Resource #3: The Dangers Of Early Retirement
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.
- One 2016 study in the Journal of Epidemiology and Community Health suggests that retiring early may actually increase your risk of dying early. Findings showed that healthy people who postponed retirement and chose to retire a year later than those in a comparison group had an 11% lower risk of dying early.
- A 2013 study from the Institute of Economic Affairs in the United Kingdom found that retirement increases the probably of having at least one diagnosed physical condition by 60% and suffering from clinical depression by 40%.
- A study from Cornell University and the University of Melbourne shows a striking correlation between Social Security claims for early takers and a jump in mortality. The effect is biggest on men in this scenario, who see an increase in mortality risk of about 20%.
- Retiring later appears to delay the onset of Alzheimer’s, according to the International Journal of Geriatric Psychiatry.
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.
Next Steps
1) Share your feedback.
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3) Develop A Plan For The Non-Financial Aspects Of Retirement
Robert Laura’s ground-breaking book Naked Retirement is the No. 1 resource in helping people begin to think about and plan for every day life in retirement. To Learn more and save 10% click here.
4) Consider Making An Impact As A Certified Retirement Coach
Did you know there is a growing group of people who have been trained to help people plan for the non-financial aspects of retirement? Too often, new retirees learn things the hard way and waste some of the best years trying to figure it out, which is why we created the Certified Professional Retirement Coach designation. It’s a certification that positions you as a retirement expert, equipped with skills, tools, and resources to help people make a better transition. Click here to learn more, and take the first module free with this link.
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