Early retirement may seem like a dream come true — however, some Americans have encountered several problems that can arise when those regular paychecks cease.
In fact, many retirees who left the workforce at a younger age now regret it. According to to look for from the American Association of Retired Persons (AARP), more than a quarter of retirees discovered that they needed to spend more money on medical expenses and housing than they had anticipated.
Don’t miss
Retiring Early Could Leave You With Less nest of eggs to cover these unexpected expenses and the increased cost of living.
Here are five important things many retirees would change if they could go back in time.
1. Claiming Social Security too early
Many people may assume that retirement automatically means diving into Social Security (SSA). The reality, however, is that you can retire without claiming these benefits if you have enough money set aside to get you through the first few years.
Unfortunately, most people don’t – and many early retirees regret how quickly they claimed their Social Security benefits.
National Bureau of Economic Research (NBER) Survey revealed that one-fifth of older Americans wish they had delayed claiming Social Security. This is understandable, since every month you delay claiming benefits can result in an increase in your monthly income.
Delaying your retirement until age 67, for example, could lead to a 24% increase in your standard Social Security benefit.
Early retirees are even more likely than the average senior to wish they had made different choices, since claiming benefits at age 62 with a full retirement age of 66, for example, could shrink a standard benefit at 25%.
With half of the population over 65 years old Relying on retirement benefits to provide at least 50% of family income is a huge blow.
If you want to find estimates about your benefit before making an early retirement decision, the SSA has a variety of helpful tools at its disposal. websitewhich can help you understand the full impact of working under 35.
2. Not saving enough before retiring
More than half of respondents to the NBER survey on financial regrets said they wished they had saved more money before retiring. In comparison, other to study conducted by MedicareFAQ found that number was even higher – with 86% wishing they had more money set aside, while 60% admitted they didn’t start investing in retirement funds early enough.
For early retirees who have to rely on their savings for more years than the average senior, having little savings can be a serious concern. Running out of money at age 70 or 80, after decades out of the job market, is not an easily solved problem.
See more information: Who says you can’t beat the market consistently? Meet the team of market experts whose stock picks beat the S&P 500 by 12% – four consecutive years
3. Stop taking out health insurance
Approximately three-quarters of retirees reported concerns about their health in old age, according to to look for from the TransAmérica Institute. Additionally, 52% of retirees told MedicareFAQ that they wish they had prioritized their health more before retiring.
Unfortunately, early retirees can find themselves in serious financial difficulties if they don’t plan for healthcare costs. Although it is a common assumption that Medicines will cover most medical needs, this couldn’t be further from the truth.
Fidelity Retiree Healthcare Cost Estimate in 2023 revealed that the average senior could incur direct health care costs of $157,500 (or $315,000 per couple) in retirement, even with Medicines.
Early retirees may face bigger problems than most when it comes to paying for health care because Medicare doesn’t kick in until age 65. pay premiums.
4. Long-Term Care Insurance Waiver
Seven in 10 people age 65 and older will need long-term care in their lifetime, and the Cost of Care Genworth survey revealed that a semi-private room in a nursing home can cost $8,669 per month, while a room in a nursing home costs an average of $5,350 per month.
Looking at these numbers, it’s no surprise that the MedicareFAQ study revealed that one-third of retirees wish they had purchased long term care insurance. Unfortunately, the longer you wait to purchase this coverage, the higher your premiums will be.
Purchasing a policy or paying for a nursing home room later in life can be especially challenging for early retirees who may have already exhausted their resources by the time they need this type of care.
5. Leaving the job market at a young age
Many retirees who left the job market before the age of 62 ended up regretting the fact that they retired so early, for various financial reasons.
About a third of retirees wish they had stayed on the job longer, according to the NBER study. Of those surveyed, 52% said they regretted the lack of savings, while 19% revealed that they regretted having applied for Social Security too early.
Before deciding to retire early, make sure your finances are in good shape and research what Social Security claims will look like at different ages. impact the value of your benefitand create a plan for how you plan to spend your retirement – and factor in additional costs for home improvements or travel.
What to read next
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
