Retiring earlier than you originally planned sounds like a pretty sweet deal on the face of it. You can ditch your boss and those dull “9 to 5” days for more time with family, travel, and hobbies. At least that’s the theory.
In practice, early retirement is rarely as rosy as it is in most workers’ imaginations. And about 15% of seniors end up regretting retiring earlier than they expected, according to a recent survey by Clever Real Estate. Here are three reasons why.
1. They didn’t save enough
People don’t always retire sooner than expected because they want to. Sometimes, people are forced out of their jobs due to downsizing, caring for a family member, or illness. Approximately 64% of retirees in the Clever survey said they retired earlier than they originally expected to, and over half of them listed poor health as the reason for doing so.
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Rather than spending retirement doing what they love, these individuals may have to schedule their time around doctor appointments. This extra expense can stretch their already strained budgets to the limit.
It’s not always possible to prevent something like this from occurring, but you can reduce the odds by doing your best to stay healthy and prioritizing retirement savings at every age. Make regular contributions each month if you can afford to do so and avoid taking early withdrawals from your retirement accounts.
2. They’re bored not working
Jobs aren’t always fun, but they give a lot of people a sense of purpose, an opportunity to socialize, and a chance to challenge themselves. Leaving the workforce behind forces retirees to find other ways to fulfill these needs. Some are easily able to do so, while others struggle.
If you fall into the latter camp, returning to the workforce may not be a bad idea. You don’t have to work full-time or in the industry in which you spent your career. You can choose something that’s more in line with your interests and flexible enough to work around your other commitments.
3. They claimed Social Security too early
About 29% of retirees said they wish they’d retired later because they claimed Social Security early and they regretted it. The federal government assigns everyone a full retirement age (FRA), based on their year of birth. It’s somewhere between 66 and 67 for today’s workers.
Every month you receive benefits before your FRA shrinks your checks by anywhere from 5/12 of 1% per month to 5/9 of 1% per month. If you sign up right away at 62, you’ll only get 70% of the full benefit you’ve earned based on your work history if your FRA is 67, or 75% if your FRA is 66.
You can also flip this around and say that every month you delay benefits will increase your checks. This continues if you wait to file past your FRA, too. Every month you delay past your FRA will grow your checks by 2/3 of 1% per month until you reach 70. Then, you’ll get 124% of your full benefit per month if your FRA is 67, or 132% if your FROM ice 66.
This does not mean that claiming early is always wrong. Delaying benefits can lead to a larger lifetime benefit, but you’ll receive fewer years of checks. Therefore, you’d have to claim for many years in order to catch up to where you would’ve been if you’d claimed early.
For example, if you qualify for the $1,671 average monthly benefit at your FRA of 67, you’d get about $1,170 per month if you claimed at 62 and $2,072 per month by waiting until 70. If you lived until 75, you’d do better by starting early. You’d get $182,520 from the program by signing up at 62, compared to just $124,320 by claiming at 70.
The numbers look different if you live until age 85. Then you’d do better by delaying benefits. Waiting until 70 would net you a lifetime benefit of $372,960, compared to just $322,920 if you claimed at 62.
You have to weigh your life expectancy when deciding when to sign up for Social Security. You also need to consider whether you can afford to delay benefits. If you’d like to wait to apply but you can’t cover your bills without Social Security, you might consider remaining in the workforce until you’re ready to claim.
When you retire is your call, but it’s not a decision you should rush. Think about your financial situation and whether you’re ready for the change to your lifestyle. And don’t hesitate to delay retirement if you decide you’re not ready yet.
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