The concept of early retirement is becoming a more attractive option for many people who would like to spend less of their time working and more of their time living.
With that said, some individuals and families find that even though they’d technically like to retire early, they’re not quite ready to give up working altogether. In the personal finance world, we call this having the ability to live a work optional lifestyle.
Together we’ll examine four reasons why you might want to continue working even if you retire early. (And it doesn’t have to be for financial reasons!)
We’ll also discuss the various choices and opportunities you have when living a life of financial independence, which essentially means you no longer rely on a job or career to cover your expenses.
1. A Work Optional Lifestyle Can Keep You Healthy
The period of life after retirement is often referred to as your golden years. Most pre-retirees share a common fantasy about their golden years that we often see in advertisements geared toward seniors: The fantasy of kicking your feet up on some tropical beach, perhaps with a drink (or two) in hand, without a care in the world.
But what if that wasn’t the case? What if there was actual data showing that a ‘carefree life’ in retirement isn’t so carefree after all?
Although results vary by study, some research has found that a lack of employment is associated with a decline in physical health, feelings of depression and anxiety, and even premature death. And many retirees are not fulfilled or satisfied with their retirement.
Meaningful activities are necessary for a healthy life, and work is one critical way we derive meaning from our lives. Therefore, retirement shouldn’t be seen as the end of all activity, and it certainly doesn’t mean you have to stop working. Instead, it should be viewed as exchanging one set of activities for another.
2. A Work Optional Lifestyle Can Enhance Your Fulfillment
One of the most exciting things about early retirement comes in the form of choices. Once working for money becomes optional (because now you’re covering your expenses with income from investments and assets), you can focus your attention on engaging in meaningful activities without the pressure to generate a huge amount of income or profit.
Having choices could mean that you decide to start your own non-profit organization, open and run a small business without worrying too much about profits, or even work a job that may be fulfilling, but doesn’t pay very well (like teaching).
Of course, having the ability to retire early could also mean that you spend more time volunteering or re-engaging with one of your passions like music, painting, or writing. However you choose to spend your newfound free time, you’re now at liberty to strengthen the connection you have with yourself as well as others to find more fulfillment.
Early retirement is an opportunity to explore more of yourself and your ability to impact others. And sometimes that opportunity might still technically look like a job or career.
But when you’re no longer reliant on any one job or career to fund your lifestyle and cover your expenses, you’ll have the time and energy to explore whatever fulfilling options strike your fancy.
3. Your Work Optional Lifestyle Can Enhance the Lives of Others
Part of the work you’ll need to continue after retiring early revolves around designing and preserving your legacy – your legacy for your loved ones, your legacy for your community, and your legacy for posterity. To live a truly meaningful life, it’s essential that you’re able to answer the question of how you’re making an impact.
If you choose to continue working in early retirement, you’re creating opportunities to pay it forward to the people you’re working with and for. For example, you may have more time to mentor younger employees at a company you work for.
Or you may have more time to truly help groups of people you care about by opening a business that serves them.
And if your work-optional career does provide you with more money, you’re expanding your ability to pay it forward financially to communities who can benefit from your generosity and involvement.
4. Optional Work Keeps You Focused On Proper Financial Management
One thing that shouldn’t be viewed as optional if you retire early is proper financial management. You’ve worked diligently to get yourself into a position where it’s no longer necessary to work for money. But that’s subject to change if you don’t put the work in to maintain your hard-won financial independence.
It’s important to remember that just because you’re “retired” doesn’t mean you’re able to access many of your retirement assets just yet. There are important age-related considerations to keep in mind if you’re retiring early.
For instance, you can’t begin taking Social Security benefits until age 62. Even then, many people don’t want to start taking Social Security until they’ve reached full retirement age or longer, which currently means waiting at least until age 66 or 67 depending on the year you were born. You can’t rely on Social Security to help cover your expenses when you retire early.
You also can’t take withdrawals from a 401(k) or IRA until age 59.5 without incurring steep penalties (although there are a few exceptions). If you do, you could be subject to a 10% tax penalty in addition to income taxes at your regular tax rate. (Assuming a 24% tax bracket, that $5,000 withdrawal just became worth $3,300… yikes!)
Continuing to work in early retirement shouldn’t be a financial necessity. (That wouldn’t really be retirement, right?) But a work optional lifestyle in which you make even a little bit of money can ease the strain on your assets if you plan to be “retired” for 30 years or more.
Create a Plan to Retire Early With Caviness Wealth Management
We understand that each individual’s vision for early retirement is different, so you need a customized plan that accounts for all your circumstances and needs if this is something you’re considering.
Of course, one of the most challenging components of an early retirement plan is to ensure you don’t overspend your assets. At Caviness Wealth Management, we help our clients develop a custom strategy to account for a wide variety of scenarios. Part of that process may involve planning around a work optional lifestyle.
To see if we can help you reach your early retirement goals and stay on track after you’ve retired, click here to schedule a conversation.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.
