5 Things People Regret About Early Retirement
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In my rules of funny and adviser, I see far too many people retire early and an ultimately end up regretting their decision to do so. And at of all the times i've seen people regret the retirement, there tends to be a few commonalities as to why they end up regretting that decision.

So on today's podcast, i'm going to walk you through the five most common reasons I see people regret their early retirement as well as what you can do to avoid these regrets. This is another episode of ready for retirement. I'm your host, James can all, and i'm here to teach you to get the most of life with your money.

Can now on to the episode to start. Let's some pack what I mean by retiring early, what is early that can be very much a relative thing. What i'm going to say is anything before the age of sixty five, why is sixty five typically thought of his common page? What for number reasons? Number one, that's when medicare starts, so you're eligible for health insurance coverage.

Number two, that used to be the age which you can collect social security as your full retirement age, the age since been pushed out. Number three, a lot of pensions now, pensions are less common today than they used to be able. A lot of pensions would start at the age of sixty five and just a nice round number.

So a lot of people think of age sixty five as the traditional retirement age course. Many people retire later, but a lot of people retire earlier. And that's what I want to focus on today.

If you retiring before the age of sixty five, what are the common mistakes we see people make? So when you retired, you don't need to worry about these things and can instead focus on everything they're excited about with your retirement. So let's jump right in the first thing I see the first mistake I see is people not knowing what they are retiring to.

Now here's the reality. If you're retiring early, not definite, it's not guaranteed, but chances are good you're not retiring early because you absolutely love what you're doing for work. You absolutely love what you're doing for work you probably you do in so you ouldn't be retiring early, so at least maybe aren't fully in love with what you do for work.

At best IT may be you done right? Hate IT. At worst, if that's the sense there is this trap, you might fall in to, that trap is thinking that retirement is just magically going to make all your problems go away.

Now to be fair, when you first retire, IT might seem that way. There's no longer in ARM clock. There's no longer a boss, there's no longer report, there's no longer deadlines.

It's gonna almost like the honeymoon phase of your retirement. And you will feel like that I will feel really good until that honeymoon phase starts to drift away. IT starts to dissipate. What comes next might not be all rainbows and butterflies.

What comes next unless you are intentional designing, what you're going to retire to, might make you and I feel unlost IT, might make you feel unsatisfied and might make you feel like you're drifting and you really just don't know what you want to do with your life. The reason I say, if you only have a funny cal plan, but it's not connected some type of even a life plan, it's incomplete. You have all the money in the world, but if you were tired, are completely bored and unfulfilled and don't know what to do, what good is that? Money is not really serving any purpose in your life.

That is why IT is important that you understand what you're retiring to. Now this does not need to be something big and dramatic dragana life plan that has every single chat of your life prepared out in advance. IT can simply be an understanding of what's most important to you.

What do you value? health? Family relationships? adventure? Start by understand what matters most to you.

And then what's one thing you can do into this category? What's one thing you can do in retirement to take care of your health? Step two, how can your money a line in such a way to support that? What's one thing you can do in retirement to support relationships with the people who care about most? And then step to, how can you use your money to support that? What's one thing you can do in retirement to pursue that sense of adventure that may be has been missing in your life because you've been so committed work and responsibility is there?

Well, what's one thing you can do them with your money to support that? So lifetime doesn't need to be a dragani binder about everything about you and what you're going to do. IT just needs to be direction. IT just needs to be the sense of here's what I am, what I want to do.

And then you can start to use your resources, your resources being your income, your asset, the financial resources have to pursue that that so that when you retire, it's not simply escaping the job that you didn't like, but it's retiring to something is going to bring you far more enjoyment, contentment and satisfaction. But if you just retire thinking as long I can get away from the thing I hate, that I magically become happy, you probably going to be disappointed. Start by having a life plan, start by having an understanding of what's most important to you.

What are your retiring to in your retirement transitions going to go whole lot Better. The second mistake that I see, people make their retire early as they start to get too conservative because they don't believe that their Young more. There is this traditional sense of, okay, you retire.

You need to get very conservative with your portfolio. In many ways, this is an incredibly rescue proposition. If you're not doing IT correctly.

IT is risky for people who are retiring at traditional ages, saif sixty five beyond. It's even more risky for people who are retiring before the age sixty five. The reason for that is sample the earlier you retire, all else being equal.

Of course, in terms of life expectancy longer, your money needs to last to support you throughout the entire of retirement. So do not found to the trap of thing in, okay, i'm retired. I met the finish line. Now it's time to take my investments that were growth ranted and now get super conservative.

Just to protect what I have to be clear, you absolutely need to make sure that you have a portfolio location that is designed to have some piece of IT, very conservative, very stable to support downturns when they happen or to create income for you when market down turns happen. But the biggest riser retirement in your ability to enjoy IT is in those temporary downturns. Yes, it's painful when the market goes down twenty percent, twenty percent, twenty percent.

In news flash, that is going to happen multiple times over the course of retirement. But that pain tends to be relatively short lived. Short lived could be months, IT could be years.

But that pain, historically speaking, one hundred percent of the time, has passed. What's a much greater risk to people? Isn't this temporary downturns? Is the permanent loss of purchasing power. The permanent loss of purchasing power comes when your portfolio is too conservative, when your money is not working for you, in the cost of everything goes up and up and up. So this is inflation.

The cost of everything is going to a continue to get more expensive, whether it's the eggs you purchase at the grocery store, whether it's housing, whether it's close, whether it's fuel, whatever IT is the cost of everything you purchase to maintain your standard living retirement is going to continue to up if your portfolio isn't position in a way to outpace that, to grow faster than inflation, you're going to be in a position where I might feel really conservative to have all your money in cash for all of your money really stable or at least some majority of your money like that. So when I feel really good at first, you're not coming up too many ups and downs. One day, you going to wake up, feel like the money you have, the income you have isn't going as far all this hurts a little bit more to go to the grocery store, all of the vacations you used to be able to take, you can't quite take the same vacations.

All the setting, the things that you used to be able to do pretty easily, you can no longer do pretty easily because your portfolios been positioned to conservative and where you are too focused on one risk, which is the up and downs the market, you are not nearly focused enough on the bigger risk, which is the erosion of your purchasing power over time. That is why for people retiring and especially for people retiring early, look at retirement not as a finish line, but as another beginning point, as another beginning point of you now need your money to potentially last for thirty, forty plus years, depending, of course, on when you retire, how long you might live. But you cannot afford, in most cases, to be too conservative with your assets, to be too conservative IT gives a false sense of security in its a risk of unit pain for down the road.

By the way, down the road when you're seventy, eighty beyond, you can just go back to work. You can't just go get another job to make up for your last income. You're at a point where you can go back to work then, which is why it's crucial on the front of retirement to make sure your assets are position appropriate to create and come today and to protect the portion of reportable lio that needs be protected today, but also to make sure the portfolio is growing for you that income can continue to keep up with inflation and beyond over the course of retirement.

The third mistake that I see, people make their retire early as they don't even consider part time work. Typically, like I said, if your tired early is probably because you're pretty burned out, is probably you're pretty sick of work. The lasting that you want to think about is doing something even a part time basis.

So we don't put the thought and doing, and we just jump and retirement. And there's a few issues with that. Number one is sometimes is very difficult to go from, go in a hundred mouse power all in on something to just completely stop in depending on your personality and the nature who you are that might not even be healthy.

So in some ways, simply working part time, even apart from the financial benefits, working part time can be a nice transition period for you. You can allow you to adjust this new way of living instead of going from all in york to completely nothing. But the second benefit is actually a financial benefit.

So obviously, working part time is a financial benefit, but maybe not in the way that you're thinking may actually be a much more significant financial benefit than you're thinking. Let's just see that you're fifty five. You're making one hundred and fifty thousand dollars for year, but you don't like work.

Works become a drag. Work is something that you're ginning pretty n out on. But you are working full time. You're earning one hundred fifty thousand dollars in the long as you can see yourself doing that. Four is five more years.

So from age fifty five to eight sixty, you make a hundred and fifty grand player, which is a total of seven hundred and fifty thousand dollars over that time for your time period. Now let's compare that to the personal age. Fifty five says, you know, maybe i'm not going to continue working part time.

Maybe i'm going to scale this back. I'm going to earn eighty thousand dollars per year. So a little over half of what you were previously making. But here's the thing you're working less. If it's not as stressed as a position, maybe you're going back to doing something that you enjoy doing, you're probably going to be able to do that for much longer. So instead of just working from fifty five to sixty, maybe be you could be totally happy working from fifty five.

Sixty five IT may be because this is a job as not as demanding you have time to take the trips, to do the things that you want to do, to prioritize health, to prioritize relationships, to almost feel like here, in some ways, partially retired, even as you continue to work. Now that combined income for this made up salary of eighty thousand dollars per year for ten years is eight hundred thousand dollars. So of course, it's a little bit more, but it's actually a whole lot more because when you're working in and earning one hundred and fifty thousand thousand per year taxes are going to take a much bigger chunk out of the entity of that vers.

If you are working in learning, eighty thousand dollars year tax aren't nearly gonna as high as they would be at one hundred and fifty thousand dollars per year. Now eighty is not exactly half of one hundred and fifty thousand, but is not like a proportionate reduction because we have a progressive tax system. The dollars you earn from eighty thousand to one hundred and fifty thousand argument tax at a higher rate than the first eighty thousand dollars that you earn.

So it's just the way of saying even if your total income earned over this time is pretty similar simply because you earned less but work longer, that after tax income will probably be much higher because you're not having income tax at a higher rate in this example. So back the big picture. Part of this, yes, financial, this tends to make a lot of sense.

But the big picture here is when we think about retirement, IT tends to be a very binary decision. Where are they working or not working? Where are they retired or not retired? A Better approach is to say, how can I make a work as desirable as possible, as appealing as possible, as meaningful purpose as possible?

Because work really, truly does have the potential to be incredible or can be something that ideally you actually never want to retire from because it's so enjoyable and so fun and so meaningful, unfortunate as not something that everyone has. Because of that, how can we make IT like that to the grave extent possible and get the most out of our work, not just financially, but also from a satisfaction standpoint, from a meaning, my connection, all these other things that work has to offer. Because when we simply go all in on work for the first forty years of our life, forty five years of our life, and then stop abruptly, it's a very chAllenging in traction and said, you can think about starting to dial things back, starting take your foot off the gas a little bit.

That gives you some time to think. That gives you time to go back to step number one, which is what do what I actually want to do when i'm retired. Often times, people don't think about that because they don't feel like they have the time to think about that.

They're spending forty to fifty hours a week of working. They're spending time committing. They are spending time doing all things you need to do just to survive.

They're not thinking proactively, intentionally about what do we actually want to do. And I retire. If you start concerning a part time option, you start to have more time.

You start to have the ability to you start to have the ability to say, what do what I actually want to do with my days. And I can be a very healthy transition. That a lot of people who tired early wish they hadn't just cut out for turkey.

They instead wish maybe they had thought to do some the more part time in gradually transition in retirement. The fourth mistake that people make in the retire early as they don't practice retirement. So what does that mean to practice? Well, there's a couple that i've talked to were talked about here where they moved to a hawaii I when they retired early because they just envision that would be the best thing in the world.

Why I wouldn't. They want to retire and go live on the beach. Well, I did. So they didn't like IT. They didn't actually practice ahead of time.

They just made this giant move at the, I did have not enjoying IT what was practicing that had looked like, well, can you take extended time off? Can you use all your pet? ho? Can you say about some sick of and go spend a months. And hawaii, go spend two months. And why not in traditional vacation, but live in an airbnb, go grow shopping at the local grocery markets, do the things that you would do as if you lived there and weren't just on vacation there, and see how you actually like IT or another couple who was so excited, retired and finally be away from their work.

But the day they retired, all of them, they felt really constricted and they're illness to spend IT was difficult for them to flip the switch actually starts spending down their portfolio to the point that they never wanted to go to dinner because that was too expensive, even though their portfolio could easily support that. They never practice. They never did some of these things.

They never pulled money out their portfolio to start living on. And they went into the retirement totally unprepared in the same way you would never go to do a big performance without preparing. Think of retirement as a big performance.

Now that performance is your life, and that's a big chunk of your life. But practice the things you want to do, you're going to start to understand what you actually enjoy, what you don't enjoy, unforeseen chAllenges. When you do that ahead of time, you can work things out.

You can start making changes before you actually retire. So by the time that you actually do, you retire with confidence new, retire into something they've already tested. I know that you are to enjoy.

And in the fifth and final mistake, I see people make their retire early is they use conventional retirement rules that don't actually apply to them. So there are three big ones here. The first one is portfolio with raw rates.

So a big question coursing you retire is, how much can I spend for my portfolio and not just how much can I spend today. But be assured, or assured as possible, that money is gonna the rest of my life. Well, the traditional rule is the four percent rule.

People hear that I say, OK, I can take four percent per year for a my portfolio and i'm going to be OK for the rest my life. Well, that might be the case. Berta depends upon what you mean by the rest of your life. That research was based on a thirty year time period.

And ask a question, if you were to retire and not retire into a market, but what if you retired into a horrible market or a media market or really anything in between, what's the most amount you could pull from your portfolio and be assure that your money is going to last for? In this White paper, in this research, thirty years now, four percent is about what that number came up with. So if you take up four percent per year from your portfolio, IT doesn't matter of the markets upper down.

If markets are within the confines what they have been historically, you can withdraw four percent per year. That money go last for thirty years. What about the individual that retires at fifty two? Thirty years might not be enough.

Eighty two is going to into that time period. What if he to you run at the money? Well, on paper, the research was correct. Your money lasts for thirty years, but your life might be a complete disaster at that point if you run out of money at age eighty two.

So that's a conventional traditional with raw row that maybe didn't apply to you if you are going to retire early, especially if you have a long life expectancy now under that umbrella of using conventional rules that might not apply there, this health care. So if you work till sixty five, your eligible framework care. Now with medicare, your health insurance, you stop to, of course, choose a plan.

We are how concerns is covered for you, still premium, they're still things. But there's not a whole lot that you need to go do to find your own coverage. If you retire before sixty five, you do. Now there's a couple ways in which I see this go wrong for people. They retired for the age of sixty five and they don't think about what to do for healthcare.

And then maybe they end up with a bad coverage or they end up with a really expensive coverage or they just are completely flustered and overwhelmed when they retire and don't have a great plan in place for that. That's one area in which I see that go wrong. The second area in which I see this go wrong is people who actually could retire well before sixty five.

Maybe they're sixty. Maybe there are sixty one or sixty two that plenty of money they can retire and they can go do what they want to do. But the thing that holds them back from retirement is are saying, O M not medicare age yet.

So I don't have a health care option. So they continue working simply for the health and transcoding ge. Now sometimes that's necessary, but there are other options.

You have cobra. You can go get a policy of the marketplaces, all kinds of things you can do. I just takes some preparation and planning to do so.

So this is a mistake where people actually don't retire early even though they want to, even though they have the financial things are doing so because are too overwhelmed at what they would do for help insurance. So even though options exist, they delay retirement until medicare age because they don't know about those options, they don't know how to plan accordingly. So understand the options exist that health care planners and financial planners existing can help you with that.

But don't let health insurance be the driving factor of when you're going to retire and certainly don't go into retirement without a plan for health insurance coverage. And in the final thing, under the umbrella of following conventional retirement rules, is people become too dependent upon their four one came. Now you're four one k plane is maybe one of the the best tools for creating wilf od the course of your lifetime.

The fact that you often get an employer match on IT, the fact there's tax benefits. But probably the biggest benefit is this just automated. If you set your four one k to four o rate, whether it's five percent or ten percent or twenty person, whatever is IT just happens.

Meaning, you know, I make the decision every single month to go invest money into an account IT happens for you if you get a raise. Then by d thought because of a percentage of your salary on india, four N K those dollar contributions increase. So it's one of the best tools that most people have for creating wealth themselves over time.

But a four O N K has more restrictions. There are some rules around this, but generally speaking, you cannot access that money till the age of fifty nine and half. If you want to retire early in, all you have is your four N K account.

You might be in a chAllenge in situation. So if you have the desire to retire early, don't just put your money in a four N K. Think bigger picture, think what type of an account should I put money into, not just for the immediate tax savings, but what's gona set me up for maximum flexibility when I retire?

That's gona give me that optionality that a ability to do what I want to do because of the resources to afford IT, as opposed to just doing the traditional thing or the conventional thing, which is the k, again, nothing wrong with the four one K. A four one k is probably sponsible for making more millions this country than than anything else. But if that's the only thing that you have, you're gonna a be limiting yourself in terms of options of when you can retire on how much you might be able to spend.

So that's a recap of five things that I see people struggling with when they retire early mistakes, they go back in time and unmake. So if you're lessen this and you're not yet retired, make sure you have a plan in place with things, everything from your life planned to understanding conventional retirement rules that might not apply to you and everything in between. So that is IT for today's episode.

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