Why Retiring Early Could Trigger Financial and Personal Tragedy

Retirement is a serious financial responsibility and lifestyle change.

You should start saving for retirement as early as possible so that you can live comfortably from retirement until death.

And if you are considering retiring early in life, then you must consider everything that can go catastrophically wrong.

No plan

Are you retiring early for its own sake? Or do you have an early retirement fund? 

Even if you do, you will need to have even more money in an early retirement fund than a traditional one. 

A good plan is to save as much money as you can in a retirement fund that can then be supplemented with Medicare and Social Security when you qualify.

What will you do if you retire early? How will you spend your time and money?

Don’t end up broke, entering your 60s, and relying on Social Security benefits of $19,000 annually.

Wasted savings

If you save money all through your working life until you reach retirement age, then you will make your money work for you.

The average ROI on a 401(k) depends on the financial vehicle you invest in but can range between 3% and 10%. And even the modest rate of a savings account adds up over decades.

Retirees get stuck paying hundreds of thousands of dollars out-of-pocket on medical bills. You will lose time on saving money for medical expenses on early retirement. For example, a health savings account is a tax-free bank account as long as withdrawals are used for medical expenses.

The point is that the earlier you retire, the more money you will waste that could have been saved for the future.

Burning money

The earlier that you retire, the more money that you will spend on expenses that will increase as you hit retirement age. And most people tend to save less money in their youth.

Less than 17% of Americans actively save money for their future retirement. And even when they do, they never save enough money that would make a difference as retirement nears. 

Less than 50% of people have less than $15,000 saved for their entire retirement.

So, unless you are a wealthy F.I.R.E. adherent or live in a low-cost-of-living city and spend way less than you earn, you’re going to run low on funds just as you need them when you age.

You could live long enough to be elderly and broke

Half of Americans aged 50 will live past age 80. Less than 25% will live past 90.

If you retired in your 40s, would you have enough money saved to pay your expenses for 50 years?

If not, you could live long enough to be in advanced age, broke, and in declining health.