Early Retirement: Prepare for the Unexpected

 Permanent, lifelong vacation–that’s the goal of many people who consider or take early retirement. And by early we mean people in their fifties or even younger.

It is true that early retirement will give you freedom from the corporate world while you are still young and healthy enough to be active playing pickleball or scuba diving in Mexico. You will have time to travel across the U.S. or around the globe with no vacation-days limits. Time to spend with family and old friends. Time to follow up on personal interests, whatever they may be. And plenty of income with no money worries.

Those are the obviously good things about retiring early.  It is the “no money worries” part that sometimes creates unpleasant surprises for early retirees.

Creeping (or galloping) inflation can crimp your style

One issue to keep in mind if you are retiring early is that in the next 15-20  years the cost of everything will double. That has been the pattern for decades and is not likely to change anytime soon. So what may seem to be ample funds for your lifestyle at 55, may be far too little money at 65 or 70. On top of that, by age 75 you may find yourself facing expensive health care costs–even if you are on Medicare–that can further erode your income.

And if you have chosen to retire outside the U.S. to make early retirement possible, you may end up finding it difficult, financially, to return to the U.S. if you want to move back home. Moving is expensive. Getting reliable health care may also be a problem if you retire in another country, like Mexico or Costa Rica, 2 popular overseas retirement destinations.

Staggering health insurance costs for early retirees

If you plan to make your retirement “home base” in the U.S., be prepared to spend a significant amount every month for health insurance until you are age 65 when you can sign up for Medicare and supplemental Medigap insurance. Some early retirees turn to taking part time jobs just for the health insurance benefits. The federal affordable health care act, commonly called Obamacare, may help lower health insurance costs for some early retirees. That program, however, is under assault by a few members of Congress so the future of this source of health insurance is not entirely clear.

Too bored for words

After a couple of years of travel and seemingly endless hours and days for personal interests, it is not unusual for early retirees to find themselves missing the challenges of the work world. They also miss the workplace camaraderie and social network not to mention the respect an early retiree commanded in his/her last job.

One solution: go back to work

We have plenty of suggestions about what you can do to work part time and still have much of the freedom of early retirement. Perhaps a job in real estate would be right for you. Or opening a part time small food business. Or turning a hobby into extra spending money. Or you may decide to dedicate your hours to a local non-profit organization and make the world a better place.

One other thing to consider is doing a gradual retirement instead of a total early retirement.  If you handle it carefully, you may end up having your cake and eating it too. We have tips for you about what steps to take next.

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A Real Life Retirement

A stock broker, Elaine, retired in her mid-fifties and decided that in her new life–which she did not define as “retirement”– she wanted travel to be her Number One Priority. She contacted several airlines and one of them hired her for their security department as a “wand lady”. This was back in the days just months before the federal TSA program went into effect. It sounds so quaint now that airport security was handled by a person using a detection wand on people getting ready to board a plane. Anyway, she landed the job. The pay was abysmal but the incredibly cheap travel was fabulous!  

In the training classes she found out that she was only one among many retirees who wanted a job with the airlines for the travel benefits.  Better yet, Elaine got health insurance benefits, a big issue with early retirees and especially for her as she had a pre-existing condition that would have prevented her from getting any individual health insurance. This pre-existing condition was a big motivator for her to retire as soon as she could financially. She recognized that the condition could return, even though she had been declared ‘cured’, and a future of endless travel could be out of the picture.

One secret to her success was that she was an empty nester and more than willing to work the 5 p.m. to midnight shift, the hours that most employees wanted to be at home. “It’s better than 20 years of getting up at 4 a.m. as a stockbroker,” she said. TSA now handles all of this screening work, but Elaine moved up to being a reservation agent–still working the evening shift. Still flying all over the planet for next to nothing.

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