A lot of people would like nothing better than to retire early. Others are skeptics. Though early retirement may sound like a good idea for sure, it also looks like a massive effort. But whether you’re planning on it or not, preparing for early retirement is a worthy goal, even if it never happens.
Let’s get past the perception of early retirement as a time of blissful nothingness in the ten, 15 or 20 years. Instead, let’s look at what preparing for early retirement can do for your life, even if you never actually retire.
Creating the Motivation for a Long-term Savings and Investing Goal
A lot of people have great difficulty saving money. Even the prospect of retirement at age 65 or thereabouts isn’t sufficient motivation. Young people may even reason that that’s so far into the future that they can’t worry about it.
That’s where early retirement can create a compelling reason to begin saving and investing. Though you may not be able to conceive of retiring in 30 or 40 years, doing so in 10 or 15 years may get your motivation in high gear.
In order to save and invest money effectively, it always helps to have a worthwhile goal. The prospect of early retirement can become that motivator, especially if you are currently in a job or career that you find to be disagreeable.
And even if you never retire – early or otherwise – the process of saving and investing money for that the goal will improve the quality of your life, no matter what route you choose to take.
Advanced Preparation for Normal Retirement
We just touched on how it can be difficult to motivate yourself to retire by age 65, and how early retirement can help to get you in gear. But even if you never retire early, the preparation alone will help you to lay a strong foundation for normal retirement age when it comes.
It’s a given that retirement planning works better when it’s front-loaded. That’s when you pour a large amount of money into retirement savings early in life, giving it the best chance to compound and grow.
For example, let’s say that you fast-forward your retirement savings such that you have $100,000 saved by age 35. If you invest the money at an average annual rate of return of 8%, in 30 years you will have $1,093,573 saved for retirement at age 65.
Using the safe withdrawal rate of 4%, you will then have a retirement income of nearly $44,000 per year, plus Social Security and any other income sources you will have at that time. And you won’t have saved so much as an additional dollar after age 35!
The point is, even if you don’t retire early, the heavy lifting in preparing for retirement will be done by age 35.
Imagine being only 35 and not having to worry about preparing for retirement!
You May be Unable to Work
This is the darker side of the early retirement question, but it’s one that should not be sidestepped either. Life doesn’t always go the way we expect it too. Sometimes we face obstacles that seem unreal. There are some that can happen that can force you into early retirement.
The most obvious example would be a debilitating illness or injury, either of which may have the potential to be career-ending.
Still another possibility is a health related catastrophe happening to a loved one. For example, if your spouse, one of your children, a parent, or even a sibling, were to experience a debilitating illness or injury, you may need to participate in direct care of that person.
That would be an impossible task if you also had to earn a living. But if you are in a position to retire early, you can either reduce your workload to part-time, or even quit your job completely. Either option will make it easier for you either to care for yourself or for your loved one.
Building Insulation for the Employment Stress of Middle Age
It’s unfortunate that with middle age comes a higher level of employment related stress. Some reasons for this situation include:
- Being distracted by the complications of life
- The onset of the types of health-related conditions that can either limit activity or lower your energy level
- Family issues
- The higher compensation of middle aged workers makes them vulnerable to layoffs
- Their higher health care costs move them higher on the layoff chart
- Competition from younger workers
- Industry collapse
For better or worse, all of these represent real potential obstacles to employment in middle age. But if you prepare for early retirement, you will have a large nest egg that will help to keep you insulated from much of the stress.
You Just Might Decide that Early Retirement is Exactly What You Want!
Even if you have no burning desire to retire early right now, you could develop one as the years go by. If you have already been preparing for early retirement, it’ll be a lot easier to engineer a change in direction.
There are all kinds of reasons why early retirement may be more attractive in the future than it is right now. It could be that you develop a different career choice, perhaps one that will result in lower pay. Maybe you decide that you want to devote most of your time to work on physical fitness. Or you decide that you want to get involved in charitable pursuits.
Whatever it is that you decide to do, being prepared for early retirement will make the transition easier.
Ultimately, preparing for early retirement is all about creating options in your life. Even if you don’t have a specific goal to retire early, being prepared for it means greater freedom of choice.
Maybe it’s that the biggest benefit of early retirement isn’t early retirement itself, but rather the better position that it puts you in overall. And for that reason, preparing for early retirement is a worthy goal, even if it never happens.