent saving and planning, but it also comes with a number of considerations. When a person can afford to retire will depend on their living expenses, potential income in retirement, and retirement savings.
Work With Us
Wealth Management - Combines ongoing financial planning and investment management. The financial planning fee is waived if we manage at least $500,000 in investments for you. Tax Prep will be included.
Ongoing Financial Planning - Our most popular program now includes tax prep. This is a good fit if you have several goals and want the option to manage your investments. We'll cover everything from spending, insurance, taxes, investments, retirement planning, and estate planning, just to name a few. Our goal is to give you and your family an easy-to-understand comprehensive plan to provide you with confidence you're making the right financial decisions.
One-Time Financial Plan With Ongoing Support - An accelerated version of the service above with additional support for one year after your start date. This service requires prepayment for the year and is offered at a significant discount from the annual pricing for ongoing planning.
Three-Hour Ask Me Anything - This is a good fit if you have 2-3 goals you want help with. These three one-hour meetings need to be completed within three months. The fee for this service is $2,000.
Financial Coaching - Our financial coaching program starts at $99/month. This is ideal for someone who is looking to simplify and automate their finances. We'll also serve as an accountability partner and help you overcome obstacles that may be stopping you from accomplishing your goals. You can learn more about our coaching program here. If you think this program might be a good fit for you, schedule a 15-Minute Demo.
Tax preparation is now part of the ongoing financial planning program. This will be in addition to the Tax Report we already generate for clients and our work with the IRS Withholding Calculator to help prevent our clients from getting a surprise tax bill.
Paying for College
This service is an ideal fit for parents of high school juniors and seniors with a standardized test score (ACT/SAT) and a list of colleges they're considering. This is included as part of ongoing financial planning or as a stand-alone package. This service includes:
- A college affordability assessment
- How Much Colleges Think You Can Afford (EFC)
- If You Qualify for Need-based Grants
- If You Qualify for Merit-based Scholarships
- Help you search for scholarships
- 1 Year Out of Pocket Cost (For Each College)
- 4 Year Out of Pocket Cost (For Each College)
Get More Personal Finance Tips
Weekly insights delivered directly to your inbox.
Disclaimer: Dream Financial Planning, LLC does not warrant that this information will be free from error. None of the information provided on this website is intended as investment, tax, accounting, or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall Dream Financial Planning, LLC be liable for any direct, indirect, special, or consequential damages that result from the use of, or the inability to use, the materials in this site, even if Dream Financial Planning, LLC or a Dream Financial Planning, LLC authorized representative has been advised of the possibility of such damages. Please consult with your own advisor before making any changes to your Financial Plan, Investments, or Insurance coverage.