The first time a client of mine received a buy-out offer that was several years ahead of their anticipated retirement date, both the client and I were absolutely in love with the details. There was a one-year severance, a pension multiplier, and substantial credit for health insurance. On the surface, it was a financial no-brainer. The offer was so lucrative, I couldn't rationalize passing it up.
In the early days, I didn't understand the psychology of retirement and put myself in the camp that retirement at any age must be good — especially if it was a few years ahead of schedule. But early retirement isn't all peaches and cream, and seducing people into it with money can be particularly harmful to a person’s physical, mental, and even social health.
Can you imagine walking into your financial advisor’s office with a great early retirement package and their response is:
"I wouldn't do that! You're probably going to get depressed and maybe even die earlier than your friends who are still working. Oh, and you might end up in a nursing home with Alzheimer's sooner than you'd expect. But let's look at those figures and see what we have."
I realize many of you may be thinking, “Well, if the early retirement plan doesn't work out, I could just go back to work.” But it just isn't that easy. A 2014 report by the U.S. Government Workers Survey noted that people age 50 years or older are likely to be unemployed for 5.8 weeks longer than someone between the ages of 30 and 49, and 10.6 weeks longer than people between the ages of 20 and 29.
In essence, early retirement lures you into a world that can be anything but blissful — primarily because you are giving up so many things, many times unaware of the consequences, in order to gain financial freedom. Retirement can create a loss of purpose, reduced social interaction, and loss of physical activity and mental stimulus.
The buy-out helps replace the income from your job, but most employer groups don't provide any training on replacing these non-financial aspects.
This is despite workers wanting and needing it. An Accenture survey of workers and retirees in the U.S. and Canada found that 82% would like more help with retirement planning, and 84% would like assistance with retirement coaching.
The problem goes beyond the statistics and a simplistic overview of the problems early retirement can cause. I have worked with numerous early retirees and they struggle for several reasons.
First, all of your friends are still working. That leaves you with very little to do between 9 and 5, and when you do find a retired group of people to hang out with, they end up being outsiders because you are so much younger and usually have less in common with them.
The same holds true with friends who are still working. You may have worked with the same of folks for 20-30 years, but when you are no longer in the trenches with them, the dynamics of the relationship begin to change. Talking about work isn't as easy and re-living the old days only lasts for so long.
Additionally, people treat retirees differently and have stereotypes for them. Unfortunately, the mainstream assumption by many is that retirement means you have been put out to pasture and are no longer a contributing member of society.
It's harsh, and many of us are working diligently to change that perspective and the impact ageism can have on older workers, but it's still there and doesn't feel good when and if you experience it.
The key is to make sure you’re aren’t seduced into early retirement based on financial factors alone. Yes, early retirement can be appealing, but it can also be one of the most dangerous forms of retirement if it doesn't include plans to replace the mental, social, and physical aspects of work as well.
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3) Develop A Plan For The Non-Financial Aspects Of Retirement
4) Consider Making An Impact As A Certified Retirement Coach
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About the Author:
As the Retirement Activist, Robert Laura created the Retirement Coaches Association and RetirementProject.org. He is the leading voice for the retirement coaching industry and has pioneered many tools and resources to help people prepare for the non-financial aspects of retirement including the Certified Professional Retirement Coach CRPC training and designation.
He is the author of several books and guides including Naked Retirement and Retirement Rx. He is also a nationally syndicated columnist for Forbes.com and Financial Advisor Magazine. Robert is a sought-after corporate trainer, speaker, consultant, and financial expert witness. He can be reached here