You shouldn’t retire early

You read the title right. Hear me out first before you violently react. The FIRE movement, short for “Financial Independence, Retire Early,” is 'LIT' trend and all but there’s more to retirement than meets the eye.

In the past, many retirees counted on pensions and Social Security as the pillars of a sound retirement. This transitioned to the basic three pillars of retirement later on.

The three pillars of retirement

Many people talk about retiring early and encourage others to invest into this and that but few show an understanding of the different ways there are to save for retirement is the first step. In a nutshell, the pillars are basically  government-administered plans, employment-based pension plans, and personal retirement savings plans.

Pillar 1: State retirement (pension) plan - These are publicly-funded plans administered by the government that you may be eligible for when you retire. This is your contribution while you are working, and for business owners, voluntary contributions.

Pillar 2: Employer/ment-based pension plans - Not all workplaces have these plans, but if yours does and you are permitted to join, it means that your employer is probably paying towards your retirement at the same time as you are.

Also, saying goodbye to active income early on also means potentially reducing Social Security benefits. If you believe that Social Security will be a part of your retirement income, then reducing your working years can have a significant impact on your financial benefit

Pillar 3: Personal retirement savings - The third pillar of retirement are personal savings that you set up and contribute towards on your own. Understand how much work and money is involved. You need to accumulate assets in order to generate the necessary amounts for your retirement period. You may need to work hard over many years and not spend in order to accumulate those assets. There’s no in between unless you win the lottery.

New Pillars to consider

New school’s of thought emerge and new pillars of retirement are also created. Some classify the classic pillars as merely an ‘Retirement Income Plan’.

There’s also a ‘Tax planning’ to consider when you decide on transferring hard assets to your heirs and also the taxes you may need to pay once you sell stocks or funds or dispose property when you retire.

Investment Plan - Retirees will have a varying amount of risk they are willing to take on as well as different time frames for when to draw on those investments.

Estate Plan - Simply put, estate planning is all about creating your own rule book versus relying on the government's rule book when you die.

Health Care Planning - The earlier you start thinking about long-term care, the more options you'll have on the table (HMO, health insurance, exercise, proper diet, public healthcare, medications..etc.). People tend to dangerously underestimate their health care costs.

Non-monetary aspects of retirement

Retiring early isn't just about having money, it's also a lifestyle and perhaps even a relationship change. As you leave your work, you also say goodbye to the people you interact constantly everyday. If you are extroverted, this transition will be hard.

There's also the fear of the unknown and a potential loss of identity that you will have to deal with.
The Bottom Line is that Life planning is an important key to a successful retirement.

At the end of the day, all of us are pursuing happiness and not necessarily just money.

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You shouldn’t retire early You shouldn’t retire early Reviewed by Vernon Joseph Go on Wednesday, February 19, 2020 Rating: 5

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