The Downside of Early Retirement

Early retirement has many drawbacks, even if you can afford it.

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A lot of my fellow baby boomers, in their 50s and early 60s, find they have an option to take early retirement. Some are teachers or other public employees who can opt for retirement after a certain number of years of service, which often puts them in their 50s. Others have been offered an early retirement package from their company. The package seems like a lot of money, so they're tempted to take it.

First of all, if you have a choice of when to retire, consider yourself lucky. Many employees, including yours truly, get booted out of the workplace when they’re in their 50s. Suddenly there's no more paycheck, no more benefits and no more contributions to your 401(k) plan. People who take early retirement are typically left to their own devices.

For some people, this can be a good thing. One colleague of mine, age 52, used his layoff as an opportunity to change careers. He found a fast-track program to train as a science teacher and now happily teaches in a middle school. Another friend took a package, then got a job as an office administrator at a local counseling group. He makes somewhat less money, but there's less stress and no more commute.

But far too many 50-somethings leave their familiar place of work only to find that they are unemployable at any comparable position. I have one friend working for minimum wage at the checkout counter at the supermarket. Another friend takes tee times at our public golf course for – you guessed it – minimum wage. Still another friend, who thought he could afford to retire, is now trying to sell real estate, which is no easy job in this economy.

Nevertheless, part of the American dream is taking early retirement and moving to the beach or the mountains, or buying a boat and drifting off to someplace warm and wonderful. It does work for some people. But if you're thinking about taking early retirement sometime in 2014, pause to consider these three reasons you might want to put it off until 2015 or beyond:

1. You need the money. It seems obvious, but a lot of people don’t do the math. If you still have college tuition bills staring you in the face, or if you’ve already bought a boat and a second home and you’re up to your eyeballs in debt, now isn’t the time to retire. Rule of thumb: If you can’t pay off your mortgage, you can’t afford to retire.

Do you think you can live on Social Security alone? You will be living below the poverty line. According to the Social Security Administration, the average benefit for a retired worker at the end of 2013 is $1,274. The poverty line for a couple with no dependents stands at $1,293 per month.

2. You like what you do. Maybe you can afford to retire, either because you’ve been a diligent saver or have a spouse who still works. But is that really what you want to do? Don’t underestimate the daily routine you’ve established over the years – the morning coffee on the way to work, the lunches you enjoy with colleagues and the after-work softball league. Think about your actual work. Do you enjoy the challenge, give-and-take and feeling of accomplishment when you’ve completed a project?

What about your identity? Are you proud to be a lawyer, accountant, carpenter, chef or whatever else you may be? A lot of people find self-worth in what they do. Are you ready to be lumped in with the AARP crowd that is simply retired?

3. You have no other interests. If you have long held a dream for a second career, or passionately want to pursue some long-held interest, then maybe early retirement is a good move for you. My brother-in-law jumped at early retirement, and happily spends his days in his basement workshop building furniture which he sells at craft fairs and flea markets.

But if you’ve got nothing to retire to, then maybe you shouldn’t retire. And if all you want to do is play more golf, or putter around the garden, then maybe you should think twice about it. You might find that playing golf twice a week is fun, but playing five times a week turns into a routine that eventually becomes a bore. If you retire at age 55, and live to age 85, then that's a lot of boredom.

Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement and other concerns of baby boomers who realize that somehow they have grown up.