People who dream about early retirements should study their financial situations before leaping into retirements that may not live up to their expectations. Many employees regard the FIRE movement as an official retirement guide. Standing for “financial independence, retire early,” the FIRE movement may not offer the best solution for most workers.
An Early Retirement May Mean Less Money in the Bank
Employees opting for early retirements may experience several financial difficulties. For one thing, they will not have options to contribute money into their Individual Retirement Accounts (IRAs) or Roth IRAs unless they are either working or self-employed. Another issue involves missing out on higher Social Security payments and using up savings too early.
Work Provides Some Employees with Pride and Satisfaction
Many individuals rely on daily work schedules to take their minds off their problems. Perhaps the riskiest dilemma for early retirees involves having nothing to do with their spare time. Creative individuals may not experience this issue, but people who rely on work to feel fulfilled may experience depression.
A Retiree needs to have Additional Funds for their Enjoyment
Many retirees want to travel to other countries to enjoy eating out and staying at luxury hotels. An early retiree needs to have ample funds for entertainment. A person who only has enough money to live on may find that early retirement does not satisfy the need to have fun.
Expensive Health Care Insurance for Early Retirees
Since Medicare is not available until a person reaches age 65, a person opting to retire early must pay for their health insurance in case of an emergency. It only takes one day in an emergency room to rack up an enormous bill. A person with ample insurance does not need to worry about the bill because their policy pays a large percentage.
Financial Planning with a Professional Planner
A person who wants to retire early may wish to consult with a financial planner who develops a realistic retirement plan based on income and projected savings. Someone with significant investments and available funds may find it easy to retire early. But a person who does not have a substantial savings account may find it difficult to quit at a premature age.