| Several persons wish to retire early, since this is | | | | cash value compared to earlier years. |
| often seen as a symbol of financial independence and | | | | 3) Increased longevity risk |
| freedom drudgery. Once you're thinking of and | | | | Research has shown that early retirees have a longer |
| working towards financial independence, then that | | | | average life expectancy that those who retire later. |
| may be a fair goal. Perceiving early retirement solely | | | | Those who retire at age 50 can expect to live up to |
| as a way to free yourself of the fetters of a routine | | | | age 86. This may seem like great news initially. |
| occupation might lead you to money woes sooner or | | | | However, it means that early retirees would have to |
| later. | | | | face a longer period on a fixed retirement income. |
| You could take early retirement from a particular job | | | | Unless the early retiree has a deep, diversified |
| without retiring fully, in the conventional sense. The | | | | financial portfolio to defeat inflation risk and |
| early retirement that is disadvantageous is the one | | | | purchasing power risk, early retirement may not be |
| where people retire several years before compulsory | | | | such a viable option. Increased longevity risk also |
| retirement without alternative employment. The | | | | translates into having to withdraw from your |
| disadvantages of early retirement include: | | | | accumulated savings for a longer period. For those |
| 1) Lower or inaccessible state pension benefits | | | | who retire at age fifty, the limited savings |
| This is not the result of any conspiracy to keep you | | | | accumulated would to well to last until 70. |
| in the workforce. If you request that pension | | | | 4) A non-financial disadvantage would be discontent |
| payments begin earlier due to your retired | | | | Those who retire early would soon find that if they |
| statements, the calculations are lower because they | | | | didn't prepare for it in social and psychological terms, |
| would be expected to be paid for a longer period. | | | | they may be wondering what to do with their lives. |
| There are certain benefits that cannot even be | | | | With a potentially longer life expectancy, early |
| accessed until a specific age, typically age 65. The | | | | retirees would have to find something to occupy |
| early retiree may have to rely heavily on other | | | | their time. Failing this, retirement may be the |
| sources of income for more than a decade in some | | | | definition of drudgery. |
| instances. | | | | Earlier retirement puts pressure on planning, since |
| 2) Your benefits from defined contribution plans like | | | | time is a very limited factor. Taking early retirement |
| annuities, IRAs and 401 (k)s would be lower. | | | | for a couple of years may not be disadvantageous. |
| This is the direct result of lower annuitization rates | | | | The key factors in the demerits of early retirement |
| for younger annuitants and the fact that the | | | | are a lack of preparedness and higher longevity risk. |
| compounding interest principle is not allowed to work | | | | Ultimately, the increased longevity of the early retiree |
| for longer. The compounding interest operates better | | | | is what gives rise to the other problems that may |
| in latter years on any investment since the nominal | | | | arise. |
| increases form a greater percentage of the overall | | | | |