When you think of early retirement, you probably picture yourself traveling the world, having ample time for hobbies, and enjoying a life of leisure. The only problem is, retiring ahead of schedule isn’t always all it’s cracked up to be. In fact, if you don’t have enough money or your plans for how to spend your time aren’t solid, leaving the workforce early could turn into a financial and emotional disaster.
You don’t want to retire early and regret it, especially since it can be difficult to get back into the workforce after getting out. To make sure this doesn’t happen to you, think about these five major downsides.
1. You could take a big hit to your Social Security benefits
Social Security benefits could be reduced in a few different ways if you retire early.
First and foremost, if retiring means you have to claim benefits, you’ll see smaller checks due to early filing penalties. These apply if you retire before full retirement age, which is between 66 and 67. They reduce your checks by a small amount per month but add up to about a 6.7% benefit cut each year for the first three years before FRA and an additional 5% reduction for each year before that.