Why you Shouldn’t Retire Early – Even Though you Want To

Retirement sounds lovely for most people: no boss, no schedule, no problems… There are a million reasons you may want to stop working, even if you don’t hate your job – you might just want to enjoy a life of active leisure while your body is young enough to cooperate.

Early retirement: the horse is out of the barn

That horse is out of the barn.

Maybe you don’t even like the word “retirement.” It might be about “financial independence” or “freedom.”

Retiring early isn’t always a good idea. That’s not to say you can’t or shouldn’t do it. You’ve undoubtedly done plenty of planning and research to figure out how to make it happen – and I hope you do make it happen – but here are a few last gotchas to be aware of before you pull the trigger.

Social Security Calculations

If you’re counting on Social Security to provide any part of your retirement income, double and triple-check how exactly your benefit is calculated.

Your Social Security statement assumes that you’ll keep working, earning, and contributing to the system – so the “projected” retirement income might be a lot higher than what you’ll actually get. We’re not even talking about Social Security changing to save money; we’re talking about how you’ll get less even under the current rules.

Your retirement income is based on an average of your highest 35 years’ worth of income. So what if you pull out early? You won’t earn what Social Security assumed you were going to earn. What if you don’t even work for a full 35 years? The Social Security calculation will tally a “0” for any years you didn’t have income. As you know, zeroes bring averages down.

If you want to know how early retirement will affect your Social Security benefits, use the Social Security Administration’s calculators. The Estimator allows you to tell them when you’ll stop earning income that is subject to Social Security taxes (that means you’ll stop putting money into the system and you’ll get zeroes for those years). Your projected income will be lower than you’ve previously been told.

The Estimator assumes you’ll start taking Social Security benefits at age 62. But what if you’re not that crazy? You might have sufficient assets to wait until your Full Retirement Age or later. To figure that out, you’ll need to pick through some of the other calculators and enter zeroes for your retirement years.

Remember that your final years of work are typically your highest earning years. Those would be the most powerful years to throw into the Social Security calculation. That doesn’t mean you shouldn’t quit early, but doing so means missing out on Social Security income.

Retiring at age 62

What about going until age 62, using the Social Security planner as a guide?

Age 62 is still considered “early” under SSA rules (note that there is no “retirement age” in the US, but different benefits become available as you age). So taking benefits at age 62 comes at a cost: your monthly income will be reduced by 25-35 percent, depending on your age. That means every $1,000 of Social Security income could shrink to $750 or $650, depending on your age (and it’ll be permanently reduced – for the rest of your life, and your spouse might stuck with it as well if the spousal benefit is used).

Datapoint: most retirees can increase their benefits by 33% by waiting until age 66 (vs. age 62). Waiting until age 70 results in a benefit that’s 76% higher than your age 62 benefit! Source: Stanford Center on Longevity.

One way to look at this is to find the breakeven point: how long do you have to live and collect benefits for it to make sense to wait? The only way to find out is to do calculations at SSA.gov. Keep in mind that if you’re a 62 year old female, your life expectancy is 84 years; a 62 year old male’s life expectancy is 81. Life expectancy is not when you’ll break even — it’s how long you’re expected to live. If your breakeven age is below your life expectancy (and you’re in good health), the numbers say to wait.

If you can wait it out, it’s best to wait until your Full Retirement Age (FRA) — which is probably between 65 and 67. What if you can wait even longer? For each year you wait after your FRA, your benefits will increase by 8% until you reach age 70. For those with a FRA of age 65, that means an increase of up to 32%! Click here to find out what your FRA is.

If you’re part of a married couple, remember that it’s not all-or-nothing: one of you can claim early if needed, and the other can wait for bigger benefits.


Life can be full of surprises. The sooner you pull out of the workforce, the more likely it is that something will be different than you expected – simply because you’ll have more years in front of you for strange things to happen. It’s hardly worth speculating here because the list of unknowns is by definition unknown and unlimited. But you’ll want to build in plenty of wiggle room for things to go badly after you quit working.

Again, you’re probably in your peak earning years as you consider early retirement. This is when it’s easiest to build up that cushion against the unknown. Whether you have health problems, your investments do poorly, or you just have bad luck, you’ll want plenty of room for error. Don’t quit until you’re there.

Going Back

Although I haven’t done it, it seems like you’d only want to declare financial independence when you’re 100% certain (or as close as you are comfortable with) that you won’t have to go back to work. Once the horse is out of the barn, you don’t have as many options.

Going back to work would be terribly difficult – both practically and emotionally. Let’s start with the emotional part: you’ve had a taste of freedom and you’ve enjoyed doing things your way. Can you imagine giving that up?

In practical terms, you might have a hard time getting a job that’s as rewarding (intellectually, personally, and financially) as your last job. Your skills will have aged along with your joints, and you won’t have the same network you had on your last day at work.

Again, it’s not a decision to take lightly. Early retirement can be successful, but it’d be a sad day if you had to go back. The only way I can think of to improve your chances is to have some sort of safety net (a large cushion of assets or a side/passive income for example).

Transition Instead?

We like to think of things as black or white? There’s nothing wrong with that – it’s easier that way. But instead of just quitting or just working, you might be able to transition to a more bearable situation that allows you to move towards independence without taking a leap of faith.

A “bearable situation” varies from person to person, so you’ll just have to figure out what it means for you. The point is to avoid the challenges listed above, while enjoying life and feeling good about yourself. Maybe you just take an unimportant job with enjoyable co-workers (and customers) for a few years, you work part-time, or you go into business for yourself with modest profit expectations.

[Photo credit: Rocklin]