Should you retire early or retire late?

When I was 57, I’d been retired for 3 years. Most people I talk to assume that I’m lucky, lazy, rich or ill. (Disclosure: I’m lucky, but not the other things.)

In my experience, early retirement is different from later retirement in lots of ways and I believe it’s revealing to sort the differences into 3 categories.

Financial differences

• Early retirement costs more. Whether you retired early to enjoy an active lifestyle or to nurse poor health, you’ll spend more over the span of your retirement than most healthy, but older, retirees.

• Fewer saving years and more spending years demands discipline. If you can’t stand budgeting, early retirement likely isn’t for you.

• The government cheque isn’t in the mail. You can’t start CPP/QPP till age 60 (at a reduced rate) and Old Age Security doesn’t begin until age 65.

• You stopped contributing to CPP/QPP and workplace savings plans early. So you can expect less income from them.

• You’ll take a hit on your workplace pension — if you’re lucky enough to have one. Your monthly payouts will be smaller if you start receiving pension payments earlier. I’ve delayed starting my pension payments.

• You’ll burn through personal savings faster. I’m not yet eligible for government pensions and not yet receiving a workplace pension. I’m so glad we put money in TFSAs and RRSPs and even saved in non-registered accounts! Also, I do a bit of freelance work occasionally and the income from that is handy.

• Over time, you’ll experience more inflation and the rollercoaster of more economic cycles. Buckle up!

Social differences

• You’re young and free!  What I love most about early retirement is having the vitality and time to do so much.

• But your friends aren’t retired yet. It’s like a kid going to a friend’s house and being told that the friend has chores to do and can’t come out to play for another 10 years.

• People wonder if you’ve chosen to be old. Endless marketing and media messages have made it accepted wisdom that “you’re only as old as you feel.” With the average age of retirement rising, increased availability of flexible work arrangements and elimination of a mandatory retirement age, will your still-working contemporaries think that by retiring early, you’ve chosen to become an old codger or old biddy prematurely?

• Most retirees are older than you. Often the people available to socialize during working hours are a lot older. Is this the generation gap you really want to close?

• Most recreational or social programs organized for retirees are geared to older people. Because I’m relatively young and active, my options are to entertain myself or throttle back my activities to a level geared to a less-vital lifestyle.

• You drift away from former co-workers. A healthy transition into retirement actually requires you to disengage mentally and emotionally from work life. Since retiring, I haven’t devoted any thought to what projects might be causing my former co-workers stress. But it means that when we get together, any work-related chatter is nostalgic. It isn’t really relevant to daily life now — theirs or mine.

• What’s your contribution to society? Most early retirees I know recognize that their good fortune means they have both a greater opportunity and a greater responsibility to contribute to society.

Health differences

• Some, like me, retire in good health. I have time and opportunity to actually manage my personal wellness. Contrast that with a fellow I know named John. After hip replacement surgery 12 years ago, he returned to his factory job and plans to keep working till his hip (which is getting painful) needs replacing again. He’s spending his finite health in order to work.

• But some retire in poor health. In addition to the direct physical and emotional effects of illness, poor health can lead to financial catastrophe, without the right insurance protection. Without critical illness insurance, disability insurance (while you’re still working), or long-term care insurance, illness can take a double toll: pushing you into premature retirement and into financial hardship.

• Does retirement cause poor health? Several research studies have suggested that retirees become ill sooner than their working contemporaries. But the causes are unclear:
  • Is it just a coincidence?
  • Did poor health come first, causing sick people to retire?
  • Or did retirement come first, followed by poor wellness habits (e.g., not keeping mentally or physically active) that caused poor health?

If you’ve read this far, you might be thinking that early retirement doesn’t sound that great. But I wake up every morning, thankful that I retired early.